U.S. companies are turning to derivatives to lock in future borrowing costs, as corporate finance chiefs worry that financing will grow more expensive amid stubborn inflation, even if markets are bracing for rate cuts in 2023, Bloomberg News reported. The Fed has hiked short-term rates over the past year at the fastest pace in decades, and is widely expected to boost them again by a quarter-point on Wednesday. What happens after that is unclear: Markets are betting that the central bank will pause and start trimming rates later this year. But many company executives don’t foresee monetary easing by the end of December. Rate markets reflect some of that uncertainty: The ICE BofA MOVE index, which tracks fluctuations in options on a series of Treasuries, spiked in March as a handful of banks started collapsing, and at 128.18 on Monday was well above its 10-year average of about 72. Banks usually don’t disclose volumes for hedge derivatives, but they say they’re seeing more demand from corporates for instruments that help companies lock in borrowing yields.
