#市场重新计价加息预期 Traders Bet on Emergency Rate Hike by the Fed Within Two Weeks, Market Expectations Reverse Sharply

According to Bloomberg, in the options market tracking Federal Reserve policies, demand for bets linked to the secured overnight financing rate (SOFR) has already emerged. These trades suggest that the Fed could raise interest rates as soon as two weeks from now. If bond markets significantly increase rate hike bets before the policy meeting on April 29, these positions could yield high returns. This hedge against an emergency rate hike marks a sharp reversal in market expectations.

Just a month ago, the market anticipated up to three rate cuts of 25 basis points each by the end of this year. However, since the outbreak of conflict on February 28, swap market traders have priced in about a 50% chance of rate hikes before December.

As oil prices surge, raising concerns about reigniting inflation, traders have begun unwinding large long positions in US futures. Jeff Schuh, head of the Constitution Capital rate trading desk, said that the sell-off in SOFR futures and the rise in the entire Treasury yield curve caught large funds off guard. He noted that while the latest bets do not reflect the market’s baseline scenario, they do indicate growing concern that rapid inflation could pose risks to investors who have been long Treasuries in recent months. Schuh described these hedging trades as a low-cost risk management tool, saying they “make the risk of liquidation seem more manageable 90% of the time and are an inexpensive emergency measure for managing interest rate risk.”

Currently, the interest rate swap market prices only a 12% probability of a 25 basis point hike at the April 29 policy meeting. However, the unusual activity in options markets highlights investors’ heightened vigilance toward tail risks.

The highly uncertain geopolitical environment makes it unprecedentedly difficult for traders to assess the Fed’s policy direction. Markets must evaluate not only how the conflict’s trajectory affects inflation transmission but also digest policy variables stemming from the upcoming leadership change at the Fed.

Kevin Warsh is set to succeed Jerome Powell as Fed Chair this summer, while Trump continues to pressure for lower interest rates. However, amid the renewed inflation risks, whether the new chair can quickly push for rate cuts remains highly uncertain. Schuh said, “Even if Warsh takes over the Fed, the uncertainty about the interest rate path and how long it will take him to build consensus or garner majority support for a rate cut is still completely unresolved.”