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Treasuries have posted their longest slide since April, the dollar rose and stocks fell on speculation that today’s jobs data will boost the odds of interest rate hike later this year.  The spread between comparable Treasuries to that of similar maturity German or UK debt is the highest in at least a decade according to Bloomberg.

The cause for yesterday’s continuing selloff in Treasuries was initial jobless benefits that fell to the lowest level since 1973.  Jobless claims have now been below 300,000 for 83 consecutive weeks, the longest stretch since 1970 according to the BLS>  Oil also climbed above $50 barrel for the first time since June as inventories are continuing to decline, down by 25 million barrels in September versus an expected increase of over 30 million barrels according to the IEA.

The markets are fast adding to bets that the Fed will raise interest rates before year end, perhaps as earlier as November.  Currently Fed Funds Futures are suggesting a 73% chance by December and 24% in November.

How will these odds change with the release of September’s jobs data?  Consensus is expecting a 4.9% unemployment rate, a 172k and 170k increase in nonfarm and private sector payrolls, respectively, a 0.3% increase in average hourly earnings and a 34.4 workweek.  A 62.8% labor participation rate (LPR) is expected.

Last night the foreign markets were down.  London was up 0.90%, Paris down 0.44% and Frankfurt down 0.46%.  China was up 0.49%,  Japan down 0.23% and Hang Sang down 0.42%.

The Dow should open nominally lower ahead of the jobs data but the direction can change significantly given the perceived importance of this data point.  The 10-year is off 2/32 to yield 1.75%.

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Ken Engelke

Chief Economic Strategist Managing Director

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.