US bond traders pared back expectations for a Federal Reserve interest-rate hike this month after weak September jobs data showed only 29,000 new nonfarm payrolls and a rising unemployment rate. Treasuries rose on Friday, pushing the two-year note yield down as much as 10 basis points to 4.69% and the 10-year yield down to 5.15%. Interest-rate swaps indicated traders priced in about a 20% chance of a Fed hike at the October meeting, down from nearly 30% prior to the data.
James Athey of Marlborough Investment Management Ltd said the report takes October off the table for the Fed, calling the 'US economy is strong' narrative nonsense. Charles Tan of American Century Investments noted the data gives the Fed more cover to stay on hold but warned they are just one or two inflation points away from turning hawkish. Traders also reduced bets on European and UK rate hikes, with money markets pricing a greater likelihood of two ECB hikes than three and three BOE hikes rather than four.
The data follows a monthslong selloff in the $32 trillion Treasuries market driven by elevated energy prices, AI infrastructure spending, and fiscal concerns. Fed officials including Vice Chair Philip Jefferson and New York Fed President John Williams have tempered expectations, while Dallas Fed President Lorie Logan said more hikes may be warranted to combat inflation, though high yields could also slow the economy.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing