The stronger US jobs data has US yields moving sharply to the upside once again:
- 2 year yield 5.110%, +8.6 basis points
- 5 year yield 4.808% +12.5 basis points
- 10 year yield 4.86% +14.5 basis points
- 30 year yield 5.03% +14.4 basis points. Above the 5% level. Recall that earlier this week, the yield tagged the level and backed off.
The high yield for the 10 today reached 4.887% which was just above the high from Tuesday’s trade of 4.884%.. The move takes the yield to the highest level since July 2007 and closer to the 5% level.
Looking at the monthly chart below, there is a swing area going back to 1993 – 2007 area where the yield fluctuated above and below 4.88% and 5.52%. Should the 10 year yield head up toward the 5.5% level, that would likely turn the yield curve positive (2 – 10 year spread). I would not be surprised to see the market head toward that level/target.
10 year yield
Currently, the 2-10 year spread is down to -25.6 basis points (it was as negative as -109 basis points this year). The negative spread is the smallest since October 2022 as the market chips away at the negative yield curve – only 25 basis points to a flat yield curve. Should the 10-year yield spike up toward the 5.5% level, that yield curve could un-invert and move positive.
US 2 – 10 year yield spread
The premarket for US stocks or implying a lower opening (but off the lowest premarket levels post the US jobs report):
- S&P index is down -27 points
- Dow industrial average down -124 points
- NASDAQ index is forecasting a tumble of -120 points
The NASDAQ index closed yesterday unchanged for the week. It’s looking like a down week now.
Fundamentally, things are still out of whack as a result of the pandemic. I blame the last covert stimulus spending for this employment situation (spurred on by the election. PS recall that Trump was also pushing for even stimulus at the time as well as politics was the guiding light).
Looking down our street right now, construction crews are ripping up the curbs at each and every corner, and putting in new ramps where there were ramps. Streets all around town are being repaved. Money is being spent because “it’s there” and allocated, and that is taking workers away from housing where there is a shortage. Businesses can’t find workers. That is not good. This is a time that municipalities, states, and governments should be sitting tight and letting the private sector take over. Too bad.