Payroll Friday
January 10, 2020
–Stock futures at new highs this morning. Treasuries mixed with the curve slightly flatter. Yields fell yesterday despite the 30 year auction; the ten year fell 1.7 bps to 1.855%.
–Today brings the Employment report with NFP expected 160k from 266 last. YOY earnings expected +3.1%, same as last. Atlanta Fed’s median wage growth tracker was 3.7% last (from November) just a bit under the high last year of 3.9%. https://www.frbatlanta.org/chcs/wage-growth-tracker
–One interesting trade getting play is +EDM0 9837p (settled 10.25 vs 9834.0 in EDM0) vs -0EM 9837p (settled 9.0 vs 9848.5 in EDM1). Paid 1. Clearly if the market settled here the trade would make a few bps, as front puts are in the money. However, if expectations were to shift to a much less probable chance for easing, EDM0/EDM1 could move from its current level of -14.5 closer to flat. Given the relentless march higher in equities, I would think that’s a non-trivial risk.
–Below is a chart indicating continuing claims. Fairly dramatic spike since Q4 drew the attention of some analysts. Worth keeping an eye on as a contrary signal in otherwise glowing reports of the labor market.
