On December 4, recent themes continued to appear in the SOFR options market: traders are watching various structured transactions in the first two quarters of next year to hedge against the possibility that the Federal Reserve will cut interest rates several times, or even 50 basis points. Overnight index swaps linked to the Federal Reserve are currently priced at an effective interest rate of about 3.30% for next June meeting, which is about 60 basis points lower than the Federal Reserve's current effective interest rate. The theme that has continued over the past few trading days has been the bullish structure in January, March, and June SOFR options to hedge against higher interest rate cut premiums than the swap market's current pricing.

On December 4, recent themes continued to appear in the SOFR options market: traders are watching various structured transactions in the first two quarters of next year to hedge against the possibility that the Federal Reserve will cut interest rates several times, or even 50 basis points. Overnight index swaps linked to the Federal Reserve are currently priced at an effective interest rate of about 3.30% for next June meeting, which is about 60 basis points lower than the Federal Reserve's current effective interest rate. The theme that has continued over the past few trading days has been the bullish structure in January, March, and June SOFR options to hedge against higher interest rate cut premiums than the swap market's current pricing.