Fed's Rate Hike Plans Hit by Weaker-than-Expected Jobs Report

The September jobs report was weaker than expected, showing only a gain of 29,000 nonfarm payrolls against forecasts of around 84,000. This has led to a shift in market expectations, with traders now giving a 77% probability that the Federal Reserve will hold interest rates steady at its October meeting instead of hiking them as previously signaled.

The Fed had hiked its benchmark rate by a quarter point to a range of 3.75% to 4% in September, citing high inflation. The committee had also penciled in one more hike for December. However, the weak jobs report has made this less certain.

Despite some initial volatility, bond markets have told a mixed story. The 10-year Treasury yield rose by almost 5 basis points to 5.281% after the weak data, which suggests that financing conditions may not be easing as much as expected.