Citigroup’s short-term rates trading desk is putting real money behind a simple thesis: the Federal Reserve isn’t hiking this week. With the FOMC meeting scheduled for July 28-29, Citi is actively trading contracts designed to profit from an unchanged benchmark rate, even as swap markets assign a greater than 33% probability to a 25 basis point increase.
The setup: hawks circling, but not landing
The federal funds target range has sat at 3.50%-3.75% since the Fed’s June decision. That’s where Citi expects it to stay after this week’s meeting.
Akshay Singal, Citi’s global head of short-term interest-rate trading, has been clear about the bank’s positioning. The desk is actively leveraging contracts that pay off if rates hold steady, a bet that aligns with the broader market consensus but runs counter to the non-trivial hike probability priced into swaps.
Overall markets assign roughly a 70-80% probability to no change. The disconnect is that a meaningful minority of traders, enough to move swap pricing above 33%, believe Fed Chair Kevin Warsh and his colleagues might pull the trigger on a hike sooner than the majority expects.
