Daily Market Color

Strong Labor Market Pushes Rates Higher Once Again  

Rates rise on nonfarm payrolls beat, decline in unemployment rate. Swap rates and Treasury yields rose across a steepening curve after the U.S. economy proved more robust than expected this morning. September’s nonfarm payrolls report showed an unexpected decline in the unemployment rate to 3.5% from 3.7%. The number of jobs added in September also beat estimates, coming in at 263k, 8k above consensus. Rates rose in the immediate aftermath of the release and ended higher across the board. The 2-year yield rose ~5 bps to 4.31%, while the 10-year yield rose ~6 bps to 3.88%- its highest level since hitting 4% several weeks ago.

Consumer borrowing rises more than expected in August, driven by increased credit-card loan balances. Consumer borrowings increased $32.2 billion MoM, compared to the $25 million forecasted by analysts. Revolving and non-revolving credit also increased. While higher consumer borrowing can be a positive sign for economic growth, in this inflationary environment it could also be a sign that consumers are borrowing more to afford the cost of daily essentials.

Week ahead. Fed commentary will be plentiful next week, headlined by FOMC minutes that will be released on Wednesday at 2:00 PM ET. September PPI and retail sales figures will be released on Wednesday and Friday, respectively.

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