Payrolls Friday set up the market for a typical turbulent ride, but weaker than expected headline data was subsequently eclipsed by news of the departure of the majority of the Bush Administration's economic team. The net result was sharp curve steepening and a roundtrip adventure for the bond. Non-farm payrolls sank 40,000, below median expectations of a 25,000 gain, while the unemployment rate streaked higher to 6.0% from 5.7%.
While the market reacted to the weaker headlines, some components such as the workweek data were solid. The bond gained nearly two-points prior to the resignations of Treasury Secretary O'Neill and Economic Advisor Lindsey. The former was seen as resistant to further fiscal stimulus, so the implication was that more would now be in the pipeline.
It was also erroneously assumed that a revival of bond issuance could be undertaken, though Under secretary Fisher was the main architect of its demise and so far he is still onboard. The December bond rallied to 110-26 on the data only to drop like a stone on the resignations.
Iraqi weekend weapons disclosures remained a wildcard. Indeed, stocks sank and Treasuries found a late day bid as all finished in the green by the Chicago pit close.