The largest single bet in history! On the eve of Friday's non-farm payrolls, the U.S. interest rate futures market witnessed a "massive bet on a change in the situation."

Ahead of the key employment data release this Friday, a massive bet of 200,000 contracts has drawn market attention.

On Tuesday, the U.S. federal funds futures market saw the largest single trade in history. According to the Chicago Mercantile Exchange, this record-breaking large transaction was executed at 10:04 AM New York time on Tuesday, with a trade size of 200,000 January federal funds futures contracts.

Reports citing informed traders indicate that this was a sell transaction, with a risk exposure of approximately $8 million for every 1 basis point change. The motivation behind the trade remains unclear. The open interest data released during the Asian session on Wednesday will reveal whether this trade represents a new position or a closing operation.

The timing of this trade is sensitive, coinciding with the release of U.S. labor market data on Friday. If this contract represents a new position, it would benefit from changes in expectations surrounding the Federal Reserve's policy meeting at the end of January. Current market pricing indicates a 15% probability of a rate cut at this meeting.

(Probability of Federal Reserve rate cuts in 2026)

Unprecedented Trade Size

This trade of 200,000 contracts has set a new record for a single transaction in the federal funds futures market.

The previous largest trade occurred last September, involving 84,000 contracts, and the record before that was 72,000 contracts in January 2024.

As of 2 PM New York time on Tuesday, the total trading volume for January contracts approached 700,000, below the single-day record of 883,000 set on November 21 of last year.

U.S. federal funds futures settle monthly, with the settlement price being the average effective federal funds rate (EFFR) for the month, thus closely tracking market expectations for the Federal Reserve's policy rate path.

Market participants have differing views on the intent behind the trade. If it is a closing operation, it may indicate that a large institution is unwinding risk exposure ahead of key data. If it is a new position, it suggests that traders are betting that the expectations for a rate cut in January will further weaken or disappear.

The last trading day for the January contract is January 30, shortly after the policy meeting announcement on January 28. Currently, the effective federal funds rate is 3.64%. If this trade represents a new position, as long as this rate does not fall below the current level in the coming days, it will benefit that position.

Considering the $8 million risk exposure per basis point, even minor changes in market expectations can lead to significant gains or losses.

The emergence of this trade comes at a relatively calm time in the market at the beginning of the year, and its large size stands out in an otherwise uneventful start-of-year trading environment