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source: zhitong finance network

bond traders once had a hard time predicting how far the federal reserve would raise interest rates, but they found falling rates just as troubling.

jamie patton, co-head of global rates at tcw group inc., is convinced that even if easing comes quickly, it won’t be big enough and short-term u.s. treasuries still have plenty of room to keep rising. “the fed is going to have to cut rates faster and more aggressively than the market expects,” she said.

bob michele of jpmorgan asset management has a different view. he believes that as the economy continues to grow (albeit at a slower pace), the bond market has gotten too far ahead of the fed. as a result, he prefers higher-interest corporate bonds to u.s. treasuries.

the fed is about to cut interest rates, and u.s. debt will rise first

it is all but certain that the fed will begin cutting interest rates at its sept. 18 meeting, the first cuts since 2020. that prospect alone has sent bond prices soaring as traders try to get ahead of rate cuts, raising the risk that markets will once again be upended by a post-pandemic economy whose resilience has continued to surprise forecasters at the fed and on wall street.

the uncertainty in the outlook was underscored by the labor department’s jobs report on friday, with payrolls rising by a slower-than-expected 142,000 in august, marking the weakest three-month job growth since mid-2020. but the slowdown wasn’t enough to change expectations about how quickly and how much the federal reserve will ease policy in the coming months.