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How the Bond Markets React
A New Weekly Fixed Income Feature at the BlueCollarDollar
04.05.04
The Jobs Report Unveiled

If you are a bond trader or investor as they used to be called, you have a world of things to worry about. The jobs report and the stronger than anticipated ISM number all point to one thing in the future: higher short term rates. With an almost sure bet that some move will be made by the Fed before the election, Treasuries began selling. The folks who took the hardest hit were the overseas investor who has placed their collective trust in the good faith and credit of our government.

Folks are worried that this trust may now be perceived as ill-placed. If our recovery shows signs that it is falsely propped up with monetary policy that has outrun its welcome - and the slightest indication that it might be yanked at only a hint of stability - these lenders may just flee in droves.

The ten year Treasury yield shot up to 4.17% on Friday from a pre-jobs report yield of 3.99% before settling at 4.145%. With prices running in the opposite direction, investors saw huge losses in the markets on a report that while on the surface seems amazing but underneath, looks like many that have been reported previously. Many economists have failed to come close to the actual number with estimates and this time was no different.

The most troublesome fact was the continued lack of acknowledgment of the not only the disparaged worker, the one who is no longer looking for a career but will settle for anything. Add to that the lack of jobs being created for young workers entering into the markets. With an average of 150,000 new job hunters looking for work each month that were not there the previous month, we are falling woefully short of job creation.

And the chances that the Fed will raise those rates have increased with the most popular time table estimating September. A pre-election increase might signal to the markets and the voter that Mr. Bush's economic stimulus policies had little to do with any economic recovery. Mr. Greenspan may unwittingly understand that if he and his learned bankers are to be given credit for their stewardship, this would be the right time to stop the economy on a dime.