Traders Bet on Aggressive Fed Rate Cuts Ahead of Jackson Hole Meeting

　　Xinhua Finance Beijing, August 20 Traders are flooding into a specific options bet, expecting the Federal Reserve to cut rates by more than 25 basis points next month. Since the beginning of this month, demand for positions related to the Secured Overnight Financing Rate (SOFR), which is closely tied to policy expectations, has been strong.

　　This week, traders have doubled down on this bet, with open interest targeting a 50-basis-point rate cut surging. In a few days, Federal Reserve Chair Jerome Powell will deliver a key speech at Jackson Hole.

　　Previously, U.S. inflation data came in higher than expected, leading some traders to scale back their rate cut expectations. Despite the short-term pullback, traders still seem convinced that a rate cut will occur next month.

　　On Tuesday, U.S. Treasury bonds ended a three-day sell-off, with yields falling across all maturities.

　　Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets, said, "As the market prepares for Powell's speech, the biggest risk facing U.S. Treasuries is that the Fed Chair chooses to pour cold water on the widely expected September rate cut."