Bond Market’s New $15 Million Bet Targets Multiple Fed Rate Cuts-Bloomberg

By Edward Bolingbroke
(Bloomberg) — Open interest — or the amount of risk — is
starting to swell in two eurodollar option strikes, representing
the bond market’s latest big bet: The Fed will cut rates at a
much quicker pace than what’s already priced into the market.
Specifically, the emergence of the one-year March eurodollar
midcurve trade targets a further 75bp of easing on top of what’s
already priced in, which is a total of 110bp of easing by early
2021, where the easing cycle peaks. The $15 million position
expires in about nine months. Currently, swaps data shows three
25bp rate cuts priced by the end of this year.

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