As we previously noted, while speculators had been reducing their shorts in Treasury futures, they had added to Eurodollar shorts - pushing their bets on Fed rate hikes to record highs. However, as Bloomberg notes, signals are starting to emerge that traders who built up that heavy short, or hawkish, eurodollar base since the start of 2016 could be starting to throw in the towel on a March Fed rate hike.

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CME confirmed that Wednesday saw record volume in fed fund futures of 658.7k contracts, beating the previous record of 613k on Nov. 9, the day after the U.S. presidential election. Over the course of Wednesday’s session, a total of 283k Apr fed funds futures contracts traded, largest single-day volume seen in the contract. Open interest in the contract rose by 109k, suggesting some short covering before the minutes and potential new longs after the minutes.

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The March/May fed funds spread steepened to YTD wides, further suggesting short covering in March hike positions.

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Morgan Stanley said in a note, adding that “hawkish investors increasingly gave up on March and continued to shift their focus to May”

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So much for all that jawboning about March!!