Options traders are building up bets that the broader market overreacted to the Federal Reserve’s hawkish pivot when it priced in a series of interest-rate hikes in the US starting later this year. Trading volumes in contracts linked to the Secured Overnight Financing Rate doubled in the day after the Fed’s June rate decision last week, with many of those wagers targeting the possibility of fewer rate hikes than seen in broader money markets. Market participants are hedging against a bond-market rally that would push 10-year yields toward 4.4% or lower in the coming weeks, with traders buying August call options and spending nearly $30 million Monday and Tuesday.
- Options traders are betting that the market has overreacted to the Federal Reserve's hawkish stance on interest rates.
- Increased trading in SOFR contracts suggests a hedging strategy against fewer rate hikes than currently priced in by money markets.
- This activity aims to profit from a potential bond market rally that could push 10-year yields lower.
Topics: Market cycles macro sensitivity, Public debt, Yield performance, Interest rate sensitivity, Tokenized us treasuries, Treasury bond yields
Tags: #federalreserve #interestratehikes #sofr #treasuriesmarket #bondmarketrally #10yearyields #optionstrading #fedpolicy #inflation #jpmorgantreasury
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