Private Payrolls and Mortgage Data Spur Rally

Short end of the yield curve falls 10bps. Swap rates and Treasury yields fell as many as 10bps today after rising significantly over the past few sessions, a step back from multiyear highs. Weak data led the rally, including the lowest ADP employment output in a few years and the highest 30-year mortgage rate since 2000. Meanwhile, the steepening in the curve continued, and today’s price action saw the 2s10s UST inversion decline to -30bps, the tightest spread since October 2022.

Rates sell-off eases on weaker jobs, service sector economic data. ~89,000 new jobs were added by US companies in September, the lowest level since early 2021 and trailing most economist estimates. Leisure and hospitality drove the increase, offsetting white-collar, manufacturing, trade, and transportation job losses. The ISM services index also pulled back to 53.6 in September from August’s 54.5 reading, indicating slower growth in the services sector. Traders now assign a ~24% probability of a hike in November, compared to a ~31% chance previously.

Biden announces an incremental $9B in student debt relief. The Biden-Harris administration announced today that another $9B in debt relief for 125k Americans has been approved. Student debt is considered a serious risk for spurring a potential recession, and Biden cited the $9B relief as a boost to the economy. He stated that the move would free “millions of Americans from the crushing burden of student debt… they can think about buying a house, they can start a business or starting a family.”