Interest Rate Roundup

Friday, May 02, 2008

April payrolls weak, but surprise to the upside

Now THAT is going to leave a mark -- in the bond market, that is. The April payrolls report was nothing great, but it was definitely stronger than expected. The details:

* Payrolls were down by 20,000 in April, which compares with an 81,000 decline in March. But that was much better than the -75,000 forecast of analysts. The household survey's measure of job growth was a hefty 362,000, vs. a decline of 24,000 in the month prior.

* The unemployment rate dipped to 5% from 5.1%, rather than increasing to 5.2% as forecast.

* Average hourly earnings were the weak spot -- up just 0.1% vs. forecasts for a 0.3% gain, and a gain of 0.3% in the month prior. The diffusion index was also weak -- at 45.4 vs. 48 in March.

* By sector, there were big losses in construction employment (again). That sector lost 61,000 jobs. Manufacturing lost 46,000. Retail trade shed 27,000 and temporary help services lost 9,000. That was offset by decent hiring in education and health care (+52,000) and leisure and hospitality (+18,000).

Bonds are getting their heads handed to them -- with the futures off 26/32 at last count. The dollar is ripping, up more than a cent against the euro. And stock futures are up 14 (on the S&P).

UPDATE:
I can not stress how important today's activity in the bond market could be. The low-115 area is the critical level for the continuous long bond futures. If we break there, I think it's going to get ugly.

4 Comments:

  • Mike:

    Are you looking at June or September futures?

    BTW, I read Dr. Weiss's book - Crash Profits. Loved it!

    - Shankar

    By Anonymous Anonymous, at May 2, 2008 at 12:09 PM  

  • I'm just using the continuous contract function on my terminal, or in this case, the June futures.

    By Blogger Mike Larson, at May 2, 2008 at 12:39 PM  

  • Forgive me, but I don't get why this could become ugly in the bond market.

    Any chance you'd enlighten me?

    Am a regular reader.

    By Anonymous shtove, at May 2, 2008 at 6:09 PM  

  • shtove -- by "ugly," I mean that a break of critical technical support by long bond prices could bring about more technically driven selling. We could see a sharp drop in bond prices, and a sharp spike in bond yields. So "ugly" in this context means "ugly price action." Hope that explains things better.

    By Blogger Mike Larson, at May 4, 2008 at 9:36 AM  

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