Some bond traders are betting on a bigger Fed rate cut in 2025 than the market expects
On December 19, some bond traders have been increasing bets on options and futures, anticipating that the Federal Reserve's implied rate cuts next year will exceed market expectations. U.S. Treasuries rose moderately on Wednesday ahead of the Fed's policy decision release.
Given that a 25-basis-point rate cut by the Fed is largely seen as a done deal, the market's focus is on the Fed's latest quarterly forecasts. The dot plot released in September showed officials expect 100-basis-point cuts each this year and next.
However, considering the stickiness in inflation data, the overall market is betting that the Fed will downgrade its forecast for rate cuts next year, with swap rates implying the Fed will only cut rates by 50 basis points next year. (Jinshi)
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