Daily Market Color

Rates End Higher Ahead of July Jobs Report

Rates close higher after continued claims declined to a pandemic low

The sharp drop in continued claims buoyed sentiment, helping push the 10-year Treasury yield up 4 basis points to 1.22% ahead of tomorrow’s jobs report. The health of the labor market remains a point of contention among Fed officials in their debate over tapering asset purchases, and the July jobs report could shift their timeline. Meanwhile, major equity indices closed in the green after another round of solid earnings reports – the DJIA and Nasdaq each added 0.8%, while the S&P 500 rose 0.6%.

Initial jobless claims totaled 385,000 last week, in line with expectations

Claims have been stuck in the 350,000 to 450,000 range for the past three months, with last week’s first-time filings dipping by only 14,000 from the week prior. Continuing claims, however, fell to a pandemic low, declining by 366,000 to 2.93 million. A multitude of factors continue to plague the labor market, with the delta variant at the forefront. After yesterday’s disappointing ADP private payrolls figure, tomorrow’s jobs report is expected to shed more light on the employment situation.

Fed Governor Christopher Waller thinks the Fed could shift its easy money policy soon

Earlier today, Waller said that his “outlook is very much that the economy is going to recover,” allowing the Fed to “be able to pull back on accommodative monetary policy potentially sooner than others think.” He advised that the Fed should “go early and go fast” when reducing its asset purchases from its current level of $120 billion worth of Treasurys and MBS. Waller forecasts that 85% of the jobs lost over the pandemic will be recovered by September, stating that he has “high hopes” for the July jobs report.

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