Aug 5. Terrorism concerns resurface
–Very different reactions when comparing this employment report and the last one. On July 5 rates had been moving higher in the month prior, and new highs were set in many rates/spreads. On that day, NFP was 195 with 7.6 rate and Avg Hrly earnings +0.4. Ten year yield hit 274, 2/10 spread 232, red/gold euro$ pack spread 287, all new highs. Last week’s news, prior to Friday’s number, suggested a better economy with ISM surging and Jobless Claims falling. Indeed on Thursday curve measures did make new highs, with 2/10 at 238 and red/gold 289, ten yr yield just shy of old high at 272. On Friday of course, the ten year yield dropped 12 bps to 260, 2/10 fell 9 to 230.5 and red/gold plunged over 16 bps to 273, as payrolls rose 162 at a rate of 7.4. The conclusion is that sellers were exhausted. Those that had needed short hedges had already placed them, weaker longs had already capitulated. Which augers for a drift to higher prices, unless capped by this week’s auctions of 3’s, 10’s and 30’s. Probably the most bullish item in this report (for fixed income) was the fall in avg hourly earnings from +0.4 to -0.1, a disinflationary signal. HuffPost:The labor-force participation rate, which measures the percentage of working-age Americans who are working or looking for work, fell to 63.4 percent in July, near a 35-year low.
–For the first time (I believe) the CME paused trading for 5 seconds in tens and bonds just prior to the employment release (after 7:29 but before 7:30) as large buy orders allegedly came in that would have run the market up before the actual data. Or before the data was released to the vast majority. That’s one way to uphold the embargo…
http://blogs.wsj.com/moneybeat/2013/08/02/cme-treasury-futures-trade-paused-just-before-jobs-report/
–Non mfg ISM today expected 53.0. Not much other economic news out this week. Terrorism concerns may provide marginal treasury bid as the White House held a high level meeting on new threats.
