HALISTER1: ‘Yellen Effect’ May Limit UST Reaction to Payrolls, WFS Says

‘Yellen Effect’ May Limit UST Reaction to Payrolls, WFS Says

(Bloomberg) -- Front-end yields will “be more or less anchored” even if March jobs report is very strong as “market participants take their cue from Fed Chair Yellen’s latest batch of dovish comments,” Wells Fargo strategists Mike Schumacher and Boris Rjavinski say in March 30 note.
  • Regression analysis of payroll data releases from April 2015-March 2016 shows 2Y “has been comparatively unresponsive to payrolls” while 10Y’s average implied beta on employment report Friday is ~8bp per 100k miss
  • 10Y “is unlikely to match the historical move” even if payrolls change “is way off consensus,” and “if the jobs report is strong the Yellen effect will be especially pronounced”
  • Instead, 10Y yield should move about 6bp per 100k miss in nonfarm payrolls (assuming miss of at least 50k)
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Boris Rjavinski (Wells Fargo & Co)
Mike Schumacher (Wells Fargo & Co)

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