Fed's rate cut expectations weakened

Short-term interest rate market investors have begun to abandon their positions, reflecting the expectation of a rate cut this year, following the messages given by Jerome Powell, the Chairman of the US Federal Reserve, last week.

In his presentations to the US House of Representatives and the Senate last week, Powell stated that Fed members expected more rate hikes in order to control price pressures, and signaled that one or two rate hikes could be made this year.

According to data released by CME on Monday, there has been a serious break in SOFR options for December 2023.

Futures SOFR volumes hit 75 percent of 20-day averages on Friday, while options traded 9 percent above normal levels.

However, there were some movements indicating that some investors did not give up on their interest rate cut expectations. Hedge funds have increased their net long SOFR positioning, according to the latest data from the Commodity Futures Trading Commission (CFTC).