U.S. Short-Term Rates Traders Boost Bets on June Fed Hike
(Bloomberg) -- U.S. short-term interest-rates traders are increasingly convinced that the Federal Reserve will start raising interest rates in June, and at the same time increasingly dubious that the central bank will raise rates as much as policy makers forecast.
On Friday, swaps linked to Fed meeting dates priced in odds as high as 87% -- 22 basis points of a 25 basis-point increase -- of a June rate increase. A week ago they priced in 16 basis points, a 62% likelihood.
Meanwhile, the market-implied slope of the Fed’s path continues to ease. Its peak suggests five to six hikes by the end of 2025 to a level more than 100 basis points short of Fed policy makers’ projection.
Traders will be doing the math again after next week’s Federal Open Market Committee meeting, when details are expected on the timing and pace of tapering of bond purchases. The June rate-hike pricing could face a swift move in either direction should a concrete taper scenario be mapped out.
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