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The Tell: A pre-jobs data bet may have have netted trader $10 million profit, report says

A bet on fed-funds futures just ahead of Friday's January jobs report may have netted a trader a $10 million profit, according to Bloomberg. Read More...

A big fed-funds futures bet placed just before the release of what turned out to be a blowout U.S. January jobs report may have netted a trader a profit north of $10 million, Bloomberg reported Friday.

The trader sold the January 2024 fed-funds futures contract FFF24, -0.26%, the report said, with the trade completed through a block sale of 13,996 contracts. That carried an approximate risk of $580,000 of profit or loss per each basis point move in the contract.

The trade was placed around 8:15 a.m. Eastern, Bloomberg said, citing traders familiar with the flow, with the contract priced at 95.59, implying expectations for an average fed-funds rate of 4.41% next January. The contract fell to a low around 95.37 in afternoon trade, implying a fed funds rate of 4.63%.

The short futures position appeared to remain in place Friday afternoon, the report said.

Fed-funds futures sold off after the much stronger-than-expected January jobs report and a sharp rebound in the Institute for Supply Management’s January service sector activity index.

Fed-funds futures on Friday afternoon reflected a 99.6% probability the Fed would raise the rate by 25 basis points to a range of 4.75% to 5% at the conclusion of its next policy meeting on March 22, up from an 82.7% probability on Thursday, according to the CME FedWatch tool.

For May, investors now see a 61.3% chance of another quarter-point rise to 5% to 5.25%, the level which the Fed has signaled is its expectation for a peak. On Thursday, investors saw just a 30% chance of a quarter-point rise in May.

The Dow Jones Industrial Average DJIA, -0.38% fell 127.93 points, or 0.4%, on Friday, while the S&P 500 SPX, -1.04% slumped 1% and the Nasdaq Composite COMP, -1.59% shed 1.6%. The Dow fell 0.2% for the week, while the S&P 500 rose 1.6% and the Nasdaq gained 3.3%.

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