Veriton Investment

Traders Slash Bets on a December Cut as BLS Cancels Jobs Report

(Bloomberg) -- Bond traders all but scrapped their bets on a December interest-rate cut after the government canceled the publication of the October employment report, leaving Federal Reserve officials without a key piece of economic data before their final meeting of the year.

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The Bureau of Labor Statistics said Wednesday that the October numbers would be rolled into a report that will be published after the Fed’s December decision. The announcement prompted traders to scale back expectations for a quarter-point reduction, with odds now heavily pointing to policymakers keeping the benchmark rate on hold at the 3.75% to 4% range.

“This lowers the chances of a December rate cut,” Morgan Stanley economists wrote in a note. “An easing labor market is the key argument for a December rate cut.”

Market sentiment had already been shifting toward a greater likelihood of a hold at the December 10 meeting as several Fed officials have urged caution about reducing borrowing costs while inflation remains above their target. The updated BLS schedule leaves policymakers — and traders — without a key piece of evidence around which the case for a rate cut was built.

The announcement sparked a wave of selling in fed funds futures. Swaps market linked to the Fed policy rate are now pricing in about a 30% chance of a cut in December and just a total of about 21 basis points of easing by January. Before Wednesday, the odds were roughly 50-50.

Adding to the outlook, minutes from the Federal Open Market Committee’s October 28-29 meeting released Wednesday showed several Fed officials said it would likely be appropriate to keep interest rates steady for the remainder of 2025.

US Treasuries were little changed on the day, with yields on two-year notes — which closely reflect changes in monetary policy expectations — falling less than one basis point to 3.57%.

In a statement, the BLS said due to the record government shutdown October household data, which informs key statistics like the unemployment rate, could not be collected. The November employment report — which will include the October figures — will be published Dec. 16.

“We already knew that there wouldn’t be an October unemployment rate but the news that the November data will not get published until after the Fed meeting should be a disappointment for the market,” said Leah Traub, a portfolio manager at Lord Abbett & Co. “This reduces the probability of a cut given the divided FOMC.”

(Recasts with updated pricing.)