Trader Bets Swell on Trump-Backed Fed, Data Stoking US Rate Cuts

Group 1 - Traders are increasing bets on lower interest rates following the anticipated announcement of a new Federal Reserve chair and the release of delayed economic data [1][2] - The demand for short-term curve structures linked to the Secured Overnight Financing Rate (SOFR) indicates expectations for monetary policy easing after Jerome Powell's term ends in May [2][4] - The frontrunner for the new Fed chair position is Kevin Hassett, as indicated by President Trump, which has led to increased trading activity in futures markets [3][4] Group 2 - The upcoming announcement of the new Fed chair is expected to create a "shadow Fed chair," potentially complicating the Fed's communication of monetary policy [4] - Delayed labor market data, set to be released on December 16, could influence market expectations for dovish monetary policy if it confirms signs of softening in the labor market [5][6] - Recent trading activity has shown a preference for positions that benefit from a curve steepening, particularly targeting short-dated futures [6] Group 3 - Wagers on a dovish policy shift have resulted in a decline in 10-year Treasury yields, which fell below 4% last week [7] - The 10-year Treasury yield decreased to 4.08%, down from 4.11%, reflecting market reactions to expectations of rate cuts [7]