As US Treasury Bonds Rise, Investors Await Job Data and Speeches by Federal Reserve Officials

According to the Wisdom Financial APP, the prices of US Treasury bonds are rising, as investors await the upcoming release of US labor market data and a speech by a Federal Reserve official to further clarify the monetary policy path. Data shows that US bond yields are all falling, while the market's bets on a Fed rate cut have not changed much.

Following the weak US July non-farm payrolls report released last week, investors are more concerned about the US economic outlook, leading to sharp fluctuations in the bond market over the past few days. The initial strong rebound in US bonds later lost momentum, and traders are now looking for more clues on how the US and the Fed will react.

This increases the risk of the latest data on US initial jobless claims that will be released tonight. The market currently expects that the number of initial jobless claims in the US for the week ending August 3 will drop to 240,000, below the previous value of 249,000. Some analysts point out that if the latest initial jobless claims exceed 250,000, it will be seen as a significant negative signal, and speculation about an "economic recession" will resurface.

Deutsche Bank strategist Jim Reid said, "Given last week's non-farm payrolls data, we remain highly vigilant about the relevant data on the US labor market." He added that the market will focus on the $25 billion 30-year US Treasury bond auction scheduled for 1 pm local time on Thursday, which is the "final test of investor interest in US bonds this week."

Demand for the $42 billion 10-year US Treasury bond auction on Wednesday was weaker than expected, with yields significantly higher than the indicated level before the auction. However, the $58 billion 3-year US Treasury bonds earlier this week attracted considerable demand.

Later on Thursday, the market's focus will be on the speech by Richmond Fed President Barkin at 3 pm local time. Barkin stated after the release of the US July non-farm payrolls report last week that the economic conditions are good, although it is not yet clear whether the labor market is recovering at a normal hiring pace or deteriorating more severely.

Meanwhile, market pessimism continues to grow. JPMorgan currently believes that there is a 35% chance of the US economy entering a recession by the end of this year, up from 25% at the beginning of last month.

Andres Sanchez Balcazar, Global Head of Bonds at Pictet Asset Management, said, "The market is struggling to digest all this information and is seeing it as a new macro situation." "What we are seeing is actually the unwinding of many consensus trades that were quite complacent in the market."

Currently, the swap market implies a 112 basis point rate cut by the Fed this year, significantly higher than the 65 basis points cut implied just over a week ago. The market also believes that there is a 70% chance of a 50 basis point rate cut by the Fed in September.

In response, Mohit Kumar, Managing Director at Jefferies, said, "We still believe that market expectations for a Fed rate cut are too high." He expects the Fed to cut rates by 25 basis points in September, totaling 50 basis points by 2024