Eagle Bites June 5th

U.S Jobs Data

Wednesday morning, the job openings and labor turnover survey (JOLTS) came showing 10.1 million job vacancies for the end of April, an unexpected increase after 3 months of decline and hitting nearly a 2-year low in March. Wednesday’s report also showed slowing layoffs in a demonstration of the job market’s continued strength, adding to the case for a June rate hike.

Friday morning’s job report, a measure of the total number of non-farm workers in the US, listed 339,000 new jobs last month. Expectations were almost ½ of the print, however, wage growth cooled a bit, only increasing 0.3% m/m and unemployment rose to 3.7%. With a “mixed bag” of data Friday’s report was not too consequential to the Fed’s interest rate decision.

Treasury Yields

U.S. Treasury yields rose on Friday as investors reacted to better-than-expected payroll data. The 10-year Treasury yield increased by 2 basis points to reach 3.628%, while the 2-year Treasury yield climbed by 5.4 basis points to 4.397%.

The Labor Department’s jobs data showed a significant payroll increase, with 339,000 jobs added last month, surpassing economists’ expectations. Despite this positive news, the unemployment rate slightly ticked up to 3.7%.

Additionally, the Senate recently passed the Fiscal Responsibility Act, which raises the debt ceiling and limits government spending. This action was taken just before the June 5 deadline to prevent a potential default on U.S. debt obligations.

Debt Ceiling Update

The Treasury is tentatively planning to issue an additional $123 billion in longer-term bills on June 8. On Thursday evening, the Senate voted to suspend the nation’s debt limit until January 1, 2025. President Joe Biden has signed the bill into law to prevent the first-ever default on the United States debt.

Since breaching the debt ceiling in mid-January, the Treasury Department has been unable to borrow more funds. To meet its financial obligations on time, the Treasury has implemented various extraordinary measures to buy additional time in the hopes that Congress will take action to suspend or raise the debt limit. This past Thursday’s auction witnessed the sale of $25 billion worth of three-day cash management bills with a yield of 6.15%. This yield surpasses the rates at which almost all other Treasury bills are being traded, highlighting the premium that investors demand when purchasing the government’s debt.

The United States faces imminent significant payments, with interest payments due around the 15th and last day of each month. As a result, the Treasury will likely need to continue paying high-interest rates on its debt to raise the necessary funds. Consequently, investors might opt for purchasing more Treasury bills instead of stocks, potentially reducing market liquidity.