According to Bloomberg, a trader may have made as much as $10 million on the release of January’s strong U.S. jobs report by placing a large futures bet beforehand.
The trader sold the January 2024 fed-funds futures contract FFF24, -0.27%, according to a report, with the trade completed through a block sale of 13,996 contracts. That carried an approximate risk of $580,000 per each basis point if prices moved in his favor—or loss.
The trade was placed around 8:15 a.m. Eastern, Bloomberg said, citing traders familiar with the flow, with the contract priced at 95.59, implying expectations for an average fed-funds rate of 4.41% next January. The contract fell to a low around 95.37 in afternoon trade, implying a fed funds rate of 4.63%.
The short futures position appeared to remain intact Friday afternoon.
After the much stronger-than-expected January jobs report and a sharp rebound in the Institute for Supply Management’s January service sector activity index, Fed fund futures sold off.
The likelihood of a Federal Reserve rate hike climbed to 99.6% from 82.7% on Friday afternoon, according to the CME FedWatch tool which measures expectations for changes in monetary policy among investors and traders.
Investors now see a 61.3% chance that the Federal Reserve will raise its benchmark interest rate in May, up from 30% on Thursday—a reflection of recent economic data and statements from Fed officials.
The Dow Jones Industrial Average DJIA, -0.38% was down 182 points, or 0.5%, upon the close of trading on Monday, while the S&P 500 SPX–1.04% and Nasdaq Composite COMP–1.59%.
