Treasuries Selloff Deepens as Traders Push Back First Rate Cut

A rough start to the year for bond traders just got worse as data showed a buoyant US labor market with few of the stresses that could prompt the Federal Reserve to lower interest rates.

Treasury yields rose and traders ceased fully pricing in a Fed rate cut before September in the wake of another hot reading on job creation. US payrolls rose in March by the most in nearly a year and the unemployment rate held steady.

US government bonds yields approached their highest levels this year, with the benchmark 10-year rate jumping nine basis points to about 4.40% as the fresh dose of data doused hopes that the Fed would move to reduce rates soon.

Swap contracts that predict the central bank’s rate decisions cut the probability of rate cut in June to about 52%, and to less than 100% for July. For all of 2024, traders now see only about 67 basis points of rate reductions — lagging behind the three quarter—point reduction Fed officials have signaled.

“This data certainly doesn’t give the Fed the impetus to cut anytime soon,” said Peter Tchir, head of macro strategy at Academy Securities Inc. “Treasury yields are poised to continue to move higher. The strong data and rising oil prices likely means the 10—year yield is headed to crack 4.5% to 4.6%.”

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