Stunning Resilience

One could argue that our bar is set too low if we view today’s bond market resilience as “stunning,” but if that’s not the right word, it’s damn close. Last Thursday saw yields drop 8bps, largely due to a trio of labor market reports that are nowhere near as heavily traded as today’s jobs report. Yesterday’s Retail Sales helped yields slight significantly below the 4.20% technical barrier. And now today, an effective 0.2% lower unemployment rate (0.1% in the rate itself + 0.1% implied by the higher participation rate) and big beat in the payroll count are worth only a 3bp sell-off to 4.175%?  Yep, that’s stunning.  But why did it happen? That’s a question without a great answer today. We’ll discuss possibilities in today’s recap video.

Econ Data / Events

Average earnings mm (Jan)

0.4% vs 0.3% f’cast, 0.3% prev

Non Farm Payrolls (Jan)

130K vs 70K f’cast, 50K prev

Participation Rate (Jan)

62.5% vs — f’cast, 62.4% prev

Unemployment rate mm (Jan)

4.3% vs 4.4% f’cast, 4.4% prev

Market Movement Recap

09:48 AM Quick selling after jobs report, but not as bad as it might have been.  10yr up 4.3bps at 4.185 and MBS down 1 tick (.03) 

11:14 AM Impressive resilience continues. MBS unchanged and 10yr up only 2.7bps at 4.171

12:11 PM Even more impressive. MBS up 3 ticks and 10yr up only half a bp at 4.15

01:32 PM modest bounce after weaker 10yr auction. MBS unchanged and 10yr up 2.5bps at 4.169

03:18 PM Just a hair weaker with 10yr up 3.3bps at 4.177 and MBS still unchanged