Fed Funds Futures Show 2020 Rate-Cut Bets Steady After Jobs

(Bloomberg) -- Futures traders maintained the amount of easing they expect from the Federal Reserve even after the U.S. jobs report showed payroll gains cooling more than expected.

January 2021 fed funds futures imply a rate of 1.345% at the end of 2020, in line with what was indicated just before the release of the data. Assuming an effective fed funds rate of around 1.55%, the market is pricing in around 20.5 basis points of further easing for this year. That means the market is still pricing in less than a quarter-point cut in 2020.

Nonfarm payrolls rose 145,000 after a downwardly revised 256,000 advance the prior month, according to a Labor Department report Friday. That compares with the median estimate of 160,000 in Bloomberg’s survey of economists. Average hourly earnings climbed a below-forecast 2.9% from a year earlier, the first sub-3% reading since July 2018.

Treasury yields briefly fell before returning to their pre-data levels, while the Bloomberg dollar index dipped and then recovered most of its ground. S&P 500 futures briefly pared their gains before bouncing.

To contact the reporter on this story: Alexandra Harris in New York at aharris48@bloomberg.net

To contact the editor responsible for this story: Benjamin Purvis at bpurvis@bloomberg.net

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