Bond Traders’ Big Bet for 2026 Vindicated by Soft US Job Growth

Group 1 - The employment report indicated job growth was below forecasts, maintaining expectations for additional Fed interest-rate cuts to support the economy [2] - The steepener trade, a popular bond strategy, has been successful, with the gap between 2- and 10-year Treasury yields reaching its largest in almost nine months [3] - The strategy is expected to continue performing well over the next 12 to 24 months, according to fixed-income portfolio managers [3] Group 2 - The upcoming consumer-price figures are projected to show elevated inflation, which may influence the Fed's decision to pause rate cuts [5] - Despite the positive job report, which showed a decrease in the jobless rate, there are indications that the curve wager may unwind due to fewer expected rate cuts [7] - The momentum for the steepener trade is waning, as a stable labor market and persistent inflation suggest fewer cuts may be necessary [6][7]