Daily Market Color

Rates Rise Despite Disappointing Jobs Report

Treasury yields rise on the day despite disappointing jobs report
Despite a weaker-than-expected jobs report, the impending stimulus bill and falling virus cases kept market sentiment positive today.  US equity indices closed higher – the S&P 500 and DJIA rising 0.4% and 0.3%, respectively.  Treasury yields and swap rates rose across a steepening curve – the 10-year UST yield breached 1.1855%, its highest level since March, before closing at 1.164% while the 30-year UST yield closed within 3 bps of 2%.
Labor Department reports unemployment rate fell to 6.3% in January vs 6.7% in December
After shrinking by -227k in December, nonfarm payrolls rose only +49k last month, falling well below the +105k estimate.  The surprise decrease in the unemployment rate was mainly due to a 0.1% decline in labor force participation.  10.1 million people remain unemployed, nearly twice February 2020’s 5.7 million level.  Data breakdown:
– Notable employment gains were in professional and business services sectors
– Private payrolls rose by +6k vs -204k in December
– Manufacturing payrolls fell by -10k vs +31k in December
International trade deficit narrowed to -$66.6 billion in December, down $2.4 billion in November
In December, exports and imports rose by $6.2 billion and $3.8 billion, respectively, from November’s figures.  In 2020, the overall deficit widened by 17.7% compared to a year earlier.
FX Friday: US dollar has best week in three months
After declining sharply last year, the dollar has responded positively to the improving economic outlook, with the index rising 1.1% this week and driving USDJPY higher.

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