Speculators Bet on Fed Holding Rates in December as Net Long Positions in Fed Funds Futures Hit Highest Since 2020
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Speculative net longs in fed-funds futures have surged to their highest since 2020, betting policy rates will end up below current pricing — yet the broader market still assigns roughly 75% odds to a December hike, opening a rare directional gap.
What exactly are speculators betting on?
Bloomberg macro strategist Simon White notes that speculative and leveraged-fund net longs in fed-funds futures — as a share of open interest — have surged over the past several weeks to the highest level since 2020.
This means → these players expect the Fed's actual rate path to be more dovish than what the market currently prices, possibly skipping a December hike altogether.
Yet the broader market still prices in roughly 75% odds of a December hike — a rare directional split between speculators and the consensus.
Why is the SOFR signal pointing the other way?
Unlike fed-funds futures, speculative positioning in SOFR futures — secured overnight financing rate futures — remains net short.
In plain terms = two instruments that both bet on rate direction are flashing opposite signals.
White attributes part of the divergence to basis trades between the two contracts — the U.S. Treasury's expanding balance at the Fed has recently widened SOFR relative to the fed-funds rate, drawing arbitrage flow.
But he judges the main driver is still speculators reassessing how far the Fed will tighten, not pure basis arbitrage.
Why do fed-funds futures matter more here?
White argues fed-funds futures carry stronger signaling power for Fed policy expectations than SOFR futures.
This means → SOFR futures extend further out in maturity and are heavily used to hedge interest-rate swaps, cross-currency swaps, and other products — their signal is heavily contaminated by non-policy factors.
Put simply = fed-funds futures are the "cleaner" read — participants are mostly betting on the Fed's next move; SOFR futures carry too much noise to isolate the true rate bet.
What is the broader market going through?
The Nasdaq 100 has pulled back more than 10% from its highs, entering a technical correction.
The Philadelphia Semiconductor Index has dropped over 10% in the past two trading sessions — one of the worst single-day performances in the index's 30-plus-year history — falling back to April lows.
Gold fell 5.4% in a single session despite both Treasury yields and the dollar declining. This reflects forced liquidation — investors selling gold not because they're bearish, but to meet margin calls on other positions.
Should we trust the speculators' call?
White concedes that speculators' historical positioning record in fed-funds futures shows no clear edge in predicting Fed policy.
In plain terms = they've been roughly as right as wrong in the past — not a reliable "smart money" weathervane.
Still, he argues that given current market turmoil and latent risks in AI-linked trades, a modest downward revision in the market's December-hike probability is reasonable — even if speculators don't get the direction right, their concern this time is not unfounded.
市场有风险，内容仅供研究参考，不构成投资建议。