Bond Market Update

Data Recon

• Nonfarm payrolls increased by 162,000 in August, much better than expected; the unemployment rate of 4.1% was lower than expected; the average workweek at 34.4 hours was higher than expected; and the 0.3% increase in average hourly earnings was as expected. The quick takeaway by the market is that this report just might persuade the Fed to raise rates at its September FOMC meeting.
  • The key takeaway, though, is that a rate hike in September is not assured by this August data. To that end, the 3-month average for total nonfarm payrolls was still just a modest 71,000, there was a moderation in average hourly earnings growth to 3.1% from 3.2% on a year-over-year basis, and persons unemployed for 27 weeks or more accounted for 27.0% of the unemployed versus 25.5% in July.
• Yield Check:
  • 2-yr: +6 bps to 4.39%
  • 3-yr: +5 bps to 4.46%
  • 5-yr: +4 bps to 4.55%
  • 10-yr: +2 bps to 4.78%
  • 30-yr: +1 bp to 5.25%