No Surprises in Jobs Report Keeps Bond Prices on the Defensive
?? Fundamentals
Some analysts were spot on in their estimates for U.S. payrolls last month, as the Labor Department reported 155,000 jobs were created in December. Pre-report estimates were calling for a gain of between 150,000 and 160,000 jobs. The unemployment rate ticked up 0.1% to 7.8%, as the labor pool increased modestly last month.
The private sector once again accounted for all the net-gains in employment, with the Health Care sector creating 45,000 jobs and manufacturing payrolls increasing by 25,000. Public sector employment fell by 14,000. November’s payrolls were revised upwards by 15,000 jobs, but the unemployment rate was also revised up to 7.8%.
Treasury Bond futures, which have been mired in a sell-off the past several sessions, seem to be trying to find a near-tem bottom, despite less dovish comments from the minutes of the December FOMC meeting.
However, the Fed is still determined to keep monetary policy accommodative until the employment rate falls below 6.5%, and we are still struggling to create enough jobs to significantly lower the unemployment rate to this target level. This ultimately may be the key supporting factor for Treasury prices, as the Fed still seems determined to keep interest rates low unless employment improves significantly and favored measures of inflation remain subdued.
?? Technical Notes
Looking at the daily continuation chart for Treasury Bond futures, we notice some missed signals. For Bond bears, the 20-day moving average (“MA”) looks poised to cross below the 200-day MA, which some chart technicians generally view as a bearish indicator. In addition, the 14-day RIS is weak, with a current reading of 29.82.
Bond bulls will note that the latest leg of the price sell-off occurred on smaller than average trading volume, and we may be in the process of forming a bullish “reversal” pattern on the daily candlestick chart. Friday’s low of 143-17 appears to be near-tem support for March Treasury Bonds, with resistance found at the December 28th chart gap near the 146-23 price level.
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