Positioning for an economic hard landing and aggressive Federal Reserve easing next year is spreading across the US interest-rate markets.

Everywhere You Look, Rates Traders Are Piling Into Rate-Cut Bets

(Bloomberg) — Positioning for an economic hard landing and aggressive Federal Reserve easing next year is spreading across the US interest-rate markets.

In the cash bond market, JPMorgan Chase & Co.’s Treasury client survey, conducted weekly since 1991, found that the most active investors in the market are as bullish as they’ve ever been.

Treasury Speculators Most Bullish on Record in JPMorgan Survey

In short-term interest-rate options — whose value is tied to the Secured Overnight Financing Rate influenced by the Fed — structures that would benefit from several Fed rate cuts by the middle of next year have been in favor. A notable one Monday targeted rate cuts totaling as much as 250 basis points by September, about 200 basis points more than what’s currently priced into the swaps market.

Outlier Trade Bets on 250 Basis Points of US Rate Cuts in 2024

Meanwhile in the futures market, Commodity Futures Trading Commission data released Monday shows hedge funds increased their net long position in SOFR futures to an all-time high in the week ended Nov. 21. They’ll benefit in aggregate from an increase in the amount of Fed easing expected to occur over the coming months.

h/t mark000