Latest news with #MollyBrooks
Yahoo
4 days ago
- Business
- Yahoo
Bets on Fed Rate Cuts Are Sweeping Through US Bond Market
(Bloomberg) -- Bond traders are ramping up bets on the Federal Reserve cutting interest rates this year, as signs of a weakening US economy bolster the case for the central bank to reduce borrowing costs as demanded by President Donald Trump. Mayor Asked to Explain $1.4 Billion of Wasted Johannesburg Funds All Hail the Humble Speed Hump PATH Train Service Resumes After Fire at Jersey City Station Major Istanbul Projects Are Stalling as City Leaders Sit in Jail What England's New National Cycling Network Needs to Get Rolling Positioning in options tied to the Secured Overnight Financing Rate, which closely tracks the expected trajectory of US monetary policy, shows investors readying for the possibility of cuts in each of the three remaining meetings this year, bringing down rates by a total of 75 basis points in 2025. Other plays on SOFR have included bets on a 50 basis-point cut at the central bank's next meeting, in September. Last week's soft payrolls data has made investors more confident that the Fed will cut rates to buffer US growth — a move that Trump has called for but central bank officials have so far resisted. A report on Tuesday showed that the US service sector stagnated in July, further exacerbating those worries. 'The market definitely is on edge after the July payrolls report on Friday, but there is still a lot of data to go before the September meeting,' said Molly Brooks, US rates strategist at TD Securities. 'The Fed needs more than just one data indicator and one data point in order to shift its view.' Swaps currently price in a combined amount of easing equal to almost 60 basis points, up from around 30 basis points priced ahead of the payrolls report. Treasury yields have reflected the shift, with the 10-year yield at 4.24%, compared to a high of 4.49% last month. 'Against the backdrop of slowing growth, slowing inflation (ex-tariffs), and the Fed moving closer to easing, the direction of travel for yields will be lower over the next several months,' said Dan Carter, portfolio manager at Fort Washington Investment Advisors. Bullish momentum is also building in the cash market, where traders have jumped into long Treasury positions. The latest survey of clients from JPMorgan Chase & Co. shows outright long wagers are at their biggest levels since April. Meanwhile, Fed members are also showing signs of leaning toward easier monetary policy. San Francisco Federal Reserve Bank President Mary Daly said on Monday that the time is nearing for rate cuts, while Federal Reserve Governors Christopher Waller and Michelle Bowman voted against the Fed's July decision to hold its benchmark rate steady, preferring a quarter-point reduction. Investors are also alert to news of who might replace outgoing Federal Reserve Governor Adriana Kugler, with Trump saying Tuesday that he would decide this week. It's an opportunity for the president to tap a candidate more closely aligned with his calls for the central bank to lower rates. Here's a rundown of the latest positioning indicators across the rates market: JPMorgan Treasury Client Survey In the week to Aug. 4, JPMorgan clients added to the outright long Treasuries position by 5 percentage points, taking it to the highest level since April 14. The net long position is the highest since July 7. The one-week change into longs was the most since the end of March. Most Active SOFR Options In SOFR options across Sep25, Dec25 and Mar26 tenors over the past week there has been a large position add in the 95.75 strike with new flows including large buyer of the Dec25 96.375/96.25/95.875/95.75 put condor, the SFRZ5 95.875/95.75/95.625 put fly and SFRZ5 95.875/95.75 1x2 put spread. There has also been large buying in the 95.6875 strike over the past week via SFRZ5 95.6875/95.5625 put spreads. The past week has also been heavy liquidation in the 95.375 strike mainly via Dec25 puts and Mar26 puts. SOFR Options Heatmap The 95.625 strike remains most popular across Sep25, Dec25 and Mar26 options, with a large amount of risk seen in the level via Sep25 puts and Dec25 puts. Other populated strikes include 95.75 and 95.875, where Sep25 puts are prominent. Recent activity around the 95.625 strike has been buying of the SFRZ5 95.875/95.75/95.625 put fly. The main theme post Friday's jobs data has been demand for upside hedges in SOFR options, with some positions looking to target a half-point rate cut at the next September policy meeting. Treasury Options Skew Following Friday's jobs report, skew on Treasury options across the curve has moved to favor calls as traders pay a premium on hedging a continued bond market rally over a selloff. In the long-end, the skew on the bond option has risen to favor calls by the most since April. CFTC Futures Positioning In the week to July 29, a day before the Fed decision, hedge funds aggressively built net short positioning in 10-year note futures. Asset managers took the other side, adding to net longs in the tenor and added to longs in both long-bond and ultra-long bond futures. --With assistance from Michael Mackenzie and Ye Xie. (Updates prices throughout, adds context in ninth paragraph.) Russia's Secret War and the Plot to Kill a German CEO AI Flight Pricing Can Push Travelers to the Limit of Their Ability to Pay Government Steps Up Campaign Against Business School Diversity What Happens to AI Startups When Their Founders Jump Ship for Big Tech The GOP Is Choosing Pesticides Over the MAHA Moms ©2025 Bloomberg L.P.
Yahoo
5 days ago
- Business
- Yahoo
Bets on Fed Rate Cuts Are Sweeping Through the US Bond Market
(Bloomberg) -- Bond traders are ramping up bets on the Federal Reserve cutting interest rates this year, as signs of a weakening US economy bolster the case for the central bank to reduce borrowing costs as demanded by President Donald Trump. Mayor Asked to Explain $1.4 Billion of Wasted Johannesburg Funds PATH Train Service Resumes After Fire at Jersey City Station All Hail the Humble Speed Hump Positioning in options tied to the Secured Overnight Financing Rate, which closely tracks the expected trajectory of US monetary policy, shows investors readying for the possibility of cuts in each of the three remaining meetings this year, bringing down rates by a total of 75 basis points in 2025. Other plays on SOFR have included bets on a 50 basis-point cut at the central bank's next meeting, in September. Last week's soft payrolls data has made investors more confident that the Fed will cut rates to buffer US growth — a move that Trump has called for but central bank officials have so far resisted. A report on Tuesday showed that the US service sector stagnated in July, further exacerbating those worries. 'The market definitely is on edge after the July payrolls report on Friday, but there is still a lot of data to go before the September meeting,' said Molly Brooks, US rates strategist at TD Securities. 'The Fed needs more than just one data indicator and one data point in order to shift its view.' Swaps currently price in a combined amount of easing equal to about 60 basis points, up from around 30 basis points priced ahead of the payrolls report. Treasury yields have reflected the shift, with the 10-year yield recently at 4.20%, compared to a high of 4.49% last month. 'Against the backdrop of slowing growth, slowing inflation (ex-tariffs), and the Fed moving closer to easing, the direction of travel for yields will be lower over the next several months,' said Dan Carter, portfolio manager at Fort Washington Investment Advisors. Bullish momentum is also building in the cash market, where traders have jumped into long Treasury positions. The latest survey of clients from JPMorgan Chase & Co shows outright long wagers are at their biggest levels since April. Meanwhile, Fed members are also showing signs of leaning toward easier monetary policy. San Francisco Federal Reserve Bank President Mary Daly said on Monday that the time is nearing for interest rate cuts, while Federal Reserve Governors Christopher Waller and Michelle Bowman voted against the Fed's July decision to hold its benchmark rate steady, preferring a quarter-point reduction. Here's a rundown of the latest positioning indicators across the rates market: JPMorgan Treasury Client Survey In the week to Aug. 4, JPMorgan clients added to the outright long Treasuries position by 5 percentage points, taking it to the highest level since April 14. The net long position is the highest since July 7. The one week change into longs was the most since the end of March. Most Active SOFR Options In SOFR options across Sep25, Dec25 and Mar26 tenors over the past week there has been a large position add in the 95.75 strike with new flows including large buyer of the Dec25 96.375/96.25/95.875/95.75 put condor, the SFRZ5 95.875/95.75/95.625 put fly and SFRZ5 95.875/95.75 1x2 put spread. There has also been large buying in the 95.6875 strike over the past week via SFRZ5 95.6875/95.5625 put spreads. The past week has also been heavy liquidation in the 95.375 strike mainly via Dec25 puts and Mar26 puts. SOFR Options Heatmap The 95.625 strike remains most popular across Sep25, Dec25 and Mar26 options, with a large amount of risk seen in the level via Sep25 puts and Dec25 puts. Other populated strikes include 95.75 and 95.875, where Sep25 puts are prominent. Recent activity around the 95.625 strike has been buying of the SFRZ5 95.875/95.75/95.625 put fly. The main theme post Friday's jobs data has been demand for upside hedges in SOFR options, with some positions looking to target a half-point rate cut at the next September policy meeting. Treasury Options Skew Following Friday's jobs report, skew on Treasury options across the curve has moved to favor calls as traders pay a premium on hedging a continued bond marker rally over a selloff. In the long-end, the skew on the bond option has risen to favor calls by the most since April. CFTC Futures Positioning In the week to July 29, a day before the Fed decision, hedge funds aggressively built net short positioning in 10-year note futures. Asset managers took the other side, adding to net longs in the tenor and added to longs in both long-bond and ultra-long bond futures. --With assistance from Michael Mackenzie and Ye Xie. Russia's Secret War and the Plot to Kill a German CEO AI Flight Pricing Can Push Travelers to the Limit of Their Ability to Pay Government Steps Up Campaign Against Business School Diversity What Happens to AI Startups When Their Founders Jump Ship for Big Tech The GOP Is Choosing Pesticides Over the MAHA Moms ©2025 Bloomberg L.P.
Reuters
18-06-2025
- Business
- Reuters
VIEW Fed holds rates steady, but slows expected pace of future cuts
NEW YORK, June 18 (Reuters) - The Federal Reserve held interest rates steady on Wednesday and policymakers indicated borrowing costs are still likely to fall this year, but slowed the overall pace of expected future rate cuts in the face of estimated higher inflation stemming from the Trump administration's tariff plans. In new economic projections, policymakers sketched a modestly stagflationary picture of the U.S. economy, with economic growth slowing to 1.4% this year, unemployment rising to 4.5% by the end of this year, and inflation finishing 2025 at 3%, well above the current level. While policymakers still anticipate cutting rates by half a percentage point this year, as they projected in March and December, they slightly slowed the pace to a single quarter-percentage-point cut in each of 2026 and 2027 in a protracted fight to return inflation to the central bank's 2% target. MARKET REACTION: STOCKS: The S&P 500 (.SPX), opens new tab briefly added to gains before fading and was last up 0.27% BONDS: The yield on benchmark U.S. 10-year notes was down 2.2 basis points to 4.369%. The 2-year note yield fell 3.6 basis points to 3.914% FOREX: The dollar index extended declines and was down 0.23% to 98.60, with the euro up 0.3% at $1.1512. COMMENTS: MOLLY BROOKS, US RATES STRATEGIST, TD SECURITIES, NEW YORK: 'The market reaction was somewhat muted, even though going in it seemed at least economists' estimates of the dots for 2025 seemed a bit split between one and two. The markets didn't really seem to react to staying at two as very dovish here. I think some of it is the statement, it seemed to be continuing on the whole waiting-and-seeing, waiting-and-watching trend that the Fed has been on. 'Part of the 2025 dots that we were looking at is a time decay piece, where you're seeing less meetings in 2025 than we did in March, and we'll see even less in the next SEP, and so as time continues, if they don't cut, then you have to keep pushing out the cuts to 2026.' JACK MCINTYRE, PORTFOLIO MANAGER FOR GLOBAL FIXED INCOME, BRANDYWINE GLOBAL INVESTMENT MANAGEMENT, PHILADELPHIA, PA: "There's still bias towards some version of stagnation, lower growth with rising sticky inflation. " It feels like it's a Fed that's still being very patient, and they're still biased towards cutting rates in the near future." "I don't think there was too much of a surprise in what we saw. The Fed took up the inflation expectations - obviously to be conservative in terms of the potential impact of tariffs - and took down their growth forecast slightly. That was somewhat expected. I don't think there was anything that was needle moving. "Now the nuances come in with Chairman Powell's answers and body language at the press conference." PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK: 'The Fed is looking at slower economic growth and the vote was unanimous and the fact that rates remain unchanged is no surprise. 'They do state that the economy is slowed, but still on solid footing. The dot plot is looking for two cuts this year and of course they repeat the fact that if need be, they would reconsider their present monetary (stance). 'So you know that's nothing new and we really don't have any much change here and so I would say that this statement is a little bit on the hawkish side, and I would characterize it as the same for the last month with the caveat that we could we could see slower and as far as the labor market is concerned, there's not much change in thinking there.' 'So, I would say this communique indicates that if things were to slow down too much in the summer months. or if there we see negative growth in this quarter, that Fed is likely to reduce interest rates by 50 basis points once, in September, as opposed to two 25 bp rate cuts.' 'What does this mean for the market? I don't think very much." BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN: "There's a subtle shift in the language about the unemployment rate. They're no longer confident that it has stabilized. The balance of risks is shifting from being in balance to being tilted towards a slowdown. Instead of watching inflation like a hawk, the Fed is shifting its gaze to the labor market. The unemployment rate will be an unreliable gauge of the health of the labor market with the immigration crackdown and decline in the labor force participation rate. Instead, Powell might pull a Yellen and start talking about a wide range of labor market indicators they're monitoring." MATTHIAS SCHEIBER, HEAD OF THE MULTI-ASSET TEAM, ALLSPRING GLOBAL INVESTMENTS, LONDON: With the ongoing uncertainty around tariffs and a still-robust U.S. labor market, the Fed is taking a widely expected 'wait and see' approach on rates. From our perspective, the next likely window for the Fed to lower rates will be September. We expect the Fed to potentially cut interest rates twice this year should inflation continue to drop toward its 2.0% target. "We expect equity market performance to remain volatile and continue to favor cheaper parts of the U.S. equity market, international equities, and emerging market equities given better valuations, more fiscal and monetary stimulus likely to come, and higher valuations of a number of U.S. large-cap equities. Our outlook for higher-quality bonds remains favorable given still-attractive overall yields."
