(Bloomberg) -- Traders of short-term interest-rate derivatives appear to be piling back into bets about the timing of the Federal Reserve’s first monetary policy tightening ahead of the central bank’s meeting next week.

At the end of the two-day session, the Fed is widely expected to announce plans to begin tapering its massive bond-buying program. Yet when it will begin raising interest rates remains the wildcard and that’s a favored angle for speculative trading in money markets.

Trading volumes of Eurodollar futures and options topped 20-day average levels on Friday. The volume of puts was more than three times call volume, while flows remained skewed towards downside liquidation, CME preliminary open-interest data suggest. 

As of last week, traders priced in almost a full quarter-point rate hike by July and two increases before the end of 2022.

“Fed lift-off is now fully priced in for Q3 22, with a second hike fully priced in for Q4 22,” Win Thin and Ilan Solot, strategists at Brown Brothers Harriman & Co. said in a note. “U.S. economic data remain firm and so we believe the upward trajectory in rates” is “intact.”

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