The November US employment statistics released on the 8th show that growth in the number of employees and wages exceeded market expectations, and expectations for aggressive monetary easing next year have receded. US bond yields rose.
The yield on two-year Treasuries, the benchmark most closely related to U.S. policy interest rates, rose 14 basis points (bp, 1 bp = 0.01%) at one point, the largest single-day increase since June. All maturities rose by at least 6 basis points on the day.
Swap traders now expect U.S. interest rates to fall by about 110 basis points next year, down from more than 120 basis points before the employment report was released. Non-farm payrolls increased by 199,000 from the previous month in November, exceeding the median estimate of 185,000 for economists. The unemployment rate unexpectedly fell to 3.7%.
“This is a good statistic, and I think the Fed needs to look at this and accept the early interest rate cuts next year that the market has already priced in,” Michael Darda, chief economist at RothMKM, said in an interview on Bloomberg Television. I don’t think I’ll ever be moved by that thought.”
The probability of a rate cut in March, as reflected in the interest rate futures swap market, is 40%, down from more than 50% before the employment report was released. This has vindicated the opinion of strategists who had pointed out that the bond market, which is pricing in interest rate cuts as early as March next year, is being too ahead of its time.
“These statistics will make it hard to talk about rate cuts,” said Gang Fu, managing partner at Winshore Capital Partners. “It’s not as weak as it used to be. Inflation also doesn’t support easing.”
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news-rsf-original-reference paywall">Original title:Fed Rate-Cut Exuberance Ebbs After Jobs Data, Boosting US Yields(excerpt)
2023-12-09 01:01:40
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