Bond Traders Await May Jobs Data as Rate-Hike Bets Surge

Bond investors are bracing for the U.S. May employment report on Friday, June 5, which is expected to show the labor market remained resilient, reinforcing wagers that the Federal Reserve will lift interest rates by mid-2027. The data comes as escalating Middle East tensions drive oil prices higher, adding to reaccelerating inflation and tightening financial conditions. Benchmark 10-year Treasury yields rose 3 basis points to 4.47% on Monday in Asia, rebounding with crude oil, and have surged about half a percentage point since late February. Two-year yields, sensitive to Fed expectations, hover around 4%, above the central bank's 3.5%-to-3.75% policy range. An options trade last week targeted 10-year yields topping 5% within months, a level unseen since 2023. "If inflation numbers stay high and job growth remains solid, the market could price in a more aggressive shift higher in rates," said Gregory Faranello of AmeriVet Securities. George Catrambone at DWS Americas noted that rising yields are "creating some headwinds" for the economy, making short-term notes attractive.