Rates Fall Again as Nonfarm Payrolls Looms

Rates continue to descend as focus shifts toward Friday’s data. Swap rates and Treasury yields fell across a flattening curve today, the 2-year yield declining ~6bps to 4.34% and the 10-year yield closing at 3.60% after a 5bp fall. The 2-year yield is down over 22bps on the week, largely reversing last week’s ~30bp climb. The move came after dovish commentary from Fed voter Patrick Harker, who said, “we should at least skip this meeting in terms of an increase.” The focus has now turned to tomorrow’s labor market data, which includes nonfarm payrolls and unemployment.

Previewing nonfarm payrolls. Tomorrow’s nonfarm payrolls will shed more light into the strength of the labor sector, which has generally proven to be robust and has given the Fed room to hike rates aggressively. The forecast is calling for a significant decrease from 253k last month to 195k, where a soft level would further momentum for a June “pause” that was seen as unlikely just last week. Unemployment data will also be in the spotlight, which is expected to rise to 3.5% after last month’s 3.4% matched the lowest level seen in decades.

Day ahead. Nonfarm payrolls, unemployment, and average hourly earnings data will lead the session at 8:30 AM. Oil figures will follow in the afternoon.