US Treasury Traders Raise Rate Cut Expectations for This Year, Some Positions Bet on a 50 Basis Point Cut Next Month

According to Jinse Finance, amid signs of a weakening U.S. economy, bond traders are ramping up their bets on Federal Reserve rate cuts this year. Options positions linked to the Secured Overnight Financing Rate (SOFR) indicate that investors are preparing for the possibility of a rate cut at each of the remaining three Fed meetings this year, with a cumulative reduction of 75 basis points expected by 2025. Other SOFR-related trades are betting that the Fed will deliver a one-time 50 basis point cut at the September meeting. Last week’s weak nonfarm payroll report has strengthened investors’ confidence that the Fed will cut rates to support economic growth—an action that Trump has consistently called for, though Fed officials have so far remained on hold. A report released on Tuesday showed that U.S. service sector growth stalled in July, further heightening market concerns.