The markets are pending the Movement of the US Central Bank. The vast majority do not expect surprises, but some fear that the devil puts the tail. In the wheel prior to the end of the FED committee meeting there was an operation that caught the attention of the operators.
The week began with a draw in the dispute between Trump and the Fed. On the one hand, the Court of Appeals decided not to apply precautionary measures, allowing Lisa Cook continues in your position in the Fed for the meeting of the September committee. The decision, adopted by a majority of 2 to 1, supports Cook’s arguments, considering that the causes of its dismissal are insufficient and that an administrative or judicial procedure that determines the veracity of the accusations has not been followed. On the other hand, Stephen Miran’s nomination was approved by the Senatein an express procedure, which will allow him to sit at the same meeting of the Fed Committee. They look in the mandate of Adriana Kugler, who voluntarily withdrew this summer (boreal) and ends in January 2026. Despite criticism, they look will keep their position in the Economic Council of the Government, justifying its double function for the temporality of its presence in the Fed. The attempt to influence Fed decisions begins to take shape, although for now the institutional counterweight prevents the most aggressive initiatives from thriving. Analysts consider that the incorporation of looking at the Committee will not intensify the decline of rates, in a context of cooling of the labor market. Nevertheless, political noise does not seem to affect markets. So far, the perspective of a Fed walking towards the neutrality of rates is sufficient to push the assets upwards, although some obstacles may appear in the short term because missing only two weeks, there are no indications of an agreement to avoid the closure of the government.
The market consensus does not believe that the Fed has space to surprise, so the most plausible thing is to wait for a cut of the Fed Funds rate of a quarterfinal (25 basic points), however, there were some indications that the market communed with the idea that the cut would be double the estimated, after the disappointing growth of employment during the summer (boreal). It should be noted that According to the CME Fedwatch estimator, the 25 -point cut has a probability of more than 90% and 50 points of less than 10%.
In this context Attention a strong and aggressive bet of a mysterious operator for a rate of 50 basic points. The operation was carried out in the prior of the Fed conclave and generated noise among the operators because it was not only a massive bet but also a record, to protect against the possibility of a much greater cut than expected by the market, of 50 basic points, against the consensus.
Lisa Cook
The bets made in the market
An US money market analyst said that after the data of unemployment subsidy applications and all the inflation data of last week, there was some rotation in the market related to the FED rates cut trajectory (with the expectations for 2025 in descent and the expectations for 2026 increasing). Thus, the change towards 2025 has made the probabilities of a cut of 50 basic points in September fall (from almost 20% to only around 4%), while the probabilities of a 25 basic points cut in October also receded. Thus, despite that change of aggressive trend, the analyst Edward Bolingbroke of Bloomberg reported that There was an early stirred wheel on Wall Street, since the flows in the initial part of the curve included the largest block operation in history in federal funds.
What did he mean? According to Bolingbroke, The operation was carried out in the October contract of the Fed Funds, for an amount of 84,000 contracts, which is equivalent to 3.5 million dollars per basic risk point. As Bolingbroke points out, the price and time of the operation were consistent with a buyer, which potentially indicates a coverage against a half -point rate cut at the policy meeting this Wednesday, since a cut of a quarter quarter is now completely incorporated into the swap market. And as to clear doubts and speculations about Bolingbroke’s data, CME Group Interest Rates (CME) confirmed, through network X, that this was The largest operation in federal funds of federal funds ever carried out ” On the other hand, it was seen that together with the massive flow of Fed Funds futures, and perhaps reflecting the change seen, there was also a large negotiated volume of the SFO differential (it is a reference rate, which is presented as an alternative to the dollar’s libor rate) through the increase of the slope of the September 2026/March 2027. This position, the operators explain, explain the operators, It can reflect a commitment to deeper and concentrated rates cuts at the beginning against current policy prices.
In this context, and taking into account these new large positions, the people of Goldman Sachs believe that the main short -term risk for stock markets would be a reversal of the expectations of cutting of the Fed, in particular for some of the lower quality segments of the market that have benefited from a more favorable context, of the so -called golden rich (“Goldilocks”), what economists are denominated It is neither so high as to generate tensions related to inflation, nor too weak to cause a recession.
Source: Ambito
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