Bond traders again doubt whether the Fed will cut interest rates twice this year.
The swap market has now absorbed expectations of a rate cut of about 40 basis points at the end of the year, of which the first rate cut of 25 basis points was reflected at the Federal Reserve's policy meeting in November. After the mild April inflation data released last Wednesday, markets reflected a close to 50 basis points cut by the Federal Reserve, or two cuts by 25 basis points each.
As yields have risen in recent days, positions suggest new short bets have been rebuilt, while long positions in longer-term government bonds have been partially liquidated. Traders remain cautious, waiting for more data to confirm that inflation is moving in the right direction, and for the latest minutes from Wednesday's Federal Open Market Committee meeting to provide new clues about the Fed's policy path.
Federal Reserve Governor Christopher Waller said on Tuesday that if there is enough data in the right direction, interest rates can be considered later this year and early next year. Waller said this week that April consumer price data was a reassuring sign that inflation was moving in the right direction, but was in the middle of the day.pokerdiscordHe needs "a few months of good inflation data" before he supports the Fed to ease monetary policy.
