Bond Markets Rally After Weak Jobs Report

Today’s Employment Situation Report–rescheduled from the original October 4th release data–has been easily up to the task of inspiring a break of the recently narrow trading ranges in MBS and Treasuries.  MBS have been up between .5 and .75 (16-24 ticks) depending on when you look, and 10yr yields have held around 8bps lower (2.53 vs 2.61).  The movement isn’t quite as epic as that seen in the wake of other payrolls prints, but considering that the Fed was already likely to be on hold with respect to tapering and that the fiscal drag is expected to continue into 2014, getting this much positive progress out of 32k payrolls miss (148k vs 180k forecast) is notable.

  Private payrolls painted a bleaker picture, however, coming in at 126k vs 180k forecast.  In two out of the past 3 reports, private payrolls have been the lowest in over a year.  In the past 36 reports, only 6 have been weaker.  The starkest comparison is to the 13 month time frame from March 2011 to June 2012 where every single report was better than today’s.  The time frame from November 2012 through July 2013 was also stronger than today’s report, but also clearly trumped by the 2011 strength.