Daily Comment (May 6, 2016)
by Bill O’Grady and Kaisa Stucke
[Posted: 9:30 AM EDT] It’s employment data Friday! We will update all the numbers below but the short summary is that the data was a bit soft. Non-farm payrolls disappointed, and the unemployment rate fell only because the labor force contracted less than employment did in the household survey.
Global equity markets are weaker and consequently we are seeing a drop in sovereign yields. German 10-year sovereign yields are moving to test their historic lows.
This chart shows the yield on the German 10-year sovereign. The yield is down to 0.145 bps and clearly in a downtrend. Although Eurozone economic growth has picked up a bit, fears of falling inflation and concerns about the banking system are continuing to weigh on interest rates in Europe. As European rates decline, U.S. Treasuries are starting to rally as well.