US futures rise, bonds slide

BLOOMBERG

Policy-sensitive Treasury notes fell and US stock futures advanced after a solid March jobs report did little to alter views on the Federal Reserve’s next policy move.
Futures on the S&P 500 erased losses to trade higher, while the two-year Treasury yield jumped 11 basis points to 3.94% after the March jobs report showed payroll growth moderated, while wages advanced and the unemployment rate retreated.
The cash equity markets are closed in the US for the Good Friday holiday, and futures stopped trading in New York. Treasuries are open for a shortened session. European markets are mostly shuttered.
“This payrolls info is still indicating that the job market is on solid ground, but the magnitude of the payrolls gain relative to expectations is not significant enough for the Fed to dramatically shift course,” George Cipolloni, portfolio manager at Penn Mutual Asset Management, said. “Wage growth was as expected. I do not see much here that should make the Fed move off of their current path.”
Swaps trading showed the odds for a quarter percentage point interest-rate increase at the Fed’s May meeting rose to 54%, up slightly from before the data landed. Investors have been aggressively pricing in rate cuts later this year as economic data falls short of estimates, suggesting the US economy is slowing.
Data indicated filings for jobless claims rose more than expected, a day after a private reading on hiring came in below estimates. Job openings also contracted more than forecast, adding to worries that the labour market was softening.
The next major data point for the Fed is a report on consumer prices, due April 12. Officials deliver their policy move on May 3.
“While this is an employment report not likely to cause alarm, there is still no evidence policy is tight enough to slow demand in a meaningful way, either,” Chris Low, chief economist at FHN Financial wrote in an email. “There are other things going on in the world, of course, including credit tightening in the aftermath of recent bank failures. It will all go into the mix.”
The two-year Treasury yield peaked above 5% just before March’s banking stress and then plunged as worries mounted that tighter lending will constrict growth at the same time the Fed’s aggressive tightening filters through to the real economy.
The S&P 500 concluded its first losing week in the past four as data showed filings for jobless claims surpassed estimates last week, a day after a private payrolls report indicated hiring slowed more than forecast.
US stocks bounced back from early losses after St Louis Fed President James Bullard said he didn’t think tighter credit conditions stemming from the recent banking turmoil would tip the economy into recession. Meanwhile, the International Monetary Fund (IMF) warned that its outlook for global economic growth over the next five years is the weakest in more than three decades, urging nations to avoid economic fragmentation caused by geopolitical tension and take steps to bolster productivity.
The yen fluctuated against the dollar for the first time. While much of Asia including Australia, Hong Kong and Singapore was closed for holidays, financial markets in Japan and mainland China were open. Japan’s benchmark Topix edged higher, ending a two-day slump, and shares in China and South Korea advanced.
The cash pile parked at money-market funds hit a fresh record high in the past week, although inflows slowed from the breakneck pace. About $49.1 billion poured into US money-market funds in the week to April 5, bringing total assets to an unprecedented $5.25 trillion, according to data from the Investment Company Institute.
Money-market funds have been scooping up cash recently. Initially much of that flow was driven by more attractive rates, but concern about the steadiness of some smaller lenders helped turbocharge that within March.