If risk assets fall sharply in the coming weeks.” “In the short term, we can think of one scenario where bonds rally materially. “There is no magic level of yields that, when reached, will automatically draw in enough buyers to spark a sustained bond rally,” analysts led by Ajay Rajadhyaksha said. Barclays Plc analysts wrote in a note that global bonds are doomed to keep falling unless a sustained slump in equities revives the appeal of fixed-income assets. economy added 170,000 workers in September, slightly less than the previous month.Įven with markets showing signs of calm, strategists’ reports highlight deep concern about the long-term economic toll of higher-for-longer interest rates. In the monthly employment report, economists surveyed by Bloomberg predict the U.S. A higher-than-forecast jobs number could trigger “another wave of dollar-buying and bond-selling,” he added. “Friday’s payrolls data, and next week’s inflation number will decide whether the 10-year Treasury yield goes up to 5 per cent or down to 4.5 per cent,” Societe Generale strategist Kenneth Broux said. Currently, swaps are pricing a one-in-four chance of a Fed move higher next month. Investors are keen to see if Friday’s labor data cements bets on a November pause from the Federal Reserve. While markets have stabilized from the recent rout, investor sentiment remains fragile. companies added the fewest number of jobs since the start of 2021 last month. The selloff paused after private payrolls data showed U.S. Earlier this week, the unexpected rise in August job openings spurred the rout in Treasuries. Claims ticked up to 207,000 in the week ending Sept. Thursday’s report showed a slight rise in the number of people filing for unemployment benefits compared with the previous week. “In the past, the Fed seems like they have always adjusted to the markets, but this go around, I think the markets have had to adjust to the Fed.” “The markets are finally coming to grips with higher long-term rates, and I think we’re seeing more of that reflected in the markets,” said Chris Gaffney, president of world markets at EverBank. The head of the San Francisco Fed Mary Daly - also a non-voting member - said that the central bank could hold rates steady if jobs and pricing showed signs of slowing. Richmond Fed President Thomas Barkin, who does not vote this year, said the market is seeing a return to a more normal rate seen in prior years. benchmark rate at a 22-year high Fed speakers reinforced the higher-for-longer message and said data would be key ahead of the November meeting. government bonds, now some money managers are saying 6 per cent is on the table. Wall Street has been keyed in on rising borrowing costs and saw 5 per cent as a likely target for longer-term U.S. The 30-year, which recently hit the 5 per cent level, advanced toward 4.9 per cent in Thursday’s session. 10-year drifted down to 4.72 per cent after touching a 16-year high around 4.88 per cent this week. 10-year bond moves close to 5 per cent, “we could easily see the S&P 500 fall through the 200-day moving average and at that point we could see an acceleration of the declines in stocks,” Essaye wrote in his The Sevens Report newsletter. If the report is too hot and the yield on the U.S. “Tomorrow’s jobs report may be the most important one of the year,” according to Tom Essaye, a former Merrill Lynch trader. With the gauge already down roughly 8 per cent from July highs, a too-healthy number from Friday’s monthly non-farm payrolls could push yields back up and stocks down. The S&P 500 has been hovering above a key support level that - should it fall below - technical analysts warn could drive a steeper drop. equity benchmarks ended the day pointing lower Thursday after the latest data showed weekly unemployment claims holding near historical lows. Stocks and bonds have backed away from the worst of this week’s slump, though key data Friday threatens to spur a fresh slide.

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