Bond traders are taking on a record amount of risk as they bet big on a Treasury market rally fueled by expectations the Federal Reserve will embark on its first interest-rate cut in more than four years.
Traders in the US rates options market are embracing a nascent wager on the Federal Reserve’s interest-rate path: a whopping 3 percentage points worth of cuts in the next nine months.
Whether it’s another move up or a dive down, traders are bracing for added volatility wrought by Wednesday’s dual macroeconomic catalysts: a report on consumer prices in the morning and the Federal Reserve’s rate decision in the afternoon.
The highest US yields since November are beginning to attract some opportunistic buyers, even as negative sentiment remains firmly entrenched throughout the Treasury bond market.
A block trade in US short-term interest-rate futures Tuesday was the biggest on record and helped drive gains for the Treasury market.
Bond traders are piling into bearish bets, fueling a selloff in benchmark Treasury securities, as fresh evidence of robust US growth triggers a recalibration of expectations for Federal Reserve interest-rate policy.
One of the big winners from the sudden furious rally in the US bond market: Bill Gross.
Amid signs the bond market has bought into the Federal Reserve keeping interest rates higher for longer, a cohort of investors is placing bets on the economy hitting a wall — and a sharp policy reversal in short order.
Government debt yields plunged globally as mounting financial-stability concerns prompted bond traders to abandon bets on additional central-bank rate hikes and begin pricing in cuts by the Federal Reserve.
Hedge funds are unleashing record bets that the Federal Reserve will stick to its hawkish script as they rapidly position for higher interest rates in a key corner of the derivatives market.
The most torrid Treasuries rally in a year is likely set for a breather as traders reassess their rush to abandon reflation bets with some potentially decisive events looming in the coming days.
The 10-year Treasury note’s almost three-week run above the once-elusive 1% yield is suddenly looking precarious.
