Weak data in the form of payrolls and the service sector ISM survey capped off a postitive week for Treasuries on Friday and a lousy one for stocks. The curve steepener came back with a vengeance after fading a bit Thursday, with the two-year note and 30-year bond spread vaulting five basis points to about +242 basis points before slipping back below +240 basis points. Though payrolls gained 48,000 in April, a steep downward back revision in March to -21,000 (from +58,000) combined with an 0.3% jump in the unemployment rate to 6.0% and tame hourly earnings set the bullish tone for the front-end, particularly.
Then obscure rumors of an act of terror in Philadelphia spawned by an Italian bank in Europe and vanishing Fed tightening expectations all played a role in the steepener. ISM shrank to 55.3 from 57.3 and all-totalled the data stacked up to make a non-event of next week's FOMC. Two-year yields tumbled 12 basis points to 3.12%, while the bond yield lagged with a six basis point decline to 5.53%.
The June bond closed up 18/32 at 102-24/32. The dollar continued to unwind strength along with the economic disappointment, while gold and the Swiss franc made benefitted as hedges from the uncertainty.