Traders Jack Up Fed Tightening Bets in Wake of Latest Jobs Data
- Swaps for July meeting briefly showed a hike fully priced in
- Two-year yield jumped 18 basis points to peak above 4.5% level
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Bond traders boosted expectations for one more Federal Reserve interest-rate hike in the wake of the latest jobs report, and are anticipating that the increase will most likely come in July.
The amount of tightening reflected in interest-rate swaps linked to the Fed’s June and July meetings climbed after data showed stronger-than-expected payroll growth for May, but a slower-than-forecast pace of wage gains and a jump in the unemployment rate. At one stage a quarter-point hike within the next two meetings was fully priced in. Investors also pared bets on how much subsequent policy easing they expect toward year-end following the anticipated peak of the tightening cycle.