We got new all-time highs for the S & P 500 (again) on hopes that the Federal Reserve will not only imminently cuts rates, but possibly even by a super-sized half point now in September. The 10-year Treasury yield dropped precipitously after the nonfarm payrolls data underwhelmed with just 22,000 new jobs versus the expectations of 75,000 for August. I want to use iShares 20+ Year Treasury Bond ETF (TLT) to capitalize on a continued move lower in interest rates. US10Y YTD mountain 10-year Treasury yield, YTD Revisions came into play again too. Nonfarm payrolls data for June was revised down from an initially reported 14,000 job additions to a loss of 13,000 jobs. That’s the first negative monthly nonfarm payroll number since 2020. As markets prepare for additional political fodder as this data may supply President Donald Trump with a “too late” perspective for Fed Chairman Jerome Powell, it is important to note that the Fed has been on pause since last fall with the hope of inflation getting closer towards their seemingly unattainable 2% target. Inflation is still higher than they want. This predicament should solidify the Fed cutting by a total of 75 basis points before the New Year’s Eve ball drops in Time Square, NYC. (1 basis point equals 0.01%.) I am not in the camp of a 50-basis point cut in September despite the fact that the CME Group’s Fedwatch tool suggest a nearly 15% now. However, I do believe the 10-year note yield will tuck under 4% and the Fed will telegraph at least two more rate cuts at their September meeting. The 10-year yield should revisit 3.75%. I want to use a risk reversal headed into the Fed’s Sept. 17 decision as the 50-basis point rate cut narrative will get louder, but I doubt Powell will buckle. The Trade Sell the TLT $88 9/19/25 put for $0.75 Buy the TLT $88 9/19/25 call for $1.15 This risk reversal is a debit spread costing an investor $0.40 per one lot or $40 TLT was trading above $88 when this spread was executed after the opening bell on Friday. DISCLOSURES: (Long this risk reversal) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
A trade that wins if rates keep going lower following the weak jobs figures
