--- title: "US Treasury Traders Bet on Imminent Fed Rate Hikes as SOFR Options and Futures Positions Turn Sharply Hawkish" type: "News" locale: "en" url: "https://longbridge.com/en/news/289245435.md" description: "The May Non-Farm Employment data released last Friday far exceeded expectations, directly driving a surge in new positions betting on rate hikes in the SOFR options market, with some trades pointing to a potential rate hike as early as September. The SOFR futures market has now fully priced in at least one 25-basis-point rate hike this year, while hedge fund short positions have hit record highs. The US May CPI data to be released on Wednesday will be the next key milestone" datetime: "2026-06-09T23:01:44.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/289245435.md) - [en](https://longbridge.com/en/news/289245435.md) - [zh-HK](https://longbridge.com/zh-HK/news/289245435.md) --- # US Treasury Traders Bet on Imminent Fed Rate Hikes as SOFR Options and Futures Positions Turn Sharply Hawkish Strong US employment data has ignited market expectations for Federal Reserve rate hikes, with US Treasury traders rapidly concentrating their positions in a bearish direction. The US May Non-Farm Employment report released last Friday surpassed all expectations, serving as the strongest signal of labor market recovery to date. This directly spurred a flood of new positions in the SOFR options market betting on rate hikes, with some trades even indicating that rate hikes could begin as early as September. The SOFR futures market has now fully priced in at least one 25-basis-point rate hike within the year. The US May CPI data to be released on Wednesday will become the next critical node. If inflation data comes in higher than expected, it will further reinforce rate hike expectations and drive the establishment of more bearish positions; if the data falls short of expectations, it could trigger a wave of covering by existing shorts, providing some breathing room for the bond market. ## SOFR Options Market: Betting on Rate Heats Up Across the Board Since the release of the employment report last Friday, the SOFR options market, which is highly sensitive to the direction of Federal Reserve policy, has continued to absorb new bearish positions, with trading volume significantly exceeding normal levels. Several notable trades point directly to at least one, or even two, rate hikes before the Federal Reserve's September meeting. Even against the backdrop of falling stock markets and softening crude oil prices, which have helped stabilize the cash bond market, bearish sentiment in the options market has not receded. Gennadiy Goldberg, Head of US Rates Strategy at TD Securities, stated: > "The strong non-farm payrolls data combined with persistently high inflation has prompted the market to further raise the probability of Federal Reserve tightening. This continues to keep yields elevated, although risk-off sentiment in the stock market has provided some support for yields." ## SOFR Futures: Hedge Fund Short Positions Hit Record Highs Bearish sentiment is not only evident in the options market; signals from the futures market are equally clear. According to the latest report from the Commodity Futures Trading Commission (CFTC), hedge funds had increased their net short positions in SOFR futures to historic highs prior to the release of the non-farm payrolls data. Citigroup strategist David Bieber wrote in a report on Tuesday, "Short-side momentum remains dominant." However, it is worth noting that these leveraged short positions do not entirely represent purely directional bets. They may also involve basis trading strategies by hedge funds targeting cash bonds or swaps, as well as convexity hedging operations. Once market conviction in rate hikes begins to waver, the heavily accumulated SOFR futures short positions will face the risk of concentrated covering, potentially triggering a short-term rebound in the bond market. ## Options Position Details: Near-Term Bearish Structures Dominate, 96.50 Strike Price Most Concentrated In terms of specific position distribution, new risks added to the SOFR market over the past week were mainly concentrated in Dec26 put options, with buying activity in the SFRZ6 96.125/96.00/95.375 strip put option combination being particularly prominent. Meanwhile, open interest in both calls and puts at multiple strike prices for the Jun26 contract saw a significant decline, indicating that some positions have been closed out. The 96.50 strike price remains the point with the most concentrated positions across the entire options market, with call option positions in Jun26 and Dec26 being particularly significant. Over the past week, there was also considerable new building of positions in the SFRZ6 96.50/97.00/97.50 call option tree structure, reflecting some traders' hedging layouts against potential rate cut paths. Regarding the skew in Treasury options, the implied premium for long-bond futures options continues to lean towards the bearish side, showing that traders are paying higher hedging costs to cope with further rises in long-end yields; meanwhile, the skew for 2-year to 10-year Treasury futures options continues to revert to neutral levels. ## Cash Market: JPMorgan Survey Shows Slight Reduction in Short Positions Unlike the short-dominated options and futures markets, sentiment in the cash market shows signs of marginal stabilization. According to JPMorgan's weekly US Treasury client survey this week, during the week ending June 8, investors reduced their direct short positions by two percentage points, shifting to neutral, while long positions remained unchanged. Data from the full client survey shows that the current proportion of short positions is at its lowest level since May 4. This divergent signal indicates that while bets on rate hikes in the derivatives market continue to heat up, some participants in the cash market have begun to cautiously treat the risks of excessive bearishness at the margin. Wednesday's CPI data will be an important moment to test the rationality of current pricing. ### Related Stocks - [SOFR.US](https://longbridge.com/en/quote/SOFR.US.md) - [TD.US](https://longbridge.com/en/quote/TD.US.md) - [C.US](https://longbridge.com/en/quote/C.US.md) - [JPM.US](https://longbridge.com/en/quote/JPM.US.md) - [C-R.US](https://longbridge.com/en/quote/C-R.US.md) - [JPM-M.US](https://longbridge.com/en/quote/JPM-M.US.md) - [JPM-C.US](https://longbridge.com/en/quote/JPM-C.US.md) - [JPM-D.US](https://longbridge.com/en/quote/JPM-D.US.md) - [JPM-L.US](https://longbridge.com/en/quote/JPM-L.US.md) - [8634.JP](https://longbridge.com/en/quote/8634.JP.md) - [JPM-K.US](https://longbridge.com/en/quote/JPM-K.US.md) - [JPM-J.US](https://longbridge.com/en/quote/JPM-J.US.md) ## Related News & Research - [LIVE MARKETS-The old ball game: Trade balance, home sales, small business sentiment](https://longbridge.com/en/news/289210403.md) - [CoreWeave Stock Slips: What's Happening Today?](https://longbridge.com/en/news/289224896.md) - [Elon Musk Says SpaceX Could Put One Million Tons Of Payload In Orbit Within The Next Five Years](https://longbridge.com/en/news/289279226.md) - [BREAKINGVIEWS-China tech key-man risk has its own flavour](https://longbridge.com/en/news/289269510.md) - [Oracle Earnings Put AI Momentum in Focus](https://longbridge.com/en/news/289230475.md)