The bond market is not expecting the first Federal Reserve interest-rate hike in nine years until at least March.
Traders pared bets on a 2015 hike after the Labor Department said the economy added 142,000 jobs, following a revised increase of 136,000 in August. Economists generally expected an addition of 200,000.
The data “increases the chances the Fed will have to wait until next year to begin liftoff,” said
Gary Pollack, who manages $12 billion as head of fixed-income trading at
Deutsche Bank AG’s Private Wealth Management unit in New York.
“The Fed has been overoptimistic for a long time on their forecasts for growth.”
Traders are pricing in just a
30 percent possibility that the Fed increases rates by its December
meeting, based on the assumption that the effective fed funds rate will
average 0.375 percent after the hike.
The chances climb to 39 percent by
January and 51 percent by March.
Before Friday’s labor data, traders had seen a 46 percent chance of a Fed liftoff by December.
Peter Tchir, Brean Capital LLC’s head of macro credit strategy in New York, said that it would be a policy mistake to hike rates in the near term.
A number of other analysts also agree that October is now ruled out, and the December possibility is put in doubt.
