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Why Stronger Jobs Data Gave Way to a Rate Rally

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Why stronger jobs data gave way to higher interest rates

Friday, September 2, 2022 17:40

Over 300,000 is a big number for non-farm employers. Today the number was 315k. So why were interest rates able to rise so much after the data? There are several reasons, all of which are covered in today’s video. One of the best is that the rates are prepared for the worst case. That’s the whole last month. There were also some holes in the labor market message, but they appear to be second only to mere “sighs of relief” that the data did not bring the surprises seen last month. Still high across the board, momentum is still data dependent. Today happened to be a small win.

    • Salaries in the non-farm sector
      • 315k vs 300k f’cast, 526k
    • Unemployment rate
      • 3.7 vs 3.5 f’cast, 3.5 front
    • wage
      • 0.3 vs. 0.4 f’cast, 0.5 prev
    • participation rate
    • June NFP revised down from 398k to 293k

08:42 am

Bond’s mixed reaction to a very complicated job report. After a slightly stronger decade, he is now up 0.5 bp to 3.263. MBS is still up almost an eighth.

09:52 am

Bonds are now down 5.6bps to 3.203 in 10yr and MBS are up nearly 3/8 points, making a mistake on the upside.

11:07 am

Gains have leveled off since the last update. MBS is only a quarter higher and has been trading almost flat for the past hour. The 10-year yield fell 5bps to 3.21.

11:46 am

We are now giving up some profit as MBS is a quarter of a point away from the high. The 10-year yield is up 7bps from its low (approximate) but still down 2.2bps to 3.237.

2:39 p.m.

Weaknesses were shaken off. The 10-year yield is at 3.201 where he is down 6bps and near the 1 day low. MBS is back near its highs at 99-12 (99.375) 10 ticks (.31) high.

5:34 p.m.

MBS exits the door with a 4.5 coupon up 13 ticks (.41) at a daily high (especially a two-month low level off the last 48 hours). The 10-year yield leveled off just below 3.20 in the last hour.

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