Analysis: Weak Nonfarm Payrolls Diminish Fed Rate Hike Expectations, Bond Prices Rise

Odaily reported that U.S. Treasury bond prices rose, driven by a weaker-than-expected nonfarm payrolls report, as traders scaled back expectations for Federal Reserve interest rate hikes over the coming months. The yield on the two-year Treasury note, which is most sensitive to changes in monetary policy, fell 6 basis points to 4.11%, while the yield on the 10-year note fell 2 basis points to 4.46%. Data from interest rate swaps indicated that the market now sees approximately a 20% probability of a rate hike at the Fed's meeting later this month, down from 33% before the data release.

The market currently expects fewer than two rate hikes of no more than 25 basis points each by March 2027. Nonfarm payrolls increased by 57,000 last month, with data for the previous two months revised downward, while economists surveyed by Bloomberg had anticipated an increase of 113,000. Due to a significant drop in the labor force participation rate, the unemployment rate fell to 4.2%. (Jin Shi)