The US Treasury market is under pressure following the disappointing jobs report which showed the addition of 156,000 nonfarm jobs (175,000 expected) in December as the unempoloyment rate ticked up to 4.7%. The report did however have some good news in the form of average hourly earning, which hit a post-recession high of up 2.9% year-over-year.
Selling across the Treasury complex has yields higher for the first time in 2017, with the belly of the curve climbing by more than 6 basis points. Here’s a look at the scoreboard as of 9:06 a.m. ET:
- 2-year +4.0 bps @ 1.202%
- 3-year +5.5 bps @ 1.460%
- 5-year +5.4 bps @ 1.896%
- 7-year +5.3 bps @ 2.206%
- 10-year +5.1 bps @ 2.396%
- 30-year +3.4 bps @ 2.979%
Post-election selling ran yields at the long end up about 90 basis points on speculation Donald Trump’s policies would bring back inflation to the United States. However, yields peaked in the middle of December, and have begun to roll over as traders begin to price in the possibility that Trump’s policies will take some time to go into effect, or may never get implemented at all.
Friday’s selling has caused the yield curve to flatten, with the 5-30-year spread tightening to 108.6 bps. A move below 107.4 bps would push the spread to its tigthest level since the beginning of September. The flattening of the yield curve suggests the market isn’t so optomistic about a return of inflation.