Bond Traders to Face a Reality Check With Friday’s Jobs Report
- Treasury yields priced for an accelerating slowdown in hiring
- Swaps indicate 125 basis points of Fed cuts next year
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Bond traders who powered a ferocious rally in the $26 trillion US Treasury market are about to find out if they’ve gotten ahead of themselves.
Softening inflation and employment data in the past month have convinced investors that the Federal Reserve is done raising interest rates and ignited bets that cuts of at least 1.25 percentage points are in store over the next 12 months. Treasury yields, which touched highs of 5% as recently as October, have declined sharply, with the US 10-year benchmark sliding more than three-quarters of a percentage point.