"The Fed will cut in January as well"... Increased bets on US rate cuts

As expectations grow that the Federal Reserve (Fed) will cut interest rates again in January following this month, there is a significant increase in bets on this in the futures and swaps markets.

According to Bloomberg, traders in the relevant markets are betting that the Fed will cut rates consecutively until January next year, buoyed by predictions from the major US investment bank Morgan Stanley.

Morgan Stanley recently reported that the Fed is likely to cut rates consecutively this month and in January next year, recommending that investors position themselves accordingly. Specifically, they advised buying February federal funds rate contracts and accepting the January overnight index swap rate on the premise of a rate cut, as the Federal Open Market Committee (FOMC) meeting is scheduled for January 29 next year.

As a result, January and February rate futures contracts have surged in price and volume.

Matthew Hornbach, a strategist at Morgan Stanley, said, "Investors believe that the Fed is likely to cut rates not only in December but also in January next year, and they should position themselves accordingly."

Currently, the rate futures market sees an 80% chance that the Fed will cut rates on the 18th of this month. This is significantly higher compared to 64% before the November employment figures were released.

Meanwhile, the US consumer and producer price index figures for November are scheduled to be released on the 11th and 12th of this week. These figures are expected to have a significant impact on the Fed's future monetary policy decisions.