US bond traders are betting that the Federal Reserve will soon raise interest rates. The inflation report on Wednesday is highly anticipated.

Bond traders are aggressively building positions, betting that the Federal Reserve will raise interest rates multiple times in the coming months, with some predicting that the earliest action could come at the September policy meeting. This is the current theme in the options market linked to secured overnight financing rates. SOFR is sensitive to Federal Reserve policy. Since the unexpectedly strong US jobs report last Friday led to a sell-off in the bond market, traders have been increasing their bets on rate hikes.