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Pension/insurance/hedge funds have trading algorithms that place buy/sell orders based on the
spread to USTs. As German yields took off, automatic sale orders were placed. The race up
was underwayright up until another algorithm order was triggered that ordered the purchase of
these same government bonds.
Markets were very jittery, but ultimately settled down. Throughout the wild swings, we kept
noting to ourselves nothing has actually changed in the economy, right?
Then Friday brought the latest batch of job data. As you may recall, last months report was
significantly weaker than expected. That put a lot of focus on Fridays number. Were we seeing
a weakening trend? Or was that last set of data simply a result of a nasty winter?
The market got its beloved Goldilocks number. The economy gained 223k jobs last month, right
on top of expectations. It was a strong enough number to calm jitters about a slow Q1 but weak
enough to keep June off the table for a hike. As markets reviewed the report, last months
revision stuck out because the gains were only 85k, the weakest since June 2012.
The 10T settled in at 2.15%, well off the high of 2.31% but also well above the recent technical
high of 1.99% from a week prior.
Europe is going to be driving the UST yields this week. Greece is a predictable mess, with that
pesky 770mm loan payment due to the IMF from a previous round of bailouts. Tsiparis is stuck
between a rock and a hard place, with his creditors refusing to budge and his diehard leftist
backers rejecting any talks of austerity measures. His finance minister has said Greece can make
the payment without an extension, but he has absolutely no credibility in the market. There is
not a lot of optimism right now for a resolution by Tuesday.
Economic Data
Day
Time
Wednesday
7:00AM
Thursday
8:30AM
8:30AM
270K
265K
8:30AM
Continuing Claims
2255K
2228K
8:30AM
Empire Manufacturing
4.3
-1.19
10:00AM
96.3
95.9
Friday
Report
Forecast
Previous
-4.60%
0.10%
0.20%
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