Only members of the rate-cutting camp will be considered; rate traders eye a dovish shift at the Federal Reserve under Waller's era.

Glonghui, February 4th｜After U.S. President Trump nominated Kevin Warsh as the Chairman of the Federal Reserve, short-term rate investors have been actively hedging against the risk that this year's policy easing may exceed current market expectations. Since Trump announced the nomination on Friday, options flows linked to the Secured Overnight Financing Rate (SOFR) indicate that the market is betting Warsh will push for a more dovish policy shift after taking office before the June Federal Reserve meeting. The nomination still requires Senate confirmation. Swap traders expect the next 25 basis point rate cut in July, and tend to anticipate another cut before the end of the year. However, CME Group data shows that newly added SOFR option positions on Friday included bets on two rate cuts before the end of September. Further hedging demand emerged during Monday's trading session to guard against the possibility that more easing will be priced in for the third quarter.