Another Payrolls Friday here and gone. Treasuries tottered into the release of better-than-expected data, but regained their footing after going some way to price such a result the past couple sessions. The curve flattened initially and shorter-dated maturities suffered as the market reduced near-term Fed easing expectations. July Payrolls fell 42,000, but June and May numbers were revised upwards by about a like amount. In addition, the unemployment rate remained stubbornly sticky at 4.5% in contrast to expectations of a gain to 4.7%.
A CTA (fund) was heard selling five-year bonds and 10-year bonds into the hole after the data, but prices soon boomeranged higher on good dealer demand. The September bond bounced ahead of 102-15 support, closing down merely 3/32 at 103-02, while the two-year bond and 30-year bond spread narrowed to +166 basis points before widening back to +170 basis points. Equities closed heavily, still worried about corporate profitability and now less than 100% odds of a quarter point Fed cut on August 21. Productivity, the quarterly refunding and Beige Book data next week will keep bulls off balance, but the 102-07 200-day moving average may support.