Latest news with #SFRZ5
Yahoo
3 days ago
- Business
- Yahoo
Traders Boost Bets on Just One 2025 Fed Cut Ahead of CPI Data
(Bloomberg) -- Traders are increasingly betting that the Federal Reserve will cut interest rates only once this year amid signs of resilient growth and sticky inflation. Trump's Military Parade Has Washington Bracing for Tanks and Weaponry NYC Mayoral Candidates All Agree on Building More Housing. But Where? NY Long Island Rail Service Resumes After Grand Central Fire Senator Calls for Closing Troubled ICE Detention Facility in New Mexico California Pitches Emergency Loans for LA, Local Transit Systems Wednesday brings US consumer-price data for May, which is forecast to show a pickup that may reinforce the Fed's wait-and-see stance toward further easing as it assesses the impact of tariffs. The central bank is widely projected to hold rates steady next week, and futures and options tracking expectations for its policy path show traders are moving to unwind the rate-cut premium built into the months ahead. Swaps traders now see about 0.45 percentage point of easing by year-end, the smallest degree of reductions they've priced in since before President Donald Trump rolled out steep tariffs in early April. The announcement roiled markets and at one point in the following weeks led traders to wager on as much as a full point of Fed cuts by the end of 2025. Stronger-than-forecast jobs data for May helped spur traders to exit easing bets. But the rate outlook had already been shifting in that direction, in part on hints of cooling trade tensions, which diminished further with talks between the US and China in London this week. In options linked to the Secured Overnight Financing Rate, or SOFR, there has been a pickup in hedging activity targeting around just one or even no Fed policy moves this year. Monday's trading included heavy demand for hawkish protection via a range of structures looking to the end of this year and into early 2026, which Tuesday's open interest showed were new positions. These types of wagers rise in value as rate-cut pricing fades from the futures underlying the options. Here's a rundown of the latest positioning indicators across the rates market: JPMorgan Treasury Client Survey In the cash market, Tuesday's JPMorgan Chase & Co. Treasury client survey showed investors' net long position rose to the biggest since May 5. In the week to June 9, investors' shorts fell 2 percentage points and neutrals rose by that amount. Most Active SOFR Options For SOFR options across Jun25, Sep25 and Dec25 options there was a heavy amount of new risk in the Dec25 95.375 puts following big buying in the SFRZ5 95.625/95.375 put spread, targeting no Fed cuts this year. There was also a lot of activity seen in the 95.8125 strike over the past week due to more hawkish hedging via a buyer of the SFRZ5 95.8125/95.6875/95.5625 put fly. The past week has also seen new positioning in the 96.75 strike following trades such as SFRZ5 96.25/96.75 1x2 call spread which has been recently bought. SOFR Options Heatmap The 95.625 strike remains the most-populated position in tenors across Jun25, Sep25 and Dec25 options, mostly due to large positioning around the Jun25 puts via the SFRM5 95.75/95.625 put spread, which has recently traded. Recent flows in SOFR options since Friday's payrolls have included hawkish hedges as rate-cut premium continues to fade from the underlying futures contracts over the next 18 months. The downside structures have been targeting puts in the Dec25 and Mar26 tenors. Treasury Options Skew Traders are continuing to pay increasing premiums to hedge a selloff in the long-bond contracts on both an outright basis and relative to the front and belly of the curve. Long-bond skew, however, has been drifting closer to neutral over the past week as 30-year yields have run into resistance around the 5% level. The skew on the 10-year tenor trades around neutral, with some indication that CTA accounts may be entering fresh long positions in the TY contract. CFTC Futures Positioning Asset managers aggressively added to net duration long in Treasury futures across the strip in the week ended June 3, CFTC data show. This follows three weeks of de-leveraging via the liquidation of new long positions. The duration increase amounted to approximately 452,000 10-year note futures equivalents, the biggest weekly shift since April last year. Most of the net-long addition was in the ultra 10-year note futures, where around $11.3m/DV01 of net long risk was added. New Grads Join Worst Entry-Level Job Market in Years American Mid: Hampton Inn's Good-Enough Formula for World Domination The SEC Pinned Its Hack on a Few Hapless Day Traders. The Full Story Is Far More Troubling Cavs Owner Dan Gilbert Wants to Donate His Billions—and Walk Again What America's Pizza Economy Is Telling Us About the Real One ©2025 Bloomberg L.P.
Yahoo
27-03-2025
- Business
- Yahoo
Options Traders Cut Back Expectations for US Rate Cuts This Year
(Bloomberg) -- As President Donald Trump moderates his approach on tariffs, options and futures traders are betting that the Federal Reserve won't have to cut interest rates as much to fend off a recession. They Built a Secret Apartment in a Mall. Now the Mall Is Dying. Why Did the Government Declare War on My Adorable Tiny Truck? Trump Slashed International Aid. Geneva Is Feeling the Impact. How SUVs Are Making Traffic Worse Chicago Transit Faces 'Doomsday Scenario,' Regional Agency Says Traders across many asset classes have been responding to signals from Trump that a coming wave of tariffs will likely be more targeted than anticipated when the levies are put in place on April 2. Given that tariffs were expected to weigh on economic growth — and force the Fed to step in to boost the economy — any relaxation of tariffs should relieve the pressure on the Fed to cut rates over the next year. The shift has been noticeable in the market for options on the Secured Overnight Funding Rate, which is closely tied to the fed funds rate. On Monday and Tuesday of this week, one new position was established, with a premium of more than $10 million, that would benefit if the Fed avoids making any moves this year, and do even better if the next change is a rate hike, rather than a cut. The expectations for a more hawkish Fed pursuing fewer rate cuts was also visible in the market for futures tied to the fed funds rate. Short positions that would benefit if rates don't fall have been building this week. Traders are also becoming more bearish on Treasury bonds as the chances of rates cuts go down. A survey of JPMorgan clients released Tuesday showed that net long positions in the Treasury market are at the lowest level in five weeks as outright longs dropped for the third consecutive week. Here's a rundown of the latest positioning indicators across the rates market: JPMorgan Treasury Client Survey In the week up to March 24, JPMorgan's Treasury Client Survey showed a drop in long positions by 2 percentage points, moving the net positioning to the least long since Feb. 18. Treasury Options Premium There is an increasing divergence in the cost between hedging in the front-end of the curve vs. the long-end shown by the gap between the skew on 2-year note options, which remain close to neutral vs. long-bond options, where the cost of hedging a rally is increasing, favoring call premium. Most Active SOFR Options Open interest changes over the past week have seen heavy position adds around the 95.875 strike due to flows including SFRZ5 95.875/96.125/96.375/96.625 call condor while open interest has also climbed in the 96.25 strike with flows including a buyer of the SFRU5 96.25/96.75 call spread. For liquidation, there was a large amount of risk coming out of the 96.00 and 95.125 strikes over the past week largely due to liquidation via SFRZ5 96.00/95.125 put spread bought from 12.25 to 13. SOFR Options Heatmap Across SOFR option maturities out to Dec25 contracts the 95.625 strike is the most populated where a heavy amount of Jun25 puts, Sep25 puts and Dec25 puts are outstanding. Recent flows around the strike have included buying in the SOFR Dec25 96.00/95.625 put spread while the SFRU5 95.875/95.625/95.375 put fly has also been a popular play. The 96.00 strike is also well populated following flows including SOFR Dec25 96.00/95.625 put spread and the recently traded SFRM5 96.00/96.25/96.375/96.50 call condor bought vs. selling SFRM5 95.75/95.625 put spread. CFTC Futures Positioning In the week up to March 18, hedge funds aggressively added to net short positioning in 10-year note futures, according to Commodity Futures Trading Commission data. The overall net extension of duration short among hedge funds was approximately 127,000 10-year note futures equivalents while on the flip side asset managers added to net duration long by roughly 30,000 10-year note futures equivalents. On the week, asset managers added to net long positions in 10-year note futures, ultra 10-year notes and ultra-long futures by a combined $13.5m/DV01. Business Schools Are Back Google Is Searching for an Answer to ChatGPT The Richest Americans Kept the Economy Booming. What Happens When They Stop Spending? A New 'China Shock' Is Destroying Jobs Around the World How TD Became America's Most Convenient Bank for Money Launderers ©2025 Bloomberg L.P. Sign in to access your portfolio
