Bond traders are making significant bets that the Federal Reserve is about to raise interest rates further, and even if the market expects job growth to slow, it will be difficult to significantly alter the policy outlook.

Economists surveyed by Bloomberg expect the employment report to be released by the US Labor Department on Friday to show that nonfarm payrolls increased by about 90,000 in September, down from 162,000 the previous month. However, that pace of job gains is roughly in line with this year's monthly average, indicating that the labor market remains highly resilient and giving the Fed room to continue tightening monetary policy.

The Fed's current core objective is to bring down inflation, which has remained above target for the past five years.

Steve Boothe, head of investment grade and portfolio manager at T. Rowe Price, said: "For Treasuries to rally, payroll gains need to be close to zero or even negative, and wage data must fall well short of expectations."

"In the current environment, the bar for the job market to trigger a Treasury rally is actually quite high."

On Thursday, the selloff in the US bond market eased somewhat. Concerns over rising debt burdens in Europe drove investors into Treasuries seeking a safe haven; meanwhile, two Fed officials, Michelle Bowman and Philip Jefferson, said policymakers should observe for a longer period before deciding whether further rate hikes are needed. As a result, the two-year Treasury yield fell by about 10 basis points, dropping below 4.8%, and the 10-year Treasury yield also retreated from a 24-year high.

But analysts said the rebound was not driven by a change in the US economic outlook or by any easing of the pressures pushing yields higher. Oil prices remain near $100 per barrel, and there has been no clear progress in ending the war with Iran. High federal deficit spending combined with the artificial intelligence boom continues to provide momentum for economic expansion. Inflation has already jumped above 3% this year.

Futures traders slightly reduced the scale of their rate hike bets, expecting the next hike to come at the December meeting, but still anticipating at least three 25 basis point increases by July next year.

However, the prior sharp selloff in the bond market has made market trends difficult to predict. When US inflation data came in slightly below expectations on Wednesday, Treasuries briefly rose, but the gains were quickly erased and yields climbed again toward multi-decade highs.

Analysts said that with market positioning heavily tilted toward higher rates, a significantly weaker-than-expected jobs report could prompt investors to unwind some bets and potentially extend Thursday's rally.

Ian Lyngen, head of US rates strategy at BMO Capital Markets, said: "If the data are interpreted by the market as a signal that the labor market is coming under pressure earlier than expected, the bond market rally will be much larger than the decline if the data meet or slightly exceed expectations."

Still, there is insufficient confidence that the selloff has peaked. Karen Manna, fixed income strategist and portfolio manager at AllianceBernstein, said that since the Fed's September 16 rate hike meeting, her bearish sentiment has eased somewhat, but she is still not convinced that yields have peaked.

Manna said: "The core logic for a sharp rise in rates has largely played out, but yields could still continue to move higher."