Bond Shockwave: Yields Plunge After Jobs Miss--Are Fed Cuts Coming Sooner Than Expected?
The sell-off in rate expectations marks a fast turnaround from earlier in the week, when Fed Chair Jerome Powell said the labor market was still in balance. But Friday's data flipped the script. Fed Governors Christopher Waller and Michelle Bowmanboth Trump appointeeshad already voted to cut rates at the July meeting, arguing that waiting could damage the labor market. With the latest numbers now backing their view, the market seems to be catching up. That's why you're seeing the big move on the front end of the curve, said Jeffrey Rosenberg at BlackRock. In short: the doves may be winning.
Meanwhile, the bond bulls are back in control. Treasury futures volume spiked as traders dumped curve-flattening bets and loaded up on two- to five-year notes. PGIM's Michael Collins called it a big beautiful bond market, saying the belly of the curve now offers the sweet spotgood yield without too much risk. Stocks with high rate sensitivity could benefit if rate cuts materialize. Whether Powell bends in September or not, markets just got a reminder: one bad jobs print can change the game fast.
This article first appeared on GuruFocus.
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