|10-Year: +16/32....2.94%.... GNMAs: .... USD/JPY: 99.07.... EUR/USD: 1.3177|
Nonfarm Payrolls (8:30): Actual 169K, consensus 177K, prior 104K (from 162K)
Private Payrolls (8:30): Actual 152K, consensus 180K, prior 127K (from 161K)
Unemployment rate (8:30): Actual 7.3%, consensus 7.4%, prior 7.4%
Hourly Earnings (8:30): Actual 0.2%, consensus 0.2%, prior -0.1%
Average Workweek (8:30): Actual 34.5, consensus 34.5, prior 34.4
While the drop in yield will be attributed in most quarters to the relatively disappointing August employment report (nonfarm payrolls up 169,000, downward revisions to June and July; and a dip in unemployment rate that was due to dip in labor force participation rate), it would be remiss not to add that the bulk of today's gains came in front of the release of the August jobs data. To that end, the 10-yr note was up 10 ticks just before the 8:30 a.m. ET release of the employment data. It was up more than a point soon thereafter as the employment report failed to live up to bullish growth expectations which, in turn, created a sense that a tapering announcement at the September 17-18 FOMC meeting may not be a foregone conclusion.
Notably, though, the 10-yr gave back the bulk of its post-employment report gains and faded into the close. The fade coincided with the stock market extending its gains in what turned out to be a loopy day on account of various headlines surrounding the situation in Syria.
Stocks and bonds both rallied together initially after the employment report, but stocks took an abrupt turn south on a headline indicating Russia would support Syria in the event of an external strike. The Dow Jones Industrial Average, which was up about 50 points, was soon down as many as 148 points. Treasuries, however, barely budged on the headline and ultimately served as a good tell that the headline wasn't as disturbing as first thought since Russia is already supporting Syria.
As that understanding set in, stocks rebounded almost as sharply as they sold off. However, stocks also faded late in their session in what may have been a trade of caution in front of the weekend and next week's vote in Congress on the resolution authorizing a strike against Syria. President Obama said at the G-20 Summit today that he will be addressing the American people about Syria from the White House on Tuesday.
So, while the uncertainty surrounding Syria created some intra-day volatility, the Treasury market mostly keyed off the employment report and some technical factors as support came in when the 10-yr yield hit 3.00% in the overnight trade.
There was buying across the yield curve, but it was concentrated in the belly of the curve. Yields dropped between seven and 10 basis points in maturities ranging from the 2-yr note to the 10-yr note. The 30-yr bond dipped just two basis points to 3.86%.
Notwithstanding today's improvement, the yield on the 10-yr note ended the week 17 basis points higher than where it began the week.
The Week Ahead
- Monday's data is limited to consumer credit (15). Fed speak starts and ends for the week with SF's Williams on his home turf discussing "A View From the Fed" (11).
- Tuesday's data is light with just the JOLTS -- Job Openings being released (10). Treasury will auction $31 bln 3-yr notes.
- Wednesday will see the weekly MBA Mortgage Index (7) and wholesale inventories (10). Treasury will reopen $21 bln 10-yr notes.
- Data remains slow on Thursday with initial and continuing claims, import/export prices (8:30), and the Treasury budget (14). Treasury will hold a $13 bln 30-yr reopening.
- Friday's data is the most anticipated of the week as retail sales, retail sales ex-auto, PPI, core PPI (8:30), Michigan Sentiment (9:55), and business inventories (10) scheduled to cross the wires.