Frequent hawkish signals from the Fed drive interest rate market to withdraw bets on rate cuts

Market information 06-26 23:36
Gelonghui, June 26丨Traders in the U.S. short-term interest rate market are abandoning expectations that the Federal Reserve will cut interest rates this year, prompting a large number of dovish bets to unwind. Preliminary CME data on Monday showed a sharp drop in open interest in a range of options, a sign of retreat after a sharp pullback in rate-cut bets on Friday. This came after Fed Chairman Jerome Powell emphasized that the central bank could resume monetary tightening after pausing rate hikes this month. He told lawmakers that another 50 basis point increase in interest rates is likely this year. Powell's reemphasis on his hawkish message appeared to have the desired effect on short-term interest rate markets, with traders recalibrating bets. Swaps tied to the Fed meeting date now expect the policy rate to peak after 25 basis points of hikes, while this is in stark contrast to earlier pricing in forecasts for rate cuts this year, and 50 basis points implied by the dot plot. do not match. Meanwhile, the latest positioning data from the U.S. Commodity Futures Trading Commission showed that hedge funds increased their record net long position in SOFR futures, suggesting that some funds may not have completely given up bets on several near-term rate cuts
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