Fed rate cut expectations brought forward

Ahead of US nonfarm payrolls data, traders brought forward expectations for the first Fed rate cut by a month. Ahead of the critical US nonfarm payrolls data, market players brought forward expectations for the first rate cut by the Fed by a month and priced 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 hike is not on the table” following its interest rate decision. Two-year US bonds fell 17 basis points compared to Tuesday’s close to 4.87 percent. Wells Fargo Securities strategist Angelo Manolatos emphasized that bond yields experienced major fluctuations in response to employment data last year, and said, “I expect this historic volatility to continue if there is a big surprise. However, we need inflation data to start coming in softer for a sustainable rally.” According to a Bloomberg survey, the US economy is estimated to have created 240,000 nonfarm payrolls in April. Employment in March was 303,000, increasing expectations and supporting the idea that the Fed will become hawkish. If the Fed delays cutting interest rates, the U.S. unemployment rate could rise to 4.5 percent by the end of this year, according to Bloomberg Economics.