Fed Rate Increase Odds Approach 80% as Job Growth Seen Rising – Bloomberg

Bond traders are becoming more certain the Federal Reserve will raise interest rates next month as economists say a U.S. jobs report Friday will show enough improvement to justify such a move.

The odds of a rate increase at the Fed's December meeting rose to 78 percent, the highest level since March, from 69 percent at the end of last week, futures contracts indicate. The report will show employers added 173,000 workers in October, versus 156,000 in September, according to a Bloomberg survey of economists.

The employment report "will authorize the rate hike in December," said Hiroki Shimazu, an economist and strategist at the Japanese unit of MCP Asset Management in Tokyo. "The U.S. economy continues to recover."

The benchmark U.S. 10-year note yield was little changed at 1.81 percent as of 2:32 p.m. in Tokyo on Friday, based on Bloomberg Bond Trader data. The price of the 1.5 percent security due in August 2026 was 97 9/32.

The Bloomberg Barclays U.S. Treasury Index has risen 0.3 percent this week. Investors seeking safety before the presidential election on Tuesday are helping support the market, Shimazu said.

For details on what to look for in the jobs report, click here.

Fed officials meeting this week said they would wait for "some further evidence of continued progress" in the economy amid "solid" job gains. The figures should confirm the "trend of broad-based job gains consistent with an ever-improving and healing labor market" and keep the Fed on course, said Emanuella Enenajor, an economist at Bank of America Corp. in New York.

Fed Chair Janet Yellen appears to be more inclined to let the economy run a little hot than to increase rates quickly, Tom Porcelli, the chief U.S. economist at RBC Capital Markets LLC in New York, said Thursday on Bloomberg Television. "We should be much more focused on how many more hikes does this Fed have left," he said. "There's only a handful more." The firm is one of the 23 primary dealers that deal directly with the U.S. central bank.

U.S. 10-year yields will fall to 1.73 percent by Dec. 31 and then climb to 2.11 percent by the end of 2017, based on a Bloomberg survey of economists, with the most recent forecasts given the heaviest weightings.

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