Bond traders are showing little sign of stepping back from their fight with the Federal Reserve over the path of interest rates and the market is now positioned for cuts on the horizon.
Just over a month ago the market was pointing to a quarter-point hike in 2019, but it's now factoring in a more than 50 percent chance of a reduction this year. That's in stark contrast to the median projection of two increases projected by Fed officials last month. On top of that, traders are now fully pricing in a cut by April 2020.
The rate on the June 2020 U.S. dollar overnight index swap, which was close to 3 percent less than two months ago, dropped as low as 2.04 percent today -- suggesting a benchmark rate more than 30 basis points below the current effective fed funds rate by the middle of 2020. ...
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