Why Bonds Reacted to Such a Small Beat in The Jobs Data

In today's jobs report, headline payrolls came in at 390k vs 325k f'cast, average hourly earnings dropped, and unemployment ticked up.  It would be hard to argue that this was an exceptionally strong result.  In fact, one could make the case it was somewhat lackluster.  But bonds sold-off as if the data provided some bullish economic surprise.  The selling is actually hard to justify based on the numbers above.  One of the only ways to do it would be to point out that traders (the people who move markets) were braced for weaker numbers than economists (the people responsible for the 325k f'cast).  In other words, the market was surprised to see something decent.

Econ Data / Events

  • Fed MBS Buying 10am, 11:30am, 1pm

  • Nonfarm Payrolls 390k vs 325k f'cast, 436k prev
    Unemployment Rate 0.3 vs 0.4 f'cast, 0.3 prev
    Participation Rate 62.3 vs 62.2 prev

Market Movement Recap
10:25 AM

Flat overnight, quick sell-off following jobs data, but bouncing back fairly well since 9am.  10yr yields now 2.937 after hitting 2.986 at the highs.  MBS now down less than an eighth of a point after being down nearly 3/8ths at the lows.

01:58 PM

Sideways at weaker levels, perfectly centered between post-NFP highs and lows.  10yr up 4.4bps at 2.949