Bond Market Update

Data Recon

• U.S. Treasuries have climbed off their opening levels after this morning's batch of economic data added to concerns about the state of the labor market as private employment growth decelerated to a three-year low. On the bright side, weekly jobless claims decreased and Q2 productivity was revised higher while unit labor costs were revised lower. 
• The ADP report showed private-sector employment increased by 99,000 jobs in August. That was the lowest level of job creation in the private sector since 2021. The job gains were concentrated across medium-sized establishments (68,000) and large-sized establishments (42,000). Small-sized establishments showed a decrease of 9,000 positions.
• Separately, initial jobless claims for the week ending August 31 decreased by 5,000 to 227,000 (Briefing.com consensus 236,000) while continuing jobless claims for the week ending August 24 decreased by 22,000 to 1.838 million. That is the 13th consecutive week that continuing claims have been above 1.800 million.
  • The key takeaway from the report is that layoff activity remains relatively tame; however, so does hiring activity, evidenced by the elevated stickiness of continuing jobless claims.
• The revised Q2 Productivity report showed productivity revised up to 2.5% (Briefing.com consensus 2.3%) from the preliminary reading of 2.3%. Unit labor costs were revised down to 0.4% (Briefing.com consensus 0.9%) from the preliminary reading of 0.9%.
  • The key takeaway from the report was the friendly inflation view embedded in the softening unit labor costs. They were up just 0.3% over the last four quarters, which is the lowest rate since the fourth quarter of 2013.
• Yield Check:
  • 2-yr: -5 bps to 3.72%
  • 3-yr: -4 bps to 3.59%
  • 5-yr: -4 bps to 3.52%
  • 10-yr: -4 bps to 3.73%
  • 30-yr: -3 bps to 4.04%