Join        Login             Stock Quote

Non-Farm Payrolls Send Shudder Across Bond Desks

 July 08, 2011 11:26 AM

Not only was employment growth during May half as anemic as earlier thought but June was also equally dismal. The biggest question running repeatedly through my mind is exactly how Thursday's ADP report managed to once again steer everyone in precisely the wrong direction. The official employment report for June was unambiguously bad with private, manufacturing and even government payroll data shockingly ugly. We can take solace in two facts. We can still rely on weekly initial claims data as a better forward-looking indicator for the trajectory of unemployment trends. Readings above 400,000 each week simply won't do in terms of driving the economy forward. Second, Chairman Bernanke's prediction that the decline in unemployment will prove to be "painfully slow" is turning out to be remarkably astute.

[Related -Automatic Data Processing Inc. (ADP) Dividend Stock Analysis]

Eurodollar futures – In the blink of an eye at 8:30am on Friday equity index futures plunged while Eurodollar and treasury future surged in price driving the yield curve lower in response to news of a measly 18,000 increase in June payrolls. That pace was the weakest in nine months while private sector hiring of 57,000 was the least since May 2010 and contrasts with Thursday's ADP reflection on 157,000 new positions. Service providers added 14,000 new positions – the least since September while construction employers added 9,000 jobs and retailers added 5,200 positions. The number of workers in the government sector fell for an eight straight month and by 39,000. The concern for the economy now is that the Fed's projected second-half recovery might not be as strong as projected or it might simply not show up at all. Bond prices advanced by more than one full point and enough to shave 10 basis points off the 10-year yield, which slid to 3.04%. Eurodollar futures expiring beyond June 2013 surged with implied yields slumping by 18 basis points as the yield curve flattened.

[Related -Bond Yields Rise On Stronger Economic Data]

European bond markets - The European bond markets were mixed on Friday but the trading pattern remained similar to that of recent weeks as peripheral spreads widened on fears that the Eurozone is shortly likely to stage its first sovereign debt default. Portuguese, Irish and Greek benchmark yields rose while concern over the health of the Italian economy drove its premium over German bunds to a nine-year high. An industrial production dip turned into a slump in activity fueling concerns of an economic downturn before monetary tightening at the ECB has even had time to have an impact. German bunds were in positive territory pretty much from the start of trading only to see an acceleration in the move after the U.S. report caused consternation that growth is set to disappoint. German bunds advanced by more than a full point matching a double-digit slide in U.S.

Next Page >>12


Comments Closed

rss feed

Latest Stories

article imageBogle Says Indexing Destined To Win The Battle Of The Quants

Vanguard founder John Bogle gave a powerful speech last month at the Q Group’s Spring Seminar that lays out read on...

article imageVMAX and VMIN Poised to Be Most Important VIX ETP Launch in Years

REX Shares is launching two new VIX exchange-traded products on Tuesday in what is likely to be the most read on...

article imageThe April 29 Gold Triangle Breakout Update

If you’re just watching stocks, you may be missing this powerful Triangle Breakout surge in read on...

article imageSell In May, But It Is A Presidential Election Year

With May just around the corner, articles covering the "Sell in May' phenomenon are not in short supply and read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.