Bond Market Update

Data Recon

• November nonfarm payrolls increased by 64,000 (Briefing.com consensus: 30,000). The 3-month average for total nonfarm payrolls increased to 22,000 from -8,000. October nonfarm payrolls -105,000. November private sector payrolls increased by 69,000 (Briefing.com consensus: 34,000). October private sector payrolls 52,000. November unemployment rate was 4.6% (Briefing.com consensus: 4.4%) versus 4.4% in September. Persons unemployed for 27 weeks or more accounted for 24.3% of the unemployed versus 23.6% in September. The U6 unemployment rate, which accounts for unemployed and underemployed workers, increased to 8.7% from 8.0% in September. November average hourly earnings were up 0.1% (Briefing.com consensus: 0.3%) versus a 0.4% increase in October. Over the last 12 months, average hourly earnings have risen 3.5% versus 3.8% for the 12 months ending in October.
  • The key takeaway from the employment report will be the bump in the official unemployment rate and the softening in the U-6 unemployment rate. Both have helped substantiate the Fed's concerns about downside risk to employment that served as the basis for the December cut.
• The October retail sales report was better than the headline suggests. Total retail sales were flat month-over-month (Briefing.com consensus: 0.3%) following a downwardly revised 0.1% increase (from 0.2%) in September. Excluding autos, retail sales rose 0.4% month-over-month following a downwardly revised 0.1% increase (from 0.3%) in September.
  • The key takeaway from the report is that there were solid increases in spending across many discretionary spending categories. The notable exceptions were building material and garden equipment and supplies dealers sales (-0.9%) and food services and drinking places (-0.4%). Department store sales (+4.9%), on the other hand, had a big month along with sporting goods (+1.9%) and nonstore retailers (+1.8%).
• Yield Check:
  • 2-yr: -1 bp to 3.50%
  • 3-yr: -2 bps to 3.54%
  • 5-yr: -1 bp to 3.72%
  • 10-yr: UNCH at 4.18%
  • 30-yr: +1 bp to 4.86%