US Jobs Data Triggers Rate Hike Expectations

The US jobs data for September came in lower than expected, causing expectations of a Federal Reserve interest rate hike to fall. Nonfarm payrolls increased by only 29,000 jobs last month, short of the 90,000 gain economists had predicted. This led to a decrease in bets on an October rate rise from the Fed, with traders now seeing a roughly 21% chance that the Fed will hike rates by 25 basis points in October.

The US Labor Department's employment report showed job growth for August was revised down to 133,000 from a previously reported 162,000 surge. Joseph Purtell, senior vice president, portfolio manager and rates trader at Neuberger, said the labor market print was not as hot as expected, but still described it as largely stable.

The Nasdaq Composite rose by 1.2%, leading Wall Street, while the Dow Jones Industrial Average and S&P 500 also saw gains. The dollar fell against the euro and yen. US Treasury yields initially lost ground after the jobs data, but were later higher on the day, with some investors noting that the jobs report was not so weak that it removed chances for the Fed to raise rates in coming months.

The global bond market has been selling off in recent weeks due to the ongoing selloff and rising energy prices. The yield on benchmark US 10-year notes rose by 4.93 basis points, while the 2-year note yield increased by 4.6 bps. The gap between German and French 10-year yields hit its widest level since 2011.