Bond Trader Places Record Futures Bet on Eve of Inflation Data

A significant block trade in US short-term interest-rate futures, specifically in December 2024 SOFR futures, occurred on Tuesday, marking the largest trade of its kind. This trade contributed to driving gains in the Treasury market. The substantial trade volume suggests investor sentiment regarding the interest rate set by the Federal Reserve. The trade, likely initiated by a buyer, coincided with expectations of benign March consumer price index data, potentially leading to a revival in expectations for Fed rate cuts. Confidence in this outlook was reinforced by State Street Global Advisors predicting an aggressive half-point Fed rate cut by June and remarks from US President Joe Biden’s economic aide, Lael Brainard. The swaps market is pricing in approximately 65 basis points of Fed rate cuts by year-end. The December 2024 SOFR futures were trading slightly higher than the block trade’s price, indicating continued market activity and investor interest in hedging or speculating on interest rate movements.

Our take (from the Straight to Smart newsletter):

Positive Data Shatters Rate Cut Dreams

Article Excerpt:
Key Takeaways:
  • 75,000 block trade in December SOFR futures is biggest ever
  • Wager helped drive gains for front-end Treasuries Tuesday

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Bond Trader Places Record Futures Bet on Eve of Inflation Data

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