What do bonds know? 10-year yield dips in face of strong job gains


For a 2nd consecutive day, longer-duration bonds are ignoring solid headline numbers on the economy and rallying, with the 10-year yield off another four basis points to 2.58% - within a couple of ticks of its lowest level since last summer.

The yield had jumped to 2.70% in the moments following this morning's jobs report showing 288K jobs gained and the unemployment rate diving to 6.3%.

The short end of the curve is a different story, with the 2-year yield gaining two basis points to 0.43%. Taken together, it's a flatter yield curve - maybe discounting some combination of Fed tightening and slower economic growth ahead.

TLT +0.7%, TBT -1.4%

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Comments (6)
  • bbro
    , contributor
    Comments (11216) | Send Message
     
    What are the 2 year swap spreads telling you?
    2 May 2014, 02:52 PM Reply Like
  • King Rat
    , contributor
    Comments (1610) | Send Message
     
    I don't know but perhaps the 80 bp swing over a year is related to bond fund CEFs going from a 5% premium to a 10% discount over the same time.

     

    I have theories but they keep changing so I will just leave it with the evidence.
    3 May 2014, 06:13 PM Reply Like
  • economist11
    , contributor
    Comments (80) | Send Message
     
    It would be helpful to know who is buying the 10 year bonds. China that need a place to park cash? Or banks and insurance companies that need to invest in safe investments?
    2 May 2014, 03:41 PM Reply Like
  • Wallstreetable
    , contributor
    Comment (1) | Send Message
     
    Talking heads are suggesting Russia/Ukraine exodus. I believe over $70bn left Russia recently....
    2 May 2014, 04:01 PM Reply Like
  • scott harrison
    , contributor
    Comment (1) | Send Message
     
    Buy TLT
    4 May 2014, 06:12 PM Reply Like
  • Christopher Mahoney
    , contributor
    Comments (1288) | Send Message
     
    The fact that M2 growth, inflation, nominal growth and real growth are all at low levels might explain why bond yields are at low levels. We are seeing the combination of very low inflation expectations and continued risk-aversion. As a consequence, the market's current high PE multiples are justified. The earnings yield for stocks is around 8% while bond yields are around 3% and the cash yield is zero.
    5 May 2014, 03:09 PM Reply Like
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