Halister News

(Bloomberg) -- Regression analysis of yield changes in 15 minutes following employment report releases over last 24 months found that UST curve as a whole was more responsive to 1-standard deviation upside surprises in payrolls than unemployment rate or avg hourly earnings, Credit Suisse strategists led by Praveen Korapaty say in note.

• “For 2y yields, however, earnings surprises (beta of 2.7) have a comparable impact to payrolls (beta of 3.1)”
• Implication is that if wage gains surprise more than payroll gains, 2Y “should cheapen relative to the rest of the curve,” either “in leading an outright sell-off or lagging in any initial rally”
• Additionally, “upside surprises in the jobs reports are likely to be yield curve flatteners, at least initially, going forward”
• Also, initial moves in 2Y and 5Y have been “far less likely to reverse than points further out the curve,” suggesting that “on upside surprises, the initial post-payrolls flattening of the yield curve is likely to continue into the close”
• Still, CS doesn’t recommend flatteners into tomorrow’s report, as 2/10 curve “is already close to post-crisis lows,” Fed “is unlikely to tighten policy in next few months,” and March report has tendency to be weak