Treasurys Slide, Dollar Surges After Jobs Report Beats Expectations

Headlining the jobs report released by the Labor Department this morning, nonfarm payrolls remained robust in July with a 209,000 increase.  The figure was 22,000 lower than June’s upwardly revised level, but easily surpassed expectations of +178,000, bringing the 2017 average monthly gains up to 184,000 (2016 average was 186,000).  The increase in payrolls across industries was broad based, with goods-producing jobs climbing 22,000, service-sector gains totaling 183,000 and government jobs rising 4,000.  Similar strength was displayed in the unemployment rate, which declined to a 16-year low of 4.3% despite more Americans entering the workforce, as evidenced by the labor participation rising 0.1% to 62.9%. Furthermore, it was recorded that 60.2% of the population is employed, equaling a six-year high.  Another positive in the report was wage growth, with average hourly earnings climbing 0.3% MoM, which matched expectations and beat the previous month’s +0.2% level.  Compared to a year earlier, wages in July increased 2.5%.  

 

 

US Treasurys sold off immediately following the release of the employment report as yields/swap rates gained 1-6 bps across the curve.  The yield on the 10-year note is poised to close the week near 2.27%, two basis points lower than its opening level on Monday.  The US dollar gained 0.6% against major currencies, highlighted by a 0.9% rise vs. the euro and a 0.8% jump vs. the pound.  All three major US stock indices edged higher, with the DJIA up 0.3% finishing at a new record high.  In commodities, WTI crude oil futures are set to finish the week at roughly $49.50/barrel, just below Monday’s $49.70/barrel level.  At the beginning of next week OPEC representatives will hold a two-day meeting amongst the nations involved in their production-cutting pact to discuss why some parties are not meeting their pledged quotas.  Full compliance had been achieved within the first few months after the agreement was first struck back in January, but adherence has since declined with the intended boost to prices not coming to fruition.

 

 

In regulatory news, the Senate voted unanimously to confirm Christopher Giancarlo as Chairman for the CFTC.  The Senate also unanimously voted to confirm two new Commissioners for the CFTC.  Brian Quintenz, a Republican and Rostin Benham, a Democrat will serve as the new Commissioners for the agency.  Mr. Quintenz joins the CFTC from the hedge fund Saeculum Capital Management, LLC, where he is the Founder, Managing Principal and Chief Investment Officer.  Mr. Benham will be leaving his post as the Senior Counsel for the Senate Committee on Agricultural Nutrition and Forestry.   These changes are welcome additions since the Commission has been operating with two Commissioners – Mr. Giancarlo serving as acting Chairman and Sharon Bowen who announced her resignation in January. 
 
Hope you have a great weekend.