Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Traders Pare Fed-Hike Bets After Jobs, Treasury Curve Steepens

Published 02/09/2022, 14:40
Updated 02/09/2022, 14:40
© Reuters.

© Reuters.

(Bloomberg) -- Traders in the US rates market pared their bets on the amount of policy tightening they expect from the Federal Reserve after fresh jobs data that showed an uptick in the unemployment rate and the pace of wage growth remaining steady, although the drive toward higher borrowing costs remains very much intact.

The pullback follows a runup in expectations recently that’s been fueled by hawkish commentary from Federal Reserve officials and relatively upbeat economic data.

Traders trimmed the amount of rate-hike premium priced in for the upcoming decision on Sept. 21 by 2 basis points to 65 basis points, suggesting that a 75-basis-point increase is still seen as the more likely outcome than a move of 50 basis points, but slightly less so than before the labor market data. The expected peak for the Fed target this cycle was also trimmed slightly.

“It’s just one number so we wouldn’t want to go to far, but it’s consistent with where the Fed wants to go,” said former Fed Governor Randall Kroszner, now a University of Chicago Booth School of Business professor. “It has made markets somewhat happy as they were worried it could have been a blow out report here,” he told Bloomberg Television.

Front-end Treasuries gained in the wake of the data, pulling down the yield on the two year benchmark by 5 basis point to 3.45%, while the 10-Year slid by less than a basis point to 3.25%, steepening the curve. The Bloomberg dollar index briefly extended its decline for the day, although it remains close to an all-time high, while US stock futures bounced.

Nonfarm payrolls increased 315,000 last month following a revised 526,000 advance in July, a Labor Department report showed Friday. The unemployment rate unexpectedly rose to 3.7% as the participation rate climbed. Year-on-year growth in average hourly earnings was at 5.2%, the same as the prior month and slightly below the median estimate of economists.

 

©2022 Bloomberg L.P.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.