According to ChainCatcher, traders are making a significant move into a specific options bet, believing that the Fed will implement a substantial rate cut of more than 25 basis points next month. Since the beginning of this month, there has been strong demand for positions related to the overnight secured funding rate (SOFR), which is closely tied to policy expectations.
This week, traders have once again increased their bets, with open contracts targeting a 50 basis point rate cut soaring significantly. In a few days, Fed Chair Powell will deliver a key speech at Jackson Hole.
Previously, the inflation data released by the U.S. exceeded expectations, leading some traders to lower their rate cut expectations. Although there was a pullback in the short term, traders still seem to firmly believe that there will be a rate cut next month. On Tuesday, U.S. Treasury bonds ended a three-day sell-off, with yields on government bonds across all maturities retreating. Ian Lyngen, head of U.S. interest rate strategy at BMO Capital Markets, stated: 'As the market prepares for Powell's speech, the biggest risk facing U.S. Treasuries is that the Fed Chair chooses to pour cold water on the widely expected rate cut in September.'
