Bonds Rapidly Repricing Reality After Jobs Report

Yes, today was “just one” jobs report.  And yes, there are many examples of subsequent reports signing a different tune in cases like this.  But today’s astonishingly large bond rally wasn’t only about today, nor was it only about this week.  Bonds are in the process of repricing an updated reality and correcting from the uptrend in rates seen in the first 4 months of the year.  This began as early as the month of May.  The past few weeks have put a bit of an exclamation point on the shift with inflation data leading the charge.  From there, the past few days have done the same via a combination of Powell stepping out of the market’s way and now today’s “food for thought” jobs data.  Bottom line: if inflation falls any more and if labor market trends continue at even a slow pace in the same direction, the Fed is behind the curve on cuts and the market is trading accordingly until the data says otherwise. 

Econ Data / Events

Nonfarm Payrolls

114k vs 175k f’cast, 179k prev

Unemployment Rate

4.3 vs 4.1 f’cast, 4.1 prev

Participation rate

up 0.1 (offsets U/E slightly)

Earnings

0.2 vs 0.3 f’cast/prev

Market Movement Recap

09:52 AM Huge rally after jobs data.  Finally settling down.  MBS up 3/8ths in 5.5 coupons and 5/8ths in 5.0 coupons.  10yr down 13.5bps at 3.843.

01:20 PM After initial consolidation, most of the gains are holding.  MBS up half a point and 10yr down 16bps at 3.82.

03:04 PM Best levels of the day apart from initial data volatility.  10yr down almost 18bps at 3.80.  MBS up over half a point.