Rates Stay Near Neutral as Nonfarm Payrolls Looms

Rates mixed ahead of Friday’s nonfarm payrolls. Swap rates and Treasury yields were mixed across a steepening curve today, the 2-year yield falling just over 1bp to 3.79% while the 10-year yield rose over 4bps to 3.38%. The move came after trade balance data was lower than expected (-$64.2B) while initial jobless claims came in slightly higher than the forecast. Tomorrow’s data will be under a larger spotlight, with nonfarm payrolls and unemployment figures the highlights. Nonfarm payrolls is expected to come in at 185k, a steep decline from last month’s level of 236k.

PacWest, Western Alliance stock plunge today. Regional bank stocks suffered again today, led by PacWest which was down more than 50%, a record low, and capping off 5-straight days of decline. The decline was driven by news that the bank is exploring strategic options including asset sales, but the bank noted in a report today that they have not experienced out-of-the-ordinary deposit outflows following the sale of First Republic Bank. Western Alliance stock was also down 38% following a 3rd party report that the bank was exploring strategic options, but this was categorically denied by the bank. This news comes along U.S. officials announcing that they are assessing possible market manipulation of regional bank stocks given increased short-selling activity and price volatility in recent weeks.

Day ahead. Nonfarm payrolls, unemployment rate, and average hourly earnings figures will lead the day at 8:30 AM. The unemployment rate is expected to increase to 3.6% from 3.5%.