Bond Traders' Fed Wagers Now Hinge on Jobs With Italy Angst Fading

  • Prospect of four 2018 hikes could get new life, NatWest says
  • For TD, more aggressive rate path depends on hourly earnings
Photographer: Alessia Pierdomenico/Bloomberg
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After Italian politics whipsawed Treasuries this week, bond traders are about to turn their focus back to U.S. domestic prospects with Friday’s release of the monthly labor report.

At stake is the market’s outlook for the path of the Federal Reserve in the run-up to a widely expected June 13 rate increase. Traders are rebuilding bets on Fed tightening after Italy’s crisis roiled markets Tuesday. They’ve priced back in expectations for three total increases in 2018, while stopping short of factoring in a fourth. Just a couple of weeks ago, wagers on that more aggressive pace were starting to take hold.