Rates Whipsaw on Debt Limit and Jobs Data

Rates whipsaw as market digests debt limit, inflation data and upcoming jobs report. Rates jumped to start the day, the 10-year Treasury yield touching1.57% for the first time since June. However, that sell-off was short-lived and rates quickly fell after U.S. markets opened – the 10-year yield ultimately closing 1 bp lower at 1.53%. Meanwhile, U.S. equities reversed a down session to close higher- the S&P 500 climbing 0.41% on the day.

U.S. private businesses added the most jobs since June. The ADP employment report showed that businesses added 568,000 jobs in September, surpassing economists’ expectations of 430,000. The increase was led by big gains in leisure and hospitality. The Fed has indicated that continued strong employment data over the next few weeks will allow the central bank to begin tapering its $120 billion monthly bond buying program as early as next month. The all-important jobs report will be released this Friday.

The debt ceiling debate continues to consume Washington. With the debt limit debate still raging in Congress, the White House held a round table with CEOs of some of the nation’s largest companies to understand what a debt default would mean to the economy. Jamie Dimon, CEO of J.P. Morgan Chase, commented that the bank would start reviewing all of its contracts pertaining to collateral requirements and repurchase agreements this week to understand the impact on Treasuries if the U.S. defaulted on its debt. Dimon warned, “…interest rates will start going up, it will get worse as we get closer to the brink.”