Rates Little Changed Ahead of Jobs Report

Swap rates and Treasury yields take a breather ahead of nonfarm payrolls. Swap rates were little changed today across a modestly flattening curve, the long end closing lower by roughly 2 basis points as shorter maturities were little changed. That said, the front end of the curve continues to price in a remarkably aggressive 8 quarter-point hikes by year end to a final rate of ~2.50%. Breakeven inflation rates have moderated in recent days but remain close to the all-time highs established earlier this month.

Stage set for strong jobs report. March’s nonfarm payrolls report comes out tomorrow and expected to show yet another decline in the unemployment rate and continued wage inflation. The labor market is an important part of the inflationary picture, as its posited that an unemployment rate below the NAIRU (or the non-accelerating inflation rate of unemployment) creates additional inflationary pressures. Current forecasts call for an unemployment rate of 3.7% and for hourly earnings to increase at a 5.5% annualized rate.

U.S. orders biggest ever release of oil reserves. President Joe Biden announced the release of 180mm barrels of oil from the country’s emergency stores, the move is designed to keep oil prices at bay and offset some of the reduction in Russian oil imports. Crude oil fell on the day, US crude touching $100/barrel.