Traders Ramp Up Bets on Half-Point Fed Rate Cut by Year-End (1)

Traders are piling into wagers calling for at least one outsized Federal Reserve interest-rate cut by year—end, betting on the potential for more aggressive policy than other market watchers currently foresee.

Recent activity in options linked to the Secured Overnight Financing Rate shows a buildup in positioning for a half-point reduction either when the Fed meets later this month or in December. That’s more than the two quarter-point cuts now priced into interest-rate swaps.

While the weeks-long US government shutdown has delayed the release of key data on employment and other metrics, any resolution will unleash a flood of information ...