Derivatives traders bet the Fed will cut rates twice this year

U.S. Treasuries rose, yields fell, and mixed data on the labor market kept traders betting that Fed officials will cut interest rates this year. Although the June nonfarm payrolls report showed higher-than-expected job growth, data in previous months was revised downward and unemployment rose. Derivatives market traders further strengthened their bets on rate cuts, and their expectation of two rate cuts this year once again reached 100%. The probability of the Fed cutting interest rates as early as September is currently believed to be around 76%. Jeff Klingelhofer, co-head of investment at Thornburg Investment Management, said: "I think there is still room for U.S. bonds to rise. Judging from Powell's recent statements, he has a strong tendency to start a moderate easing cycle. The labor market is returning to a better balance, inflation faces downside risks, and the economy may slide into recession." Jeffrey Rosenberg, portfolio manager at BlackRock, said: "To consolidate the expectation of a rate cut in September, another round of data is needed. More importantly, the inflation data next week and the data next month are more important." (Jinshi)