January Jobs Surge Weighs on Projected Rate Cut pricing

Tsy futures gapped lower after broadly higher than expected Change in Nonfarm Payrolls of +353k vs 185k est (prior up-revised to 333k from 216k), Private Payrolls surge to +317k vs. 170k est. Unemployment Rate 3.7% vs. 3.8% est while Labor Force Participation Rate near steady at 62.5% vs. 62.6% est.

• Futures continued to extend lows after little initial react to UofM and Factory/Durables Order data
  • U. of Mich. Sentiment (79.0 vs 78.9 est)
  • U. of Mich. Current Conditions (81.9 vs. 83.5 est)
  • U. of Mich. Expectations (77.1 vs. 76.0 est)
  • U. of Mich. 1 Yr Inflation (2.9% vs. 2.9% est), 5-10 Yr (2.9% vs. 2.8% est)
• Mar'24 10Y futures currently trading -1-06.5 at 111-22. Technical support at 111-16/110-26 Low Feb 2 / Low Jan 19 and bear trigger. Curves remain flatter but well off lows: 2s10s -2.206 at -34.839 (-40.198 low), while 10Y yield remained above 4% at 4.0237% (+.1435) after starting the day around 3.8648%.
• Factory Orders in-line w/ 0.2% vs. est, Ex Trans (0.4% vs. 0.2% vs. est)
• Durable Goods Orders in line w/ 0.0% vs. est, ex Trans (0.5% vs. 0.6% vs. est)
• SOFR futures gapped lower (SFRH4-SFRZ4 -0.080-0.210) while projected rate cut chances retreated: March 2024 chance of 25bp rate cut currently -22.2% vs. -38.7% pre-data w/ cumulative of -5.6bp at 5.263%, May 2024 at -70.6% vs. -90.8% w/ cumulative -23.2bp at 5.087%, while June 2024 at retreated to -87.9% vs. 105% w/ cumulative -45.2bp at 4.867%. Fed terminal at 5.3175% in Feb'24.