For weeks on end, it’s been “sell first and ask questions later” for the bond market. Any econ data that’s been at least halfway decent has been at risk of prompting additional selling. Last month’s jobs report was particularly problematic and that placed extra emphasis on today’s report. While it was modestly stronger than expected at the headline level, wages declined sharply and unemployment ticked up as more workers entered the workforce. Bonds could have taken this report either way, but early trading has been strong after some initial indecision.
Note the bounce at 3.17. That had been the most recently broken technical level on the way up. If it continues holding as a floor, that could be viewed as an endorsement of the recent sell-off. In other words, it would be better for the outlook to get back below that level sooner than later.
Digging a bit deeper and asking why today’s jobs number have been good for both stocks and bonds, our answer is as simple as a glance toward Fed Funds Futures. Rate hike expectations are down across the board. This suggests the market was braced for something even more compelling than the already strong NFP number.
As to the relative level of strength of this jobs report, don’t let the modest 315k vs 300k beat fool you. 300k+ is historically rare, and it will likely need to move quite a bit lower before the Fed would begin discussing policy efforts as having had their desired effect.