Bond Brief: Jobless Selloff
Updated from 11:00 a.m. EDT
Treasuries were hammered Thursday by the threat of a strong monthly payrolls report and evidence that liquidity around the world is set to tighten.
The benchmark 10-year note fell 12/32 to yield 4.89%, the highest level since June 2002, while the 30-year bond sank 28/32 to yield 4.96%. Bond prices and yields move in opposite directions.
The two-year note edged lower 2/32 to yield 4.83%, and the five-year note lost 6/32 to also yield 4.83%.Nearly two weeks of declines have built a risk premium back into the long end, in the form of higher yields, and widened the spread between the 10-year and two-year yields to six basis points. Longer-maturity debt usually yields more than shorter-maturity debt to compensate investors for lending money for a longer period of time. However, the curve has been flat or even inverted since the beginning of the year, a phenomenon Alan Greenspan called a "conundrum" and one that often precedes recession. "I wouldn't say that the conundrum has significantly ended yet," says John Shin, senior economist at Lehman Brothers. "A lot of [the slide on the long end] is in anticipation of tomorrow's jobs report." Along with the housing market, the employment picture is seen as the key to when the "data-dependent" Federal Reserve will stop raising interest rates. Fed funds futures have priced in 100% odds that the Fed will raise rates by 25 basis points in May, taking the rate to 5.0%. But there are only 34% odds for a hike at the June meeting. Central bankers have voiced concerns that "wage inflation" could occur if unemployment drops and salaries increase enough to ramp up consumer spending. The March nonfarm payroll report is expected to hold steady at 190,000 and the unemployment rate is expected to edge lower to 4.7% from 4.8%.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV