US bond traders raise interest rate cut expectations this year, with some positions betting on a one-time 50 basis point cut next month.

Given the signs of a weakening US economy, bond traders are increasing their bets on the Fed cutting interest rates this year. Options positions linked to secured overnight financing rates indicate that investors are preparing for a potential rate cut at each of the remaining three Fed meetings this year, with a total expected cumulative rate cut of 75 basis points by 2025. Other trades related to SOFR are betting that the Fed will cut rates by 50 basis points at once during the September meeting. The weak non-farm payroll report last week has strengthened investors' confidence in the Fed cutting rates to support economic growth, a move that President Trump has been calling for. However, Fed officials have so far remained on the sidelines. A report released on Tuesday shows that US service sector growth stagnated in July, further intensifying market concerns.