Bond Market Likes Payroll Numbers

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Includes: TLH
by: Market Blog

By David Berman

As equity investors continue to debate the pros and cons of recent economic developments – a better-than-expected headline reading for U.S. payrolls, some not-so-good details in said report, and some co-operation among European authorities, etc. – at least the bond market has taken a brave position: It sees good news.

The yield on the 10-year U.S. Treasury rose above the 2 per cent threshold on Friday, for the first time since mid-September after hitting a multi-decade low on Sept. 22. It was recently spotted at 2.043 per cent. (As yields rise, bond prices fall.) The boost is no doubt due largely to the Labour Department’s payrolls report, released in the morning. That report showed overall job gains of 103,000, blasting past expectations for gains of about 60,000. There were all sorts of horrible details in the report, such as the year’s highest U6 reading (another gauge of unemployment, which includes marginally employed workers) and a big gain in the number of people unemployed for six months or longer.

Observers weren’t thrilled with the report. Calculated Risk, always a good source, put it this way: “Overall this was a weak report, and only looked decent because expectations were so low.”

The bond market, where yields rise on good news and fall on the bad, seems to disagree.