US Treasury yields rose across the curve on Wednesday. The 10-year note rose by nearly 1.5 basis points to 4.155%, after a stronger US jobs report reduced expectations for Fed rate cuts.<\/p>\n
The 10-year yield rebounded from about 4.125% after the BLS said January nonfarm payrolls rose by 130K, above the 70K forecast. The unemployment rate fell to 4.3% from 4.4%, below the Fed\u2019s 4.5% full-year estimate.<\/p>\n
Markets no longer expected a March rate cut, with 27 basis points of easing priced towards July 2026. For 2026, markets priced two cuts, with the first expected in July.<\/p>\n
Kansas City Fed President Jeffrey Schmid said rate cuts could allow inflation to stay higher for longer. He said policy should remain restrictive if inflation is near 3%.<\/p>\n
The US Dollar Index fell 0.14% to 96.75. Five-year breakeven inflation fell to 2.47% from 2.5%, and the 10-year measure fell to 2.32% from 2.35%.<\/p>\n
Initial Jobless Claims and Fed speeches are due on Thursday. On Friday, January CPI is expected to ease, with headline and core inflation seen falling from 2.7% and 2.6% year on year to 2.5%.<\/p>\n
Based on the strong January jobs report, we see the Federal Reserve has a clear justification to delay interest rate cuts. The market is now pricing the first move for July 2026, a significant shift from just a few weeks ago when a spring cut seemed possible. This “higher for longer” reality means we should anticipate continued tension in short-term interest rate markets.<\/p>\n
The immediate focus is the upcoming Consumer Price Index (CPI) report, which creates a prime opportunity for volatility trades. Options strategies like straddles on interest rate-sensitive ETFs, such as the TLT, could be effective to capitalize on a large market move regardless of the direction. The discrepancy between a hot labor market and falling inflation expectations suggests the market is uncertain, and this CPI print could force a decisive move.<\/p>\n
Looking back, we saw how sticky inflation proved to be throughout 2025, even after the aggressive rate hikes of the preceding years. The Fed was forced to hold rates steady for much of last year, disappointing those positioned for an early pivot. This recent history shows we should be cautious about front-running rate cuts, as strong economic data can quickly reverse market sentiment.<\/p>\n
Recent statistics support this cautious view, making the Fed\u2019s hawkish stance more credible. For instance, the CME FedWatch Tool now shows the probability of a July rate cut has dropped from over 70% last month to just 52% following the jobs report. Furthermore, last week’s ISM Services PMI report showed a surprisingly robust reading of 53.8, indicating that the largest sector of the economy continues to expand at a healthy pace.<\/p>\n
This environment suggests positioning for a flatter yield curve, as short-term rates are likely to remain anchored while longer-term yields may still drift lower on disinflation hopes. Traders could use SOFR futures to bet on the 2-year and 10-year yield spread compressing in the weeks ahead. With the VIX currently hovering near a low of 13.5, purchasing VIX calls is an inexpensive way to hedge against an equity market downturn if inflation data comes in hotter than expected.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Treasury yields climbed after strong jobs data cooled Fed cut hopes; 10-year hit 4.155%, markets reprice.<\/p>\n","protected":false},"author":62,"featured_media":17023,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-41630","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/41630","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=41630"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/41630\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17023"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=41630"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=41630"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=41630"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}