Bond Market Update

Data Recon

• The December employment report was quite good (all things considered). Nonfarm payrolls increased by a stronger-than-expected 256,000, the unemployment rate slipped to 4.1% from 4.2%, average hourly earnings growth year-over-year was a sturdy 3.9%, and more people were employed.
  • The key takeaway from the report for the market is that it was perhaps too good, which makes it think one of two things, if not both: the Fed may have made a mistake cutting rates as aggressively as it did at the end of 2024, thereby fueling the prospect of sticky inflation because the labor market is still strong, and there isn't going to be another rate cut for an extended period.
• Yield Check:
  • 2-yr: +7 bps to 4.34%
  • 3-yr: +9 bps to 4.43%
  • 5-yr: +8 bps to 4.54%
  • 10-yr: +7 bps to 4.76%
  • 30-yr: +5 bps to 4.98%