After Trump attacks Powell, bond traders ramp up bets on Fed cutting rates in 2026.

Bond traders are increasing their bets, believing that the Federal Reserve will be more aggressive in cutting interest rates next year, as the market speculates that a change in leadership at the Federal Reserve will bring about the looser monetary policy that President Donald Trump has been calling for. This confidence is reflected in the yield spread between SOFR futures expiring in December 2025 and December 2026, which reflects the market's expectations for the magnitude of interest rate cuts by the Federal Reserve during that period. Although this yield spread has been slowly widening over the past few months as traders expected the Federal Reserve to delay rate cuts due to economic resilience, Trump's fierce criticism of Federal Reserve Chairman Jerome Powell has accelerated this trend. Currently, investors expect a 76 basis point cut in interest rates next year, compared to only 25 basis points expected in April of this year.