The lede from Doug Short: This morning’s employment report for November showed a 178K increase in total nonfarm payrolls along with a 17K upward revision for September and a 2K downward revision for October (a net revision gain of 15K). The unemployment rate dropped from 4.9% to 4.6%, the lowest rate since August 2007. The Investing.com consensus was for 175K new jobs and the unemployment rate to remain unchanged at 4.9%.
The bonds are rebounding nicely today from a deeply oversold condition. We continue to expect a healthy rebound in the TLT(iShares 20+Year Treasury Bond ETF)from current levels despite the strong headline data in this morning’s employment report.
The Employment numbers for October were released today. A few key points: This is the fourth consecutive month of declining manufacturing workers, and the 7th decline in the past 10 months:
The chart below puts this in context: since 2014, the US had added 571,000 waiters and bartenders, and has lost 34,000 manufacturing workers:
Since the official start of the last recession in December 2007, the US has gained 1.8 million waiters and bartenders, and lost 1.5 million manufacturing workers. Worse, while the latter series had been growing, if at a slower pace than historically, it has now clearly rolled over, and in 2016, some 60,000 manufacturing jobs have been lost:
Hat tip Zerohedge.com
The lede: The November surge in global yields has already resulted in the worst monthly loss in the Bloomberg Barclays Global Aggregate Total Return Index, which lost 4% in November, the deepest slump since the gauge’s inception in 1990, and equivalent to $1.7 trillion in losses to $45.1 trillion.
The sell off is continuing this morning with the TLT down another 1.5%. The yield on 10-year U.S. notes rose 56 basis points in November, the biggest jump since 2009, and was at 2.41% in early trading on Thursday. The average yield on the Bloomberg Barclays Global gauge climbed to 1.61 percent on Nov. 23, after touching a record low of 1.07 percent on July 5.
Hat tip Zerohedge.com
Pessimism in the bond market has reached an extreme. No surprise considering the pounding the entire fixed income sector has taken since the election.
The TLT(iShares 20+ Year Treasury Bond Fund)is off over 15% from the July high and has been retesting the 40 week moving average for the last two weeks.
We believe the bond sell off, much like the huge rally in the financial stocks, is way overdone. Hardly the time to be negative from a contrarian point of view.
Hat tip Anthony Welch of Ned Davis Research