The mid-week holiday brought a short trading week, but that didn’t prevent market volatility from making an appearance. The yield on the 10yr Treasury is up +19bps since the start of the week as markets are filtering through economic data to predict the Fed’s next move.
The big news of the week is the jobs numbers as both the ADP and BLS released employment numbers this week. On Thursday, the ADP released an eye-popping June number that showed private payrolls increased by 497k compared to an estimated 225k. Hiring improved across the spectrum, including everything from construction, leisure, and hospitality. Continuing Claims also came in slightly lower than expected at 1,720k compared to an estimated 1,737k.
Alternatively, the BLS released its “less exciting” change in nonfarm payrolls report on Friday morning which showed jobs gains of 209k compared to an estimated 230k while the unemployment rate remained steady at 3.6%. Mortgage applications were down -4.4% for the week ending on June 30th as the average rate on a 30yr mortgage ticked up to 6.85% from 6.75%.
All in all, the market believes that this week’s news should give the “data-dependent” Fed enough ammo to continue their rate hiking campaign when they meet later this month. As it stands now, Fed Funds Futures are currently projecting a 91% chance of a 25bp rate hike at the July meeting.
Looking ahead to next week, there will be plenty of news to keep the market’s attention. We’ll get a look at June’s inflation numbers with the CPI report coming out on Wednesday and the PPI report on Thursday. The University of Michigan will also be releasing their Consumer Sentiment report for the month on Friday.
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