Record Wagers on Fed Cuts at Risk If Powell Fails to Go Big
- Bets on October fed funds futures top any activity since 1988
- Positions will be upended if Fed only moves by a quarter point
With the Federal Reserve set to begin lowering its target rate, the debate among investors has centered on the size of the first cut and the scope of reductions.
Photographer: Al Drago/BloombergThis article is for subscribers only.
Traders who are locked into record wagers tied to the Federal Reserve’s expected interest-rate cut Wednesday are risking sharp losses if officials opt for a standard-sized reduction.
Activity in October fed funds futures, which investors are using to bet on this week’s policy meeting, has jumped to the most extreme level of any such contract since the derivative’s inception in 1988, according to data compiled by Bloomberg. The bulk of these new bets are targeting an outsized half-point cut, including a surge of positions put in place this week, the data show.