Traders Lock In Fed Bets as Rate-Cut Size Debate to Finally End
- Market is split between a quarter- and half-point reduction
- Treasuries look vulnerable after gains every month from May
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Bond investors that have been frantically wagering on the size of the Federal Reserve’s first interest-rate cut in four years are about to find out whether they made the right trade.
The market is fully pricing in a quarter-point rate reduction on Wednesday, when the US central bank is expected to kick off its rate-cutting cycle, with the chance of a bigger move viewed as a coin-flip. Treasuries have rallied into the decision, climbing for a fifth-straight month and driving short-dated yields — those most sensitive to Fed policy — to their lowest in two years.