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%.
