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Bond Markets hit Weakest Levels since Early May After NFP; Mostly Holding Ground Now
Posted to: Micro News
Thursday, July 3, 2014 9:06 AM

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Who cares about the overnight session on NFP day?  Life began at 8:30am today with the release of June Nonfarm Payrolls.  Here's the run-down

  • June Payrolls +288k vs 212k forecast
  • May revised to 224k from 217k, April to 304k from 282k
  • Unemployment Rate 6.1 vs 6.3 forecast and previous, lowest since Sep 2008
  • Workweek 34.5hrs, unchanged
  • Participation rate 62.8, unchanged
  • Private Payrolls 262k vs 210k forecast, May revised to 224k from 216k
  • Earnings +0.2 vs +0.2 ($24.45 vs $24.39 in May)

This was unpleasant to bond markets at first glance, and indeed Treasuries hit their weakest levels since early May.  MBS weakened as well, but not nearly as much. 

Fannie 3.5s were down to 101-26 at their worst (-12 ticks on the day) but are only down 6 at the moment.  10yr yields, on the other hand, were up to 2.6922 and are still fairly close at 2.674 (+0.46 on the day).  While this is higher than the important 2.66% inflection point, losing less than 5bps feels like  a win given NFP at 288 vs 212.

Part of that may have to do with yesterday's assessment that a stronger number was very likely baked in.  The takeaway is that the baked-in number clearly wasn't as high as 288k, nor would anyone expect it to be.  But perhaps it was 230-240k, which makes the current weakness feel about right.

Also out at 8:30, but not market movers:

  • May Trade Deficit $44.39 bln vs $45.0 bln forecast, $47.04 bln in April
  • Jobless Claims 315k vs 314k forecast

Additionally, Draghi began his press conference following the ECB's policy announcement, but hasn't said anything that's moved markets yet.  Time is running out on that by now.

The only other data of the morning is the ISM Non-Manufacturing report at 10am.  On full business days that don't include NFP, this is one of the most important reports each month, but its relevance today is anyone's guess.

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