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Traders Dial Back Bets Against Fed Cuts as Growth Worries Build

Edward Bolingbroke
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Bond traders are reversing aggressive bets against Federal Reserve rate cuts in 2026, signaling growing concerns over economic growth amid geopolitical tensions. The $31 trillion Treasury market is recalibrating as traders unwind short positions ahead of the Fed’s March policy meeting, reflecting uncertainty over inflation and Middle East conflict risks. Futures markets had previously priced out rate cuts, but shifting growth worries now prompt traders to reduce bearish wagers on Treasuries, hinting at potential policy easing. The Fed’s upcoming decision arrives as markets weigh conflicting pressures: stubborn inflation versus slowing economic momentum exacerbated by geopolitical instability. Analysts note the rapid shift underscores volatility in rate expectations, with traders now hedging against a possible Fed pivot if growth deteriorates further.
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Eccles Federal Reserve building in Washington.Bond traders are scaling back some of the aggressive bets that had largely driven markets to price out Federal Reserve interest rate cuts this year.As the $31 trillion bond market is caught between risks to growth and inflation stemming from the war in the Middle East, futures traders are unwinding a flurry of recent wagers against Treasuries ahead of Wednesday’s Fed policy meeting.

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Source: Bloomberg Markets

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