NEW YORK- US Treasury yields shrank on Wednesday as jobs data revisions and minutes of the Federal Reserve’s July meeting reinforced expectations that the central bank will finally cut interest rates in September for the first time in over four years.
US two- to 30-year yields all slid to two-week lows.
The Bureau of Labor Statistics revised payrolls in the April 2023-March 2024 period to show a 0.5 percent reduction in jobs, equivalent to 818,000. This was at the higher end of market estimates of up to one million fewer jobs.
If the numbers hold steady through the final revision in February, it would be the largest downward revision since the 902,000 decline in March 2009.
“It seems like the impact of the tightness of monetary policy was greater than what the Fed initially thought,” said Joe Kalish, chief global macro strategist at Ned Davis Research.
“Tighter monetary policy did slow the economy, did slow jobs creation and that should allow the Fed to get going even though the economy is not in recession. They should start cutting by September.”
The Fed minutes said “the vast majority” of policymakers “observed that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting.”
The rate futures market fully expects a September rate cut. However, bets on a 50 basis-point easing rose to 37 percent from 25 percent on Tuesday, LSEG calculations showed. Odds of a 25-bp cut consequently decreased to 64 percent from 75 percent on Tuesday.
