Treasury Yields Leap as Jobs Data Spur Bets on Bigger Fed Hikes
Comment of the Day

August 05 2022

Commentary by Eoin Treacy

Treasury Yields Leap as Jobs Data Spur Bets on Bigger Fed Hikes

This article from Bloomberg may be of interest to subscribers. Here is a section:

Yields on two-year Treasuries surged in response to the jobs report, a reflection of the expected Fed rates over that period. Market pricing indicated a 75 basis-point increase to the Fed’s key rate is now seen as a more likely outcome in at the central bank’s September meeting than 50 basis points.

Powell has described the labor market as “tight to an unhealthy level,” and has been seeking a moderation to help bring demand for products and services more in line with supplies that have been constrained by Covid-19 disruptions. He and other Fed leaders are worried about the potential for a wage-price spiral, with higher wages feeding into inflation in a cycle that is hard to break.

“This number is so comprehensively strong with a pretty significant uptick in wages,” said Mark Spindel, chief investment officer at MBB Capital Partners LLC in Chicago. “Companies are paying up for labor. Income matters most. When you look at the breadth of the employment report, and the earnings, this is an enormous tailwind for income.” 

Eoin Treacy's view

It has been widely reported that the USA has missed out on 2 million immigrants following the isolationist policies adopted by President Trump’s administration. At least 1 million of those would have been highly educated/skilled individuals.

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