Treasury yields have slumped back lower (and the policy-error-suggesting curve is flattening dramatically), after the initial knee-jerk spike, as Fed-whisperer Jon Hilsenrath hints that September is back on The Fed’s table…
And 2s10s is plunging… (cough policy error cough?)
As WSJ’s Jon Hilsenrath explains to the layman trader…
Fed officials are likely to be relieved by today’s job report, which shows a noted rebound from the one for May, and not panicked into raising short-term interest rates quickly. They are likely to look at the two months together; May and June averaged job growth of 149K, a slowdown from prior readings and roughly in line with the pace of gains officials believe is needed to keep the jobless rate below 5%. Moreover, 2.6% year-over-year growth in average hourly earnings for private-sector workers will strengthen the Fed’s conviction that waning slack in labor markets is putting modest upward pressure on wages. Taken altogether, this increases the chances of a September rate increase. But officials are likely to remain in a wait-and-see mode.
The markety does not agree for now…
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