Bond traders bet on 300 bps of Fed cuts by March

Fed officials recently forecast just 25 basis points of reductions by the end of this year and a total of 125 basis points by the end of 2025. — Reuters

NEW YORK: Traders in the US rates options market are embracing a nascent wager on the Federal Reserve’s (Fed) interest rate path: a whopping three percentage points worth of cuts in the next nine months.

Over the past three sessions, positioning in the options market linked to the secured overnight financing rate showed an increase in bets that stand to benefit if the central bank reduces its key rate to as low as 2.25% by the first quarter of 2025.