Bond Traders Bet on Fed Rate Hike, Non-Farm Employment Data to be Key Test

On June 1, bond traders are focusing on this week's key employment report to confirm their bets: the strength of the U.S. economy is sufficient to drive the Federal Reserve to raise interest rates by next year. In addition to developments in the Middle East, another focal point will be the monthly employment data to be released on Friday, which is expected to show that the labor market remained resilient in May. Coupled with high oil prices and accelerating inflation, this may reinforce market expectations that the Fed will eliminate its dovish stance in the June statement. This will be the first meeting since Kevin Walsh took office as Fed Chair. Traders expect the Fed to raise rates by mid-2027 or even sooner, highlighting how the war in Iran has led to soaring energy prices and is disrupting previous market expectations of a quick rate cut after Walsh's appointment. It is estimated that since the conflict began, the surge in bond yields has tightened financial conditions equivalent to approximately 75 basis points of Fed rate hikes. (Sina Finance)