【Bloomberg】Virus Overshadows All as Traders Brace for 2020 Fed Rate Cuts

Traders are so fixated on the coronavirus that, in the absence of compelling reasons to do otherwise, they’re piling into hedges in case the contagion is a disaster for the global economy.

Much of the activity involves bets that the Federal Reserve will feel increased pressure to reduce interest rates. A flurry of eurodollar options trades emerged this week that profit if the central bank delivers more than the one-to-two quarter-point cuts already priced in for 2020.

During the holiday-shortened week ahead, there’s little in the calendar of events that looks likely to pull investors away from virus headlines.

“The impact of the virus on the global economy is going to be significantly more than what people are expecting, and when the global economy goes south, the Fed steps in,” said Tony Farren, managing director at broker-dealer Mischler Financial in Stamford, Connecticut.

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