Fed interest rate cut expectation brought forward
Before the US non-farm payrolls data, traders brought forward their expectations for the first Fed interest rate cut by a month.
Before the critical US non-farm employment data, market actors moved the expectation of the first interest rate cut from the Fed forward by a month and priced it in November.
The pricing came after the best two-day performance in short-term bonds since January, following the Fed’s message that “an interest rate increase is not on the table” following the interest rate decision.
Two-year US bonds fell 17 basis points to 4.87 percent compared to Tuesday’s close.
Angelo Manolatos, strategist at Wells Fargo Securities, emphasized that bond yields experienced great fluctuations in response to employment data last year and said, “If there is a big surprise, I expect this historical volatility to continue. “However, for a sustainable rally, we need inflation data to start coming in softer.”
According to a Bloomberg survey, it is estimated that the American economy created 240 thousand non-farm jobs in April. In March, employment reached 303 thousand, increasing expectations and supporting the idea that the Fed would become hawkish.
According to Bloomberg Economics, if the Fed delays the interest rate cut, the US unemployment rate may rise to 4.5 percent by the end of this year.