The probability of an interest rate cut in July is close to zero, and strong employment data has caused bond traders to abandon their bets.

U.S. Treasury prices plunged as stronger-than-expected non-farm payroll report prompted traders to pull back from bets on a rate cut by the Federal Reserve this month. Short-term Treasury yields fell, with the 2-year and 5-year yields rising by nearly 10 basis points, and the 10-year yield jumping by 6 basis points to 4.34%. Gregory Faranello, head of U.S. rates trading and strategy at AmeriVet Securities, said that the likelihood of a rate cut in July is now almost nonexistent, and that the Fed will pause its actions for the summer. He stated that "employment data is key in the Fed's policy adjustments," and this report gives Powell the space to stay put. Interest rate swap data shows that traders see the probability of a rate cut at the July 29-30 meeting to near zero, while the probability of a cut in September is around 75%. The data showed an increase of 147,000 in non-farm payrolls, significantly higher than the median estimate of 106,000 from Bloomberg's survey, with revisions to the previous two months' data. The unemployment rate fell from 4.2% to 4.1%.