Bond Traders Step Up Fed Hedges as Shutdown Clouds Outlook

The data void created by the US government shutdown is pushing bond traders to hedge against the risk that the Federal Reserve pauses at one of its two remaining meetings this year, or potentially delivers more policy easing than the market anticipates.

Interest-rate swaps have been steadily pricing in roughly a quarter-point rate cut in both October and December in recent weeks amid signs the job market is cooling. The catch, though, is that the government closure that began on Oct. 1 has delayed the release of official data that traders rely on to assess growth and inflation and gauge the Fed’s next steps, after it eased last month for the first time this year.