Bond traders are increasing bets that the Federal Reserve’s next move could be a
rate hike before any easing, with swaps implying over a 50% chance of a hike by
April next year. Positioning in SOFR futures and options shows growing demand
for hedges against higher rates into 2027, alongside widening short exposure in
Treasuries as 30-year yields approach 5%. The shift comes amid heightened policy
division ahead of Kevin Warsh taking over as Fed Chair, with traders also
focused on upcoming US labor data and inflation risks. LPL Financial’s Lawrence
Gillum said rate cut odds are fading, while Wellington Management’s Brij Khurana
noted the market is not fully pricing a potential hiking cycle.
