Here’s What The Bond Market Is Telling Us
US treasuries fell sharply after the
jobs report showed the economy added more jobs than forecast in July.
The report increases the likelihood the Federal Reserve will have to continue
raising interest rates into 2006 to combat inflation. The FOMC is almost certain
to raise on Tuesday, the 10th straight hike.
207,000 jobs were created in July and the government made upward revisions to
June’s report, raising the number to 166,000 from 146,000. The report followed
strong economic data earlier in the month in manufacturing and auto sales.
The benchmark US 10yr T-Note -0.63% declined for the sixth straight week,
pushing yields higher. The 10yr is now trading at its lowest level since April
2005. The 10yr was highlighted in the
TradingMarkets.com Implosion 5 List last night.
Prices fell across the yield curve, the 5yr T-Note
-0.34% and the 2-yr T-Note -0.14%. 2yr yields hit a 4-year high and are
only 28 basis points beneath 10yr yields compared to 1.75% last year. December
Eurodollars closed lower pushing the yield up to 4.325% from 4.27
yesterday and 3.97 in June. The US dollar was the other major beneficiary,
rising across the board.
Crude Oil +1.52% closed near a new all-time
high, settling at $62.31. Natural Gas +2.71% continued to
outperform, leading the energy sector higher again. Natural Gas was highlighted
in the
TradingMarkets.com Momentum 5 List last night.
The entire grains complex closed lower. Both Wheat
-1.54% and Corn -1.26% were highlighted in the
TradingMarkets.com Implosion 5 List last night.
Economic News
Employment Report:
Non-Farm Payrolls: M/M Change – Actual 207,000 Consensus 175,000
Unemployment Rate: Actual 5.0% Consensus 5.0%
Average Hourly Earnings: M/M Change – Actual 0.4% Consensus 0.3%
Average Work Week: Actual 33.7 hrs Consensus 33.7 hrs
Consumer Credit: M/M Change – Actual $14.5 B Consensus $6.0 B
Ashton Dorkins