Jobs Reports Higher Than Anticipated

The Jobs Report came out this morning better than anticipated – even though the May unemployment rate increased to 5.5% from 5.4%.  There were more jobs created than anticipated, but the revisions certainly made me jump when I saw the change not only for April, but the big change in the revision upward from the poor March report.  Over the past three months, job growth has averaged 207,000 a month, compared with 251,000 in the 12 months prior to May. April’s nonfarm payrolls were revised down to 221,000 and March’s tally up to 119,000, a net increase of 32,000. The number of people working part time who want a full-time job rose to 6.7 million in May from 6.6 million in April.

The reaction to the better than expected report sent interest rates higher, the 10yr on the initial reaction jumped to 2.44% +13BPS from yesterday’s close and MBS prices dropped 60 bps.  As of 11:30AM, we have the 10yr at 2.39% and MBS at a negative 47BPS.  I noted yesterday that the next target for the 10yr note yield is 2.50% by some experts of which I was wishing would not be true, but with today’s report – I am now leaning with the experts that this does increase expectations for the Feds to move rates in September, but I have yet to change my opinion.  Although the report was stronger than what many were expecting it is unlikely the Fed will make a move this month when the FOMC meets on the 16th and 17th. It is a two day meeting with a Yellen press conference after the policy statement is released on the 17th.

Nothing new on the Greek debt situation, yesterday Greece took the path of delaying any required payments this month until the end of the month. Talks continue, the ebb and flow seems to change daily and will likely be that way through the end of the month. The obvious question, when the end of the month comes what will happen.

The rest of the day not likely to see many changes in current prices and rates. 2.50% is very likely if this pace continues. Not much to add today as the work has been bearish since April 28th with a brief fake out last Friday when key resistance was penetrated.  I know I did not however, looking for follow-though Monday. Monday German rates exploded taking the US rates higher and there has been no stopping since then. Rates are going to move higher - unless stock indexes suffer serious declines (600 points on the DJIA and 150 points on the NASDAQ). Small declines in the indexes will not encourage safety flights to treasuries, as it would have to be a panic kind of movement.