Interest rate options traders are increasing their bets on a 50 basis point rate cut by the Federal Reserve this month

ChainCatcher news indicates that interest rate options traders have increased their bets on the Federal Reserve cutting rates by 50 basis points this month, reflecting growing speculation in the market that policymakers will take aggressive action to prevent the economy from faltering. Currently, swap contracts show that the likelihood of the Fed cutting rates by 50 basis points this month is about one-third.

Options linked to the Secured Overnight Financing Rate (SOFR) show a significant surge in open interest (i.e., the number of positions held by traders) in some call contracts expiring on September 13. September 13 is five days before the FOMC's rate statement. If this Friday's non-farm payroll report and next week's Consumer Price Index (CPI) data indicate that the labor market and inflation are cooling, it would provide enough justification for the Fed to ease policy more swiftly, and these positions would pay off. (Jin Shi)