Traders brace for US jobs data after Fed's Waller soothes bond markets

Global bond markets experienced a brief respite on Friday, marking the second consecutive day of stabilization. This pause in the sell-off came after Federal Reserve officials, including Governor Christopher Waller, conveyed a more dovish outlook during an interview at Reuters NEXT. Waller's comments suggested that underlying disinflationary forces remained intact and that the Federal Reserve might choose to keep interest rates unchanged at their upcoming September meeting, should new data support this trend.

This shift in sentiment provided a temporary reprieve for battered fixed-income desks, as benchmark borrowing costs across Europe and Asia retreated from multi-year peaks. In Germany, the policy-sensitive two-year Schatz yield remained flat at 2.957%, while the benchmark German 10-year Bund yield eased to 3.357% from its peak of 3.370%.

In Asia, Japan's 10-year government bond yield slipped to a one-week low of 2.900%, marking a retreat from heights above 3.000%. Despite this short-term reprieve, the duration rally in bond prices remains fragile, with institutional strategists cautioning that traders are closely watching the upcoming U.S. nonfarm payrolls report for August and the subsequent Consumer Price Index (CPI) release for further clues about central bank policy guidance.