Bond traders are starting to bet that the Fed will make a big move to cut interest rates by 50 basis points in September

Bond traders are upping their bets that the Federal Reserve will cut interest rates by 50 basis points in September, rather than betting on the standard 25 basis points cut in September. This is fully reflected in the federal funds futures market. Weaker-than-expected inflation data released on Thursday sparked a buying frenzy in October that continued on Friday. The contract due on October 31 has fully digested policymakers' expectations of a 25 basis point cut at the September 18 meeting. Any buying at higher price levels means more people are expected to believe that the Fed may start its first easing cycle in years with a "big deal". Positions have also benefited from rising expectations for a 25 basis point rate cut on both July 31 and September 18, but traders gave up hope for a July cut a few weeks ago and none of the big Wall Street banks are predicting a rate cut in July.