Bond Market Update

Data Recon

• Fourth quarter productivity increased 1.2% (Briefing.com consensus 0.8%) following an upwardly revised 2.3% (from 2.2%) in the third quarter. Unit labor costs increased 3.0% (Briefing.com consensus 2.6%) following a downwardly revised 0.5% increase (from 0.8%) in the third quarter.
  • The key takeaway from the report is that the productivity is on the rise, which will help temper inflation pressures. The 1.8% annualized rate of productivity growth in the current business cycle (starting Q4 2019) is higher than the 1.5% rate of the previous business cycle (Q4 2007 through Q4 2019).
• Initial jobless claims for the week ending February 1 increased by 11,000 to 219,000 (Briefing.com consensus 213,000). Continuing jobless claims for the week ending January 25 increased by 36,000 to 1.886 million.
  • The key takeaway from the report is that there simply hasn't been a material increase in initial jobless claims, which would suggest there is some real weakening in the labor market. Hiring activity might have slowed, but the layoff activity does not impart an indication that employers think the economy is on the brink of a meaningful slowdown.
• Yield Check:
  • 2-yr: +3 bps to 4.21%
  • 3-yr: +2 bps to 4.22%
  • 5-yr: +3 bps to 4.27%
  • 10-yr: +1 bp to 4.43%
  • 30-yr: UNCH at 4.64%