Traders started betting up the ante that the Fed will have at least one 50 basis point rate cut before the end of the year

Traders are lining up positions to bet on at least one unconventional rate cut by the Federal Reserve before the end of the year, in a sign that markets are anticipating a more aggressive policy shift than is widely expected. Recent options activity linked to the guaranteed overnight funding rate (SOFR) suggests that markets are accumulating positions for a 50 basis point cut by the Fed at this month's or December's meeting. This is far more than the two 25 basis point rate cuts currently reflected in the interest rate swap market. While the weeks-long US government shutdown has delayed the release of key economic data such as employment, any resolution would unleash a wealth of information on the evolution of the economy. Some market participants expect the data wave to provide more evidence of economic weakness, which could support deeper interest rate cuts.