Daily Market Color

America is Working Hard

Rates move higher in volatile session. Swap rates and Treasury yields soared higher in the morning after a strong beat in ADP employment change, which came in over 2x the forecast at 497k. However, rates grinded lower throughout the remainder of the session, as the 2-year UST yield closed at 4.98% after reaching a peak of 5.12%. The 10-year yield rose 10bps to 4.03%, surpassing the 4% mark for the first time since early March. Elsewhere, equities fell on the day, the S&P 500 and NASDAQ Composite declining ~0.80%.

Today’s strong labor data foreshadows tomorrow’s results. In keeping with the theme of strong U.S. labor markets driving inflation, today’s data indicated strong labor growth in June. ADP Employment, which is released the day before nonfarm payrolls, exceeded expectations by a wide margin and reached the highest level in over 1-year. Job vacancies declined MoM per the JOLTS job openings data, indicating labor supply and demand are coming into balance, but the largest jump in the quits rate in 9-months indicates that workers still feel confident in their ability to find another job. The ADP data often differs from the government’s employment data, but today’s releases are viewed as consistent with a labor market that has yet to fully respond to tighter monetary policy.

Day ahead. Nonfarm payrolls, unemployment, and average hourly earnings figures will headline the day at 8:30 AM. Oil data will be released in the early afternoon.

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