FED Remains in Play Post-NFP/ISM Data

Off lows, Tsy futures remain broadly weaker after this morning's surge in job gains for January of +517k, 2.75x larger than the mean estimate of 188k (and well over 320k high estimate survey of 77 economists by Bbg). Tsy 30YY at 3.6288% +.0840, yield curves extend inversion: 2s10s -6.590 at -78.151%).

• Unemployment rate sank a tenth to 3.4%, the lowest since 1969, the Bureau of Labor Statistics reported Friday. November and December payrolls figures were also revised 71,000 higher.
• Meanwhile, ISM services was far stronger than expected in January at 55.2 (cons 50.5), back at the 55.5 in Nov via December's 49.2. The largest increase since Jun'20 followed the largest downward surprise since 2008.
• Short end rates gapped lower as markets reverted back to more (possibly larger) rate hikes ahead - but moderated somewhat in the second half. Fed funds implied hike for Mar'23 at 22.5bp (vs. 23.3bp post-ISM), May'23 cumulative 37.5bp to 4.957%, Jun'23 41.5bp to 4.997%, terminal climbs to 4.980% in Jun'23.
• Goldman Sachs' chief economist Jan Hatzius tweeted “this morning’s report provides strong evidence of continued economic expansion in January. We continue to expect two more 25bp fed funds rate hikes in March and May, and we continue to expect no rate cuts in 2023."