Daily Market Color

Jobs Down—Rates Up?

The always entertaining and sometimes volatile monthly payroll data release lived up to the hype this morning, as it revealed some interesting national employment trends.  The headline print of -33k non-farm payrolls figure was far below expectations and the first negative print for that series since 2010.  That said, the Hurricane impact explains much of it, and the rest of the employment data was fairly bullish and led to an overall bond market sell off.

The unemployment rate dropped from 4.4% to 4.2%, average hourly earnings rose by 0.5% month over month, and the Underemployment rate fell from 8.6% to 8.3%, its lowest level since before the financial crisis.  Despite the -33k figure, the rest of the positive data on the jobs front cause US Treasurys to sell off, The 10 year Treasury started the day at 2.36% pre payroll, gapped up to 2.40% after the print, and has since settled back to 2.36%, up 2 bps from yesterday’s close.  Treasurys and swap rates across the curve are up 1-2 bps on the day after the initial early jump.  The likelihood of the next Fed tightening at the December FOMC meeting ratcheted over 80% after today’s data.

“You’ll Find Out”/”We’ll see”

Political news was dominated by debate over what President Trump may have meant by a comment made before a dinner with US military leaders where he said this event could be “the calm before the storm”.  Despite numerous requests to clarify this statement, all he has shared so far is “you’ll find out”.  It is unclear whether he might have been referring to the growing rift with North Korea, or fighting ISIS, or any other possible international threats.  The Catalan Parliament made a similar “we’ll see” comment, when asked how they would respond to the Spanish Constitutional Court’s ruling today to suspend Catalonia’s parliament meeting planned for Monday, at which they were expected to declare their independence from Spain.  Lots of cliff hangers today.

Other Market Activity

The dollar initially strengthened against most major currencies after the payroll data, but has since reversed course to slightly lower on the day against the Euro and Yen, although it remains in positive territory against the pound.  Energy prices were down across the board, with WTI Crude down nearly 3% to $49.34 and NYMEX Natural gas down 2% to $2.867.

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