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Traders add to bets Fed will raise rates in early 2015

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(Globalpost/GlobalPost)

(Reuters) - Traders of short-term U.S. interest-rate futures boosted bets that the Federal Reserve will wait until 2015 before raising short-term borrowing costs after a government report showed the U.S. economy added fewer jobs than expected in July.

Fed funds futures contracts pared earlier losses and rose after the U.S. Labor Department reported 162,000 jobs were added last month. Economists had expected a rise of 184,000 jobs.

The futures contracts, tied to the Fed's policy rate target, rise in price when traders see a bigger chance of a later Fed rate hike.

Futures prices suggested traders see a 65 percent chance of a rate hike in January 2015, with probabilities increasing through the first half of 2015, according to CME Group's Fed Watch, which generates probabilities based on the price of Fed funds futures traded at the Chicago Board of Trade.

Before the report, traders had put the chance of a January 2015 rate hike at 59 percent.

(Reporting by Ann Saphir; Editing by W Simon)

http://www.globalpost.com/dispatch/news/thomson-reuters/130802/traders-add-bets-fed-will-raise-rates-early-2015