The Treasury market has completely ignored the jobs report.
In a note to clients, Hans Mikkelsen, credit strategist at Bank of America Merrill Lynch, wrote that with Tuesday’s “flattening” of the Treasury curve, the market has dismissed the jobs report.
Flattening is when the spread between short-dated and long-dated Treasury bonds narrows.
With [Tuesday’s] sharp flattening in the Treasury curve interest rates have now almost completely recovered from Friday’s rally, that was inspired by the very weak March payrolls report, with 2-year and 30-year yields just 2 and 1 bps lower than Thursday’s closings, respectively. Moreover, with today’s 1.1% decline in Utility stocks — sharply underperforming the 0.21% decline in the S&P 500 — the sector has now actually underperformed the market since Thursday last week. That shows a market increasingly concluding — amidst encouraging data such as yesterday’s ISM non-Manufacturing for March and today’s JOLTS Job Openings for February — that the weak jobs report was a one-off that does little to change the outlook for the Fed to start hiking interest rates this summer/fall.
Here’s Mikkelsen’s chart.