Interest Rate Alert

February Payrolls Report Stronger Than Expected

The February payroll report came in stronger than forecasted as payrolls increased 295,000 versus a consensus forecast of 235,000. Partially offsetting this strength was a downward revision of (18,000) to the previously reported January payroll figure. The jobs increase in February marks the 12th straight month that payrolls have increased by at least 200,000. The unemployment rate fell to 5.5%, which is the lowest level in almost seven years. The decline reflected both an increase in hiring and a decline in the number of people in the labor force as the participation rate decreased to 62.8% from 62.9%. Hourly earnings increased a less than expected 0.1% for the month and are up 2.0% over the last twelve months.

Treasury yields increased following the jobs report with the yield on the benchmark 10-year Treasury note up 8 basis points (bps) from yesterday’s close. The Fed Funds futures also increased and are now placing a 96% probability of a 25 bps rate increase in June.

Treasury Yields with bps changes
Maturity Yield 1-Day YTD
2-year 0.71 +6.8 +4.3
3-year 1.12 +8.7 +5.5
5-year 1.67 +9.6 +1.8
7-year 2.01 +9.7 +3.7
10-year 2.20 +8.5 +2.8
30-year 2.79 +5.7 +3.5

Source: Bloomberg

Written by:

Marco Bravo, CFA
Senior Portfolio Manager

 

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