At 8:30 am ET, this morning, in the July employment report, there was some concern that job growth would be weak after Wednesday's ADP data (+167K private jobs). Once again, the ADP data was well off the BLS data. The consensus for NPF jobs was +1.675 mil, as reported 1.763 mil; private jobs were expected at 1.525 mil, as released 1.462 mil. Job growth was better than ADP's miss, but job gains have declined sharply between June and July (June 4.791 mil). The unemployment rate at 10.2%, slightly lower than 10.5% but generally in line. Manufacturing jobs were thought to be +267K, as reported up just 26K. Average hourly earnings, the consensus was -0.7%, earnings increase by 0.2%,
yr./yr. +4.8%, a little stronger than +4.1% estimates.
There was little initial reaction to the employment data in the bond market,
but MBS prices edged higher. Stock indexes pushed off of their lows but were still negative.
President Trump signed a pair of executive orders prohibiting US residents from doing business with the Chinese-owned TikTok and WeChat apps beginning 45 days from now. Trump is ramping up his ire with China. He's making his challenge of China a central theme of his campaign, not leading in the polls and counting on voters of both parties dislikes of China and the belief China didn't stop the virus when they could have. Less than 90 days before the election, both the candidates' comments will be aimed more at voters than anything else. Biden still hasn't stepped up to name his running mate; it was expected this week.
According to recent comments on both sides, the talks between Democrats and Republicans over another stimulus package are going nowhere. Each side accusing the other of being unwilling to compromise and the biggest issues far from resolved. Whether there will be more discussions today isn't known at the moment. Trump meanwhile said he would extend enhanced unemployment benefits and imposing a payroll-tax holiday.
At 9:30 am ET, the DJIA opened -86, NASDAQ -32, S&P -9. 10
yr. at 9:30 am 0.53% -1 bp. FNMA 2.5 30 yr. coupon at 9:30 am +6 bps from yesterday's close, and +24 bps from 9:30 am yesterday.
The strong move higher in gold over the last three months has been staggering. We have had a bullish bias for gold since early this year and have been well rewarded. The two drivers for gold are the continual decline in the dollar and movements to the yellow metal as a safe haven. Gold today down a little; likely, both the dollar and gold have overrun reality and due for corrections. That said, the longer look will continue to support gold as US debt will likely continue to force the dollar lower over time.
Technically the 10 yr. remains positive with resistance at 0.50%, but there isn't anything looming that will push rates higher. MBS markets will stay strong, safe higher yields in MBSs, and little concern about duration risk.
PRICES @ 10:00 AM ET
10 yr. note: 0.53% 1 bp
5 yr. note: 0.20% -1 bp
2 Yr. note: 0.12% unch
30 yr. bond: 1.19% -1 bp
Libor Rates: 1 mo. 0.155%; 3 mo. 0.243%; 6 mo. 0.289%; 1
yr. 0.446% (8/6/20)
30 yr. FNMA 2.5: @9:30 105.33 +6 bp (+24 bp from 9:30 yesterday)
30 yr. GNMA 2.5: @9:30 105.34 -12 bp (+14 bp from 9:30 yesterday)
Dollar/Yuan: $6.9682 +$0.0147
Dollar/Yen: 105.83 +0.28 yen
Dollar/Euro: $1.1770 -$0.0107
Dollar Index: 93.49 +0.70
Gold: $2057.20 -$12.20
Crude Oil: $41.48 -$0.47
DJIA: 27,308 -78
NASDAQ: 11,096 -11
S&P 500: 3343 -5