UMBS down 30 bps on the day. Non-Farm Payrolls crushed the market today

NFP = 517k vs 185k f’cast [260k prev]

unemployment = 3.4 vs 3.6 f’cast [3.5 prev]

earnings = 0.3 vs 0.3 f’cast [0.4 prev]

Also 71k in positive revisions to Nov and Dec

We don’t have explanations yet or even the ability to comprehend a beat of this size in juxtaposition with the month’s other labor related data. We do know bonds are selling and that the bewilderment is evident in the restraint of the sell-off.

On a deeper dive, of the 894k job creations, 606k were part-time.

Avg Hourly Earnings were up .3% in Jan (4.4% YoY)

Avg Weekly Earnings were up 1.2% in Jan (4.7% YoY)

Remember, ADP came in at +106k.  So a big disconnect here.

ISM Non Manufacturing = 55.2 vs 50.4 f’cast [49.2 prev]

Coming into the week, yields were near the top of a narrow range (3.4-3.56 give or take).  With both ISM reports, the jobs report, and policy announcements from the Fed/ECB/BOE, it was a distinct possibility that we’d see that range broken.  By Thursday morning, that looked like it was a work in progress, but by the end of the day, yields were back to 3.40.

Then in a cruel twist of fate this morning, NFP beat forecasts by the widest margin in a year and half.  90 minutes later, ISM crushed its forecasts as well.  These events combined to push yields right up to the top of the range, leaving us to hurry up and wait for the next set of potential market movers.

Common Sources and influences


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