Bloomberg: Bond traders cancel bets on a July rate cut after strong jobs data
Bloomberg, July 3rd. US Treasury prices fell sharply after the strong-than-expected jobs data, which prompted traders to exit their bets on a Federal Reserve rate cut this month. Short-term bonds led the decline, with two-year and five-year yields rising nearly 10 basis points. The 10-year yield rose 6 basis points to 4.34%.
Gregory Faranello, head of US interest rate trading and strategy at AmeriVet Securities, said: "The door for a July rate cut is closed," "the Federal Reserve will end its summer rate cuts,". "The Fed's signal for action is employment," this report gives Fed Chair Jerome Powell space to adopt a wait-and-see approach toward easing policies.
After the release of the jobs data, bets on a September rate cut became uncertain. Interest rate swaps showed that traders believed the probability of a Fed rate cut at the meeting on July 29th to 30th was almost zero, compared to about 25% before the report. The chance of a rate cut in September dropped to around 75%. After slight upward revisions in the previous two months, employment increased by 147,000 people, while the median forecast in a Bloomberg survey was 106,000. The unemployment rate fell from 4.2% to 4.1%.
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