Bond traders lower expectations for Fed rate cuts this year

After the U.S. ISM manufacturing index expanded for the first time since 2022, bond traders expected less monetary easing from the Federal Reserve this year and briefly priced in a less than 50% chance of a first interest rate cut in June. Gregory Faranello, head of U.S. rates trading and strategy at BofA Securities, said the ISM report confirmed last week's assertion that the economy's resilience kept the Fed patient. For the bond market, this means interest rates will remain higher for longer. Nonfarm payrolls data for March, due out on Friday, is expected to show the slowest job growth in months.