Volatility rises with the Friday jobs report

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Published Date 12/8/2023

Before 8:30 am ET when the November employment data was reported the 10 year note yield was at 4.19% +4 bps. On the reaction to the employment data the yield increased to 4.26%, MBS price down 22 bps.

November employment rate expected unchanged at 3.9% declined to 3.7%. NFP jobs thought to be +180k increased 199K, private jobs +150K as was expected. Average hourly earnings increased from +0.3%, increased +0.4% and up from +0.2% in October, year/year earnings at 4.0% unchanged from October. The participation rate at 62.8% as expected but increased from 62.7% in October.

The employment sector not as weak as was widely believed based on other recent data like the JOLTS job openings data released Tuesday. Wages on a month/month basis stronger than what was expected. More job growth. The expectations that the fed will begin cutting rates early next year are now in question. In the fast swap trading markets prices declined from what had been expected from the Fed. The 2 year note yield immediately following the report increased 10 bps.

Over the last month the decline in rates was excessive as previously noted here and likely to find resistance; today’s data is that resistance. The increase in belief that the Fed would cut in March had stretched the conviction to what we consider an over-confident market in the near term.

At 9:30 am the DJIA opened -44, NASDAQ -59, S&P -8. 10 year at 9:30 am 4.22% +7 bps; 6.5 FNMA 30 year coupon at 9:30 am -20 bps from yesterday’s close and -20 bps from 9:30 am yesterday.

At 10 am the University of Michigan consumer sentiment index, forecast at 61.9 from 61.3, increased to 69.4.

Technically the 10 year note has not traded above its 20-day moving average since late October; at its high this morning (4.27%) it tested and held the average.

Source: TBWS

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