Making Sense

"You don't have to be great to get started, but you have to get started to be great" -  Les Brown The Employment data and the soft ISM print lead to strong bond buying interest with yields on US2s down 14.80 bps and on US10s down 11.80 bps bps over the week. US2s10s steepened 3 bps to close the week at -32.60 bps from -35.60 bps at end of last week. The Atlanta FED GDPNow estimates were revised lower to 1.50%.  We  did not get any post news drift after the initial  sell off in bonds post the Presidential debate barring a move on Monday to 4.795% which was largely faded. Yields on US2s held the 4.76% resistance through the week before dropping sharply. The next support comes in at 4.50% - break below which opens the room for a move likely towards 3.50%. The markets are now pricing in 51 bps of rate cuts into 2024 with 72% probability of the first 25bps rate cut by September 2024.  Fed Chair Powell in his speech mentioned that Inflation is now showing signs of re...

"We may never know where we are going, but we'd better have a good idea of where we are" Friday saw the release of the much awaited NFP data print and along side the ISM Non Mfg PMI which is a survey based measure. An analysis of the NFP data should not only focus on the headline number but also various other details like revisions, participation rate, employment rate etc. On the surface reading, the numbers showed strength as can be seen in the table below:   NFP▲ UR (in %) AHE mom AHE yoy Nov-23 173,000 3.7 0.35% 3.96% Exp 1,70,000 3.8 0.29% 3.90% Dec-23 2,16,000 3.7 0.40% 4.10% The prior two months were revised lower by 71K with the Oct - Dec  average at 164,667 compared to Jul - Sep 3 month average of 221,000 which clearly points to a decelerating trend in Employment gains. The unemployment rate was steady at 3.70% due to a drop in Labor participation rate. Under the hood, the Civilian Labor Force declined by 676,000 and the number of employed people fell by 683,000. ...

In February, ISM Services PMI registered 55.1% (marginally lower than prior reading of 55.2%), showing a growth in February for the second consecutive month after a reading of 49.2 % in December, the first contraction since May 2020 (45.4 %). For a quick understanding of how the components have moved, look below. The market is most concerned about inflation and while the prices paid index continues to be elevated , it is gradually moving towards equilibrium and the supplier delivery time is reducing which is supportive of lower prices. Business Activity Index at 56.3% (prior 60.40%) New Orders Index at 62.6% (prior 60.40%) Employment Index at 54% (prior 50.00%) Employment activity in the services sector grew in February after an unchanged reading in January Supplier Deliveries Index at 47.6% (prior 50.00%) - The number indicated the fastest delivery performance since June 2009, when the index registered 46 %. Note that Supplier Deliveries is the only component that is inversed; a readi...