Rates Rise Heading into Massive Payroll Report on Friday

Rates rise ahead of payrolls. Swap rates and Treasury yields resumed their upward march today after US manufacturing and job data showed continued strength in the U.S. economy. The 2-year Treasury yield rose ~2 bps to 3.506%, while the 10-year yield rose ~6 bps to finish at 3.249%. The 10-year has climbed nearly 65 basis points since the start of August.

Previewing nonfarm payrolls. Tomorrow’s jobs report will be the final one before the crucial September FOMC meeting. Nonfarm payrolls are expected to increase by ~300k, well below last month’s surprise increase of 528k. Wage inflation, a measure of increased importance in this environment, is expected to tick higher to 5.3%. A weak payrolls number might be one of the few things that can derail a 75bp hike at this month’s meeting, as Fed officials continue to beat the price stability drum in public comments.

Day ahead. Friday will be headlined by unemployment and payroll data that is set to be released at 8:30 AM ET. New order data for US manufactured goods will follow at 10:00 AM ET.