How Bond Traders Profited Off U.S. Wage of $24.45 an Hour
Yields on 10-year Treasuries (USGG10YR) hit a three-week high, suggesting traders were bracing for evidence the long-awaited pickup in wages would materialize and provide the catalyst for the Federal Reserve to raise interest rates.
While the economy rebounded last quarter from the steepest drop-off in five years and employers added jobs at a pace not seen since 1997, the lack of wage growth and any resulting inflation has become one of the biggest reasons why bulls in the $12.2 trillion market for Treasuries have gotten it right.
The 139 million workers that held non-farm jobs in July made an average $24.45 an hour, just a penny more than in the prior month, government data show.
At the start of the year, Wall Street prognosticators foresaw 10-year yields rising for a second year and reaching 3.44% by year-end.
Lackluster earnings growth also raises the likelihood Fed Chair Janet Yellen, who has increasingly focused on wages to gauge the health of the world’s largest economy, will maintain the central bank’s easy-money policies into a sixth year.
Government debt due in 10 years or more has returned 14% this year, the biggest year-to-date gain in almost two decades, index data compiled by Bank of America Corp.
Economists surveyed by Bloomberg say gross domestic product will increase 3% next year in the fastest expansion in a decade, after rising 1.7% this year.
Source: bloomberg
