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Financial Press, December 5th (edited by Huang Junzhi) Goldman Sachs Research Report recently pointed out that the financial market is too optimistic about the Fed's interest rate cut next year, which gives option traders a chance to profit at home.
The strategist including Praveen Korapaty wrote in the latest report that the market is expected to cut interest rates at 125 base points in the Fed in the next 12 months, of which 50 basis points will be reduced by the end of June (this indicates that the US economy is on the verge of decline), which is compared to this comparedGoldman Sachs's own forecast is much more radical. The bank believes that it will only cut interest rates once in 2024, with a range of 25 base points.
They said: "The market is close to the limits of reasonable pricing without being included in the possibility of recent economic recession."
Goldman Sachs Strategic Master recommends selling SOFR 95.25, which expired in June 2024, to watch the options, and take short bets to speed up interest rate cuts in the early stage.SOFR options are linked to the overnight financing interest rate, which closely tracks the market's expectations of the Fed's policy path.The option will expire on June 14 next year, two days after the central bank's June policy statement.
In recent trading days, traders have been increasing their pricing on interest rate cuts next year in futures, options, and spot markets.According to data released by the Commodity Futures Trading Commission last Friday, SOFR futures leverage net positions have reached a new high.
In addition, the option market has a betting for more than 250 basis points for the interest rate cuts before September, which is about 150 basis points higher than the current price price price.
Goldman Sachs Economist is only expected to cut interest rates once in 2024, most likely in the fourth quarter.However, the expectations of major Wall Street banks are very different. For example, UBS is expected to cut interest rates multiple times.
According to the CME Fed Observation Tools, as of press time, traders believe that five interest rate cuts by the end of 2024 are the most likely.
However, the Goldman Sachs KORAPATY team believes that even if the Fed's interest rate cut exceeds the expectations of Goldman Sachs economist, the current five interest rate cuts are unlikely to happen.