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cailianshe news, september 7 (editor: xiaoxiang)in one of the most anticipated u.s. "non-farm nights" this year, many investors may not care whether the u.s. job market is good or bad. they only care about one thing - after this night, will the federal reserve cut interest rates by 25 basis points or 50 basis points in september?

judging from the bets in the interest rate futures market, after a series of roller coaster-like pricing swings, the camp betting on the federal reserve to cut interest rates by 25 basis points this month seems to have the upper hand after all.

the following chart undoubtedly shows how fierce the confrontation between the "25 party" and the "50 party" in the us interest rate market was last night:

the weaker-than-expected performance of the non-farm payrolls quickly led to a 50 basis point rate cut bet gaining the upper hand at the first opportunity. however, soon after that, after repeated reviews of the non-farm payrolls data, people seemed to think that the non-farm payrolls performance was not too bad, and the probability of a 50 basis point rate cut fell back from 60% to 40%.

the more dramatic scene happened after the speech of fed governor waller, a long-time hawkish official within the fed and the last senior fed official to speak before the blackout period.

waller pointed out that day: "if the data supports consecutive rate cuts, then i think consecutive rate cuts are appropriate. if the data shows that a larger rate cut is needed, then i will also support it. when inflation accelerates in 2022, i strongly advocated an early rate hike, and now if it is appropriate, i will support an early rate cut."

at first glance, waller's remarks were clearly dovish, which caused expectations of a 50 basis point rate cut by the federal reserve to quickly rise to 65% after his speech.

however, a tweet from nick timiraos, a famous journalist known as the "new fed news agency", once again caused an unexpected change in the market. timiraos's understanding of waller's speech is that waller tends to support a 25 basis point rate cut at the beginning, and explicitly reserves the option of accelerating the rate cut "as appropriate" if "new data" shows that the economy has further deteriorated. according to timiraos, the "new data" waller refers to does not include this week's non-farm data.

after the release of the "(quasi-official) interpretation" by the "new fed news agency", market expectations for a 50 basis point rate cut by the federal reserve this month were completely driven down to 25%, and have not improved since then.

according to cme's fedwatch tool, as of friday's close, market traders expected the probability of a 25 basis point rate cut by the federal reserve this month to be 70%, and the probability of a 50 basis point cut to be 30%.

there is no doubt that in just one night, the bets on how much the fed will cut interest rates this month have fluctuated so frequently that one cannot help but sigh at the suspense of the fed's september interest rate meeting. although the camp supporting a "25 basis point rate cut" has temporarily gained the upper hand after one night, it is still difficult to determine whether they can really laugh until the day of the fed's interest rate meeting.

the frequent changes in market bets on non-agricultural night also led to an unprecedented scene in the us interest rate futures market last night:as of 1 a.m. beijing time on saturday, the trading volume of the second-tier u.s. federal funds futures contract, which is usually the most active on the expiration date, reached 900,000 contracts, setting a record for the highest single-day trading volume of any contract since this trading product appeared in 1988.

there were several large trades in the federal funds futures that day. at 10:04 a.m. eastern time before waller's speech, 12,000 contracts were sold at 95.025, and at 11:04 a.m. eastern time after his speech, 25,000 contracts were sold at 95.050, and at 11:32 a.m. eastern time, 20,000 contracts were sold at 94.98.

it is worth mentioning that investment bank goldman sachs also stated in a latest report in the early morning beijing time that the speeches of federal reserve board governor waller and new york fed president williams on friday indicated that the federal reserve decision-makers will consider cutting interest rates by 25 basis points at the upcoming september meeting.

jan hatzius, an economist at goldman sachs, noted, "we view these comments as consistent with our forecast of a 25 basis point rate cut in september, with fed leadership willing to cut rates by 50 basis points at subsequent meetings if the labor market continues to deteriorate."

earlier, in another report after the non-farm payrolls, goldman sachs said that the latest non-farm payrolls data would support its expectation that the federal reserve would cut interest rates by 25 basis points in september. hatzius said, "we believe that today's report is not enough to prompt the fomc to cut interest rates by 50 basis points at the september meeting."