Yields rise on stronger than expected NFP
May 5, 2025
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–Yields jumped Friday on stronger than expected payrolls of 177k (167k private). Unemp rate still 4.2%, Tens up nearly 10 bps to 4.322% with the yield seemingly gravitating to the same level as the current Fed Effective Rate of 4.33%. Shorter end led the way with 2s up 14 bps to 3.838%. On the SOFR strip SFRM6 was weakest, settling down 17 at 9674.5 or 3.255%. FFN5/FFN6 settled exactly at -100 bps (9576.5/9676.5). Easing is still expected of course, just being pushed back further in time. Just after Liberation Day, on April 7,, FFN5 ticked as high as 9639.5, the high settle was the next session at 9609.5 or 3.905%. Friday’s settle at 9576.5 is 4.235%, not even indicating 50/50 odds for an ease in June. Both Goldman and Barclays pushed back estimates for the next ease from June to July.
–Vol pulled back with big econ data now behind us. TYN5 111.5^ settled 2’16 vs about 20/64’s higher earlier in the week. FOMC is on Wednesday with no rate change expected. Auctions of 3s 10s and 30s today, Tuesday and Thursday.
–An item in WSJ notes that China stopped publishing some econ data, for example, unemployment of 16 to 24 yr olds ended a couple of years ago. But anyone can see the 10y note yield, stuck at 1.63%. A more dramatic price is Taiwan’s dollar, which has surged ~3% today following a 4% jump at the end of last week. (RTRS) “While Taiwan’s central bank has denied the White House was pressing for a rise in some Asian currencies as part of a trade deal, markets were sensing a shift anyway.” (32.48 on April 28 to 28.93 this morning).
–A couple of large trades Friday. Roll of 100k 0QU5 9700/9725cs into 0QZ5 9700/9725cs, paid 1, bought December (another indication of delayed easing expectations). Underlying contracts SFRU6 and SFRU7 both settled 9679.5.
Buyer of 40k SFRZ5 9900c ~1.25 synthetic, new position settled 1.0. SFRZ5 settled 9644.0 (-14.5).
