Bond investors are bracing for Friday's labor market data, which could cool growing expectations that the Federal Reserve raises interest rates at its September meeting. The swaps market has been assigning more than a 50% chance of a quarter-point hike on September 16, odds that edged higher after the Financial Times reported Fed Chairman Kevin Warsh is prepared to raise rates if inflation readings are hot. Economists expect the employment report will show about 80,000 jobs were created in July, while a gauge of wage growth increased to 3.5% in June from 3.4%. Traders have been spending millions in the Treasury options market for protection against rising yields, with open interest in put options on 10-year note futures surging at strike prices corresponding to yields near 5%. Interest-rate strategists at Wells Fargo said the market is likely to respond more forcefully to a strong jobs report, with any signs of wage pressure able to rebuild hike expectations and cause two-year Treasury yields to rise.
HSBC Holdings PLC
Wells Fargo & Company
JPMorgan Chase & Co