HOT Jobs Number Barely Moves Interest Rates

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We thought yesterdays jobs number would help us discern whether interest rates were ready to head higher or not—and apparently the time has not yet arrived for those spiking rates.

With the massive number of jobs created, coupled with a reasonably big jump in personal income, there was not a doubt in our mind that rates would jump. The real question was whether the jump in rates would hold in the hours and days after the announcement.  Rates jumped up to as high as 2.33% (on the 10 year treasury which was 2.26% before the release) before drifting down a bit to the 2.31% area.  Given the size of the job number beat we would not have been surprised to see the 10 year jump to 2.40%.  But it was not to be and we continue the pattern of rates jumping modestly before drifting lower again.

The employment report and the increase in income DO give the Federal Reserve more powder for their potential mid year interest rate hike, but given the poor global economic conditions globally we don’t know if a Fed hike is meaningful–interest rates of treasury notes and bonds may not even move based upon a Fed funds rate hike.  Treasury Bills will move based on the hike-but those on fixed incomes should like that as money market rates will move as well–but Notes and Bonds will move based on supply and demand.  Given the disasterous global economic situation notes and bonds may not move much at all as global buyers come to the U.S. for yield.

To summarize these events it would appear to indicate that absent a ‘black swan’  we can continue our movements toward shorter durations, but there is no need to hurry too much.

 

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