?It Ain?t Over ?til It?s Over?
Today’s Spotlight Market
The following are the pre-report estimates for this morning?s Non-farm Payrolls report:
?????????????????????????????????????? April Estimate?????? March Initial
Non-farm Payrolls:???????????? 215,000????????????????? 126,000
Unemployment Rate:???????????? 5.4%????????????????????? 5.5%
Hourly Earnings:????????????????? +0.2%??????????????????? +0.3%
Average Work Week:???????????? 34.5?????????????????????? 34.5
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Fundamentals
Depending on your generation, today?s Xpresso title could be a famous quote attributed to Yogi Berra or a Lenny Kravitz song, but it is also the view of Bond bulls who are clinging to the belief that the recent sell-off in global Bond prices is nothing more than a ?correction? in this historic interest rate bull market. The U.S. Ten-year Note yields have risen from a low of 1.845% to as high as 2.252% the past 4 weeks, as traders resist buying at current low yields with the Federal Reserve potentially ready to raise the Fed Funds rate sometime this year.
Recent comments by Federal Reserve Chairwomen Janet Yellen and Atlanta Federal Reserve President Dennis Lockhart appeared to signal to traders that the Fed was preparing to hike short-term rates, possibly as early as September, for the first time since 2006. In addition, comments by the Fed Chair that equity valuations were ?high? spooked market participants out of ?risk assets,? which culminated in a sell-off in both equities and Bonds. The recent selling in both stocks and Bonds also may be attributed to position squaring ahead of the Non-farm Payrolls report for April.
The report scheduled to be released this morning at 7:30 am Chicago time will be particularly scrutinized by analysts given the surprisingly weak payrolls gain seen in March. Traders should focus on any ?revisions? to last month?s payrolls data, as well as the hourly earnings and average work week figures to see to what extent employee wages are increasing. It is the slow growth in the average worker?s pay that is helping to keep inflationary pressures in check, and if this trend continues, it may force the Fed to postpone any potential rate hikes this year and potentially keep the Bond bull market from derailing once again.?? ?
Technical Notes? -? View Today’s Chart
Looking at the weekly 10-year Note yield chart, we notice that the recent up-tick in Bond yields may only be a ?test? of the downtrend line drawn from the most recent high in yields made back in December 2013. Since that time, 10-year yields have made a succession of lower highs and lower lows. This week?s high yield of 2.252 is currently a failed test of the most recent high of 2.259 made back in early March. The real question is if this week?s yield high holds, will we see a test of the recent low yield of 1.651 made back in late January of this year which would be necessary to continue the recent pattern.
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