On Tuesday, while everyone was anxiously awaiting the US CPI report for March, a foreign media report took the financial world by storm. According to the report, an unknown trader made a single record deal, betting that Wednesday's CPI data will be moderate, thus forcing the Federal Reserve to cut interest rates earlier. However, the results were not as expected. So, after the release of the CPI data on Wednesday, the trader made headlines once again, this time because his liquidation was so amazing.

On Tuesday, US short-term interest rate futures — overnight guaranteed financing rate (SOFR) futures due in December 2024 — had an extremely high-profile transaction during the trading session, the largest of its kind. The exact time was shortly after 9 a.m. New York time on Tuesday, when 75,000 SOFR futures contracts due in December 2024 changed hands. The Chicago Mercantile Exchange confirmed that this was the largest transaction for this product to date.

Bloomberg widely reported the deal at the time because it alone boosted the rise in the US Treasury bond market that day. After all, people think that no one would bet tens of millions of dollars without knowing anything. Everyone speculates that this deal may have been initiated by a buyer. It coincides with the market's expectation that the March CPI data will be moderate, which may revive expectations that the Federal Reserve will cut interest rates early. On the same day, State Street Global Advisors (State Street Global Advisors) also boldly predicted that the Federal Reserve would drastically cut interest rates by 50 basis points in June. The speech of US President Joe Biden's economic assistant Lael Brainard (Lael Brainard) also boosted people's confidence in this outlook.

By the time the deal was completed, the price on the swap market reflected the Fed cutting interest rates by about 65 basis points before the end of the year. At the time, the SOFR futures trading price due in December 2024 was slightly higher than the price of this bulk transaction, indicating that market activity continued and investors were interested in hedging or speculative interest rate changes.

However, in hindsight, the screen-brushing trader actually didn't know anything. All indicators of the CPI data that were actually released on Wednesday were strong, causing the market to plummet, and the deal “exploded” in a spectacular way. Bloomberg calculations found that shortly after the CPI data was released, based on the price trend of futures in December 2024, the loss on this position was about 50 million US dollars.

After the release of the hot CPI report, full pricing for the first 25 basis point interest rate cut this year has been transferred from September to November. The market currently expects to cut interest rates less than twice throughout 2024. Although it is unknown who placed the record futures bet described above, or whether it was carried out in conjunction with other trades, such a large-scale transaction (each basis point change involving $2 million in gains or losses) suggests that it was intended to offset a single potential position, probably a bearish position, although it is currently unclear.

Another data released by the Chicago Mercantile Exchange on Wednesday showed that this was a new bet or hedging deal rather than a short return to an existing position. The unknown trader wasn't the only victim of Wednesday's hot inflation data. On Tuesday, State Street Bank predicted that the Federal Reserve would cut interest rates by 50 basis points as early as the June meeting. The giant's face was hurt and fast. Swap transactions currently reflect that the June FOMC meeting will only cut interest rates by 3 basis points, which is equivalent to only a 12% chance of cutting interest rates by 25 basis points in the same month. If State Street Bank had invested in its own ideas, now that money is gone.