Daily Market Color

Treasury Yields Rise Despite Disappointing Jobs Report

Treasury yields and swap rates march higher despite disappointing jobs report
Markets largely ignored the economic weakness highlighted by the December jobs report, which showed a 140k contraction in payrolls and an unchanged unemployment rate of 6.7%. Instead, rates continued to climb higher as the prospect of additional stimulus outweighed any concerns around sluggish labor market growth.  Major equity indices rose for a fourth day in a row – the S&P 500 and DJIA closed 0.6% and 0.2% higher, respectively.  Treasury yields and swap rates rose across a steepening curve – the 10-year UST yield closing almost 4 bps higher on the day at 1.11%.
Jobs report shows decline in payrolls for first time since April, unemployment rate unchanged
Nonfarm payrolls shrunk for the first time since April, decreasing 140,000 from the month of November.  The report missed economist expectations, which had called for a moderate increase of 50,000. While the headline figure was disappointing, it was mostly offset by an upward revision in the two prior jobs reports. Other highlights of the report are listed below:
– Employment mainly declined in leisure and hospitality, private education, and government sectors
– Labor force participation was unchanged at 61.5%
– Private payrolls decreased by 95,000 after rising 344,000 in November
– Manufacturing payrolls increased by 38,000 after rising 27,000 in November
FX Friday
The dollar descended to multi-year lows at the end 2020, but dollar spot index levels started 2021 by quietly rising this week against a basket of major currencies. That said, today’s jobs report led to the dollar giving up those gains, and then some- the DXY Index falling to its weakest level in 2 years.  
Oil has its best week in four months
Earlier in the week, Saudi Arabia surprised markets by cutting their crude oil production by 1 million barrels/day. The move pulled U.S. crude oil contracts sharply higher- rising nearly 8% on the week to $52.24/barrel.

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