Bond Market Update

Data Recon

• The employment situation in December was better than feared and not entirely bad, unless one is counted among the long-term unemployed. Nonfarm payrolls increased by 50,000; the unemployment rate fell to 4.4% from 4.5%; and average hourly earnings increased 3.8% year-over-year versus 3.6% in November.
  • Granted, the employment situation could be better, but the key takeaway is that the low unemployment rate will temper concerns that consumer spending and the economy will slow rapidly due to a weak labor market. It will also likely keep the Fed's next rate cut at bay.
• Housing starts in October declined 4.6% month-over-month to a seasonally adjusted annual rate of 1.246 million (Briefing.com consensus: 1.340 million). Building permits decreased 0.2% to a seaonally adjusted annual rate of 1.412 million (Briefing.com consensus: 1.355 million).
  • The key takeaway from the report is that the weakness in starts was driven entirely by multi-family units. Single-unit starts were up 5.4% month-over-month and at their highest level since July.
• Yield Check:
  • 2-yr: +2 bps to 3.51%
  • 3-yr: +2 bps to 3.57%
  • 5-yr: +1 bp to 3.75%
  • 10-yr: UNCH at 4.18%
  • 30-yr: -1 bp to 4.85%