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Stocks and Bonds Rally Together as Weak NFP Promises More QE
Posted to: Micro News
Tuesday, October 22, 2013 10:05 AM
Whatever chances existed that we'd see a reduction Fed asset purchases in 2013 are probably out the window after this morning's payrolls print. The data was at least sobering on several fronts, if not downright disheartening for econo-bulls. 2 out of the last 3 private payroll readings have been the lowest of the past 12 month period, and today's reading is lower than any reading in 2011.
Clearly, this isn't an economy that's ready to have the punch-bowl removed, even without the fiscal drag. Given the looming budged battle in Q1 of 2014, it makes the conclusion that much easier.
Bonds and stocks both agree (more QE = higher prices for both). Fannie 3.5s are up 21 ticks so far at 102-17 and 10yr yields are down 8bps at 2.53. S&P's have added just over 10 points on the day (which is more meaningful considering they were already pushing all-time highs).
Construction Spending just came in stronger than expected, but there's been no reaction. The lousy NFP numbers are dominating the day. That said, momentum in tradeflows looks to be leveling off near current levels regardless of inbound data.
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