USD Down on Lower US Yields; Preliminary PMIs

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Rates as of 0500 GMT

Market Recap

Markets or investors, I should say just cant make up their minds. After a big riskoff day on Wednesday, Thursday was a substantial riskon day, with both equities and credit rallying. The SP 500 closed up 1.1 with tech outperforming NASDAQ up 1.8.

The cause of the good spirits was a betterthanexpected initial jobless claims figure, down 29k to 444k vs expectations of 450k. This week was particularly important as its the week when the survey for the May nonfarm payrolls NF is taken. It raises hopes that the disappointing April NFP report was just a blip, not the start of a trend, and that there will be substantial further progress in the labor market.

Note that the initial jobless claims have been running below their 4week moving average since early April. That indicates an accelerating pace of decline.

Oddly enough, despite the good news on the labor market, Treasury yields declined, with the 10year yield down 3.4 bps this morning from yesterday mornings level. At 1.628 its now below the 1.644 of Wednesday morning. Its therefore recovered all of the taper tantrum that occurred on Wednesday following the release of the minutes of the April meeting of the ratesetting Federal Open Market Committee FOMC, which showed that indeed the Committee has begun thinking about thinking about tapering down its bond purchases. The fed funds market also slightly repriced fed rate expectations, which fell by 2 bps or so in the long end. Its hard to…

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