The US Treasuries plunged on Monday following the June employment report that posted the largest non-farm payrolls increase in the past eight months. The yield on the benchmark 10-year Treasury note rose nearly 4 basis points to 1.402 percent and the yield on short-term 2-year note also jumped 2-1/2 basis points to 0.637 percent by 12:30 GMT.
The June US Labor Department employment situation report revealed a considerable +287k increase in non-farm payrolls, well above market expectations for a +180k increase, as compared to the revised +11k result that occurred in May (previous was +38k).
This comes alongside an increase in the unemployment rate to 4.9 percent, above expectations for a 4.8 percent result, from down 4.7 percent. Meanwhile, average hourly earnings increased +0.1 percent m/m, as compared to the unrevised +0.2 percent m/m reading seen in May.
Additionally, average weekly hours held unchanged at 34.4 in June. Overall, weaker net revisions were seen in April and May (net -6k revisions). Alongside the stronger than expected headline result, this report highlights lingering support for employment conditions, despite weaker readings seen in recent months. Nevertheless, more improvement needs to be seen in order to alleviate caution on behalf of the FOMC regarding the employment outlook. However, the larger than expected June increase is likely to go a long way (though we still see the outlook for interest rates being tied to concerns abroad, at least in the medium-term).
Although the strength seen in the June employment report does not in itself erase the weakness seen in April and May (which were made even weaker with -6k net revisions), it does provide a positive step forward. Had payrolls extended their streak of weakness into the summer, there existed a very real possibility that the Fed remains on hold for all of 2016 (that possibility still exists).
In the meantime, markets now look ahead to a greater flow of data on this week, highlighted by retail sales, PPI and CPI release. Additionally, markets receive 3-year Note, 10-year note and 30-year bond auctions on Monday, Tuesday and Wednesday, respectively.
Meanwhile, the S&P 500 Futures rose 8.25 points to 2,128.50 by 12:30 GMT.
The material has been provided by InstaForex Company – www.instaforex.com