Bond Yields Rise Then Fall After Non-Farm Payrolls Surprise
Today’s Spotlight Market
Here are the details from Friday?s April Non-farm payrolls report:
April Non-farm Payrolls: 288,000???????? April Private Payrolls: 273,000
April unemployment rate: 6.3%??????????? April hourly earnings 0.0%
April average work week: 34.5 hours?? March payrolls revised: 203, 000 up 11,000
Fundamentals
Spring is finally here and that was good news for the labor market as U.S. payrolls surged last month. On Friday morning, the Labor Department reported that U.S non-farm payrolls rose by 288,000 in April. This was the largest monthly increase since January 2012 and appears to represent pent-up demand for labor following the harsh winter over much of the country. Both the private and public sector saw jobs increase with private payrolls rising by 273,000 and even the beleaguered public sector saw a gain for 15,000 jobs in April.
The real surprise in Friday?s employment data was in the sharp drop in the unemployment rate, which tumbled by 0.4% to 6.3%. However before anyone celebrates this decline, we must note that the labor participation rate fell to 62.8% from 63.2% in March. This translates to over 800,000 participants leaving the labor force. Average hours worked as well as average hourly wages remained unchanged in April, which is helping to keep inflationary concerns in check.
After an initial ?spike? in yields once the employment data was released, Treasury bond futures reverses course and rallied to highs not seen since July of 2013 as yields in the cash 30-year bond moved below 3.70%. It appears the dip in long term yields was moderately offset by a slight rise in yields for the short end of the curve. Equity indices initially surged after the report, but turned mixed later in the session as traders seem to be anticipating that the Federal Reserve will continue its course in tapering back its bond purchases and could even be persuaded to raise short-term rates sooner than anticipated if employment data continues to improve, especially if average hours worked as well as wages start to turn upward in the coming months. ?
Technical Notes? -? View Today’s Chart
Looking at the daily continuation chart for Treasury Bond futures, we note that prices appear to be trying to form a fairly significant bottom should we see a weekly close above long term resistance at 137-23. Prices are starting to trend above the 20-day moving average and momentum as measured by the 14-day RSI is strong with a current reading of 67.59. The next support level is seen at the April 4th lows of 131-21.??
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