Rates Ticking Lower As Wage Growth Misses The Mark

Dec employment data this morning; non-farm jobs +139K (158K expected), private jobs +139K (150K expected). Unemployment rate as expected unchanged at 3.5%. Average hourly earnings +0.1% (expected +0.3%), yr/yr average earnings +2.9% down from 3.1% in Nov. Manufacturing jobs continue to decline; the estimate was for those jobs to decline 1K as released down 12K. On the knee jerk, the 10 yr dropped to 1.83% down 2 bps but quickly moved back to unchanged at 1.85%. The employment report isn’t bad or good, just right. MBS prices are generally unchanged on the initial reaction at 8:30 am E.T.

The weaker earnings up just 0.1% may further convince markets (if they actually need it) that there isn’t any worry about inflation. Most Fed officials, including Powell, have mostly made it clear no changes in the rate this year. It is a long year, but today’s employment data goes to that view currently held by financial markets.

Yesterday afternoon MBS prices improved on possible concerns that Iran shot the Ukrainian passenger plane, killing all 176 aboard. Iran said it wanted to download black box recordings itself from the plane that crashed, after Canada, and others said the aircraft was brought down by an Iranian missile, probably by mistake.

The House passed a largely symbolic measure opposing further military force against Iran without congressional authorization, a day after both Washington and Tehran appeared to back away from military conflict. The resolution aims to stop President Trump from using military force against Iran unless it is necessary to defend the U.S. or Congress votes to approve it. The resolution is mostly for show but is another example of the divisiveness that markets would rather not see.

The interest rate markets continue to be confined in narrow ranges, with no trend as the 10 yr stays between 1.94% and 1.80%.

Source: TBWS