Expectations for the Fed's next rate hike this month have posted the biggest swings since the start of the pandemic

• Pricing in Fed fund futures was "on a wild ride" this month before the FOMC meeting.
• Bespoke Investment Group says the spread in Fed funds futures in March was the widest since the pandemic started.

It's been a case of March Madness for financial markets.

Near-term expectations among traders for the Federal Reserve's key interest rate "have been all over the place recently," Bespoke Investment Group wrote Tuesday, just before the Federal Reserve's March rate decision was due Wednesday.

Pricing in Fed fund futures went "on a wild ride" this month before the FOMC meeting, logging a spread of 77.5 basis points between the between the implied high and low rate, the firm said.

That marked the widest monthly spread since March 2020 when the Fed unexpectedly delivered large interest rate cuts outside of its regular meetings as it rushed to respond to the onset of the COVID pandemic.

Since 1994, when the Fed started announcing policy decisions on the day of its meetings, the only other months that produced such a wide range in Fed funds futures were January and September 2001 and January and October 2008.

"Contrary to the current situation, each of those prior periods saw the Fed cutting rather than potentially raising rates, and we were right in the middle of nasty bear markets," Bespoke wrote.

Traders have spent an eventful month trying to gauge the next rate moves by the Federal Open Market Committee. Fed Chairman Jerome Powell in early March opened the door to a larger-than-anticipated rate increase of 50 basis points at the March meeting as policymakers continue to work on cooling inflation. He later told lawmakers that "no decision" had been made.

Then came the collapse and seizure of Silicon Valley Bank, which spurred questions about the role the Fed's aggressive rate hikes over the past year played in bank's eventual failure.

Odds that the FOMC on Wednesday will deliver a rate hike of 25 basis points were around 83% late Tuesday. That suggests traders heavily anticipate the Fed delivering its ninth straight rate increase at the same pace in February. A month ago, traders were looking at a 76% probability. Since then, investors have witnessed bank runs, the first seizures of lenders since 2008, and a $30 billion rescue package for one regional lender, First Republic Bank.

"[Even] though we've seen huge swings in Fed Fund expectations this month, the S&P is basically flat month-to-date," Bespoke also said.