Traders Make Record Rush to Fed Futures as Doubts Shadow Market

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions Saved Articles My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomePMN BusinessTraders Make Record Rush to Fed Futures as Doubts Shadow MarketPositions in futures tied to the Federal Reserve’s benchmark interest rate have surged to an all-time high as traders brace for the risk the central bank could start pushing rates higher Wednesday.Author of the article: You can save this article by registering for free here. Or sign-in if you have an account.3]c6]04lgnmsw00k0mcxsie3_media_dl_5.png Bloomberg, CME(Bloomberg) — Positions in futures tied to the Federal Reserve’s benchmark interest rate have surged to an all-time high as traders brace for the risk the central bank could start pushing rates higher Wednesday.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountOpen interest in the federal funds futures that will settle after the upcoming decision topped the previous record set by October 2024 contracts, which was the last time there was so much doubt about the outcome of a Fed meeting. The open interest reached 909,714 contracts Friday, according to CME Group Inc., before rising again on Monday to a total of 967,136.The trading reflects the unusually large divide over the Fed’s next move. By now, markets would typically be pricing in an overwhelming consensus. But by late Tuesday, traders were still factoring in a roughly one-third chance that the Fed could announce a quarter-percentage-point hike at 2 p.m. Washington time on Wednesday. The higher odds are on it holding steady. Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againThe doubts are being fostered by cross-currents in the economy as well as the shift in leadership at the Fed, where Chairman Kevin Warsh has favored jettisoning his predecessors’ practice of providing guidance on the central bank’s likely moves. He has repeatedly emphasized that the Fed needs to rein in inflation that has exceeded its 2% target since early 2021. But inflation pressures eased some last month — when energy prices retreated during the US-Iran ceasefire — and job growth slowed, potentially giving policymakers a reason to hold off until the next meeting in September.“This contract isolates the odds of a hike or do-nothing tomorrow,” said Alex Manzara, a derivatives broker at R.J. O’Brien & Associates. “In previous times the Fed never disappoints the market, and you don’t have a fed funds contract into a meeting more than two or three basis points from where it’ll go given the expectation,” he said. “Now all of a sudden you have uncertainty in the contract — and that creates need.”Here’s a rundown of the latest positioning indicators across the rates market:Across SOFR Sep26, Dec26 and Mar27 options last week, new risk increased most in the 96.1875 strike, led by Sep26 and Dec26 tenors, while the biggest decline was in Dec26 96.4375 calls. The Dec 26 strikes were involved in SFRZ6 96.1875/96.3125/96.4375/96.5625 call condor, bought in about 25k on July 22 for upside risk. The 96.1875 strike also was involved in SFRZ6 96.00/96.1875 call spread bought in 20k the same day.The 96.375 strike edged out the 96.50 as the most-populated, with open interest concentrated in Sep26 and Dec26 calls. In the four most populated strikes, open interest in Sep26 and Dec26 calls was 1.9 times as large as in puts.The cost to hedge Treasury futures has been stable in recent weeks, with traders continuing to pay a more of a premium to protect against a long-bond selloff. The premium in 2- and 5-year notes remains close to neutral.JPMorgan Treasury Client SurveyThe percentage of longs was unchanged in the week ended July 27 while shorts increased slightly at the expense of neutrals, leaving the net position near its four-week average.This advertisement has not loaded yet.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.