U.S. Treasuries trade in the green
Though below their session highs that were reached in immediate reaction to the Employment Situation report for July, which showed the unexpected loss of 23,000 nonfarm payrolls (consensus 86,000) and sharp downward revisions to readings from May (to 66,000 from 129,000) and June (to 20,000 from 57,000).
Average hourly earnings growth slowed to 0.1% (Briefing.com consensus 0.3%). The July employment report falls into the domain of “bad news is good news.” Participants are recognizing that nonfarm payroll growth was weak (actually, there was no growth), that wage inflation disinflated, and that the labor force participation rate continues to dwindle.
The key takeaway from the report is that it was soft enough, presumably, to keep Fed officials in a wait-and-see mode, such that they could see a better case now for not raising the target range for the fed funds rate at the September FOMC meeting.
The post-data rally briefly pressured yields on 10s and shorter tenors to fresh lows for the week while the 30-yr yield stopped just shy of this week’s low before the recent pullback commenced.
Equities are off to a higher start with the S&P 500 (+0.5%) extending this week’s gain to 3.5%.
Yields:
2-yr: -6 bps to 4.19%
3-yr: -5 bps to 4.25%
5-yr: -4 bps to 4.35%
10-yr: -3 bps to 4.64%
30-yr: -1 bp to 5.20%