Strong Labor Data Sends Yields Climbing, Equities to All-Time Highs

Yields rise on better than expected jobs data. UST yields trended lower overnight before initial jobless claims data fueled a reversal in price action. Jobless claims plummeted by 33k from the week prior, the largest decline in nearly four years. Yields climbed 4-6 bp to intraday highs in the aftermath, a particularly large move after yesterday’s FOMC statement cited slowed hiring and an uptick in unemployment. The 2-year yield closed 1bp higher at 3.56% while the 30-year yield closed 3 bps higher at 4.72%. Meanwhile, the S&P 500, NASDAQ, DJIA, and Russell 2000 all hit record highs today, which has only happened 25 times in the last 25 years.

DOJ takes Cook to the Supreme Court. The Trump Administration today asked the Supreme Court to allow the firing of Fed governor Lisa Cook. The move was widely expected after an appeals court ruled 2-1 in favor of letting Cook stay on the job and participate in this week’s FOMC meeting, following the Justice Department’s request to remove her while the case progresses. While the Supreme Court has granted Trump leniency in firing government officials so far, meddling with Fed officials risks politicization of monetary policy decisions which could lead to higher long-term inflation. Cook is facing mortgage fraud allegations, which she denies, and recent reports suggest there are documents to back her claim. The case also hinges on President Trump’s legal authority to fire a Fed official, which the law says he can do “for cause,” a definition that remains up for interpretation.

Bank of England holds policy rates steady. The Bank of England voted 7-2 today to keep policy rates unchanged at 4%, with historically dovish members Swati Dhingra and Alan Taylor voting in favor of a 25 bp cut. Following the meeting, the Monetary Policy Committee released guidance noting that future cuts will be “gradual and careful” and will “depend on the extent to which underlying disinflationary pressures continue to ease.” Medium-term inflationary pressures were in focus for the Committee as they made this decision, with Governor Andrew Bailey saying, “Although we expect inflation to return to our 2% target, we are not out of the woods yet.” Bailey’s tone echoed Chair Powell’s FOMC presser comments from yesterday, where Powell noted concerns about tariff-driven inflationary pressures and emphasized that the Fed will remain cautious with future rate cuts.