Forget the US dollar moves, the real change in markets today is in bonds. US 10-year yields are down 9 basis points and 5s are down 11 bps.
If you’re wondering whether the jobs headline or the unemployment rate matters, the bond market has your answer. It’s screaming that weak non-farm payrolls were weak.
10 year yields
Is the bond market saying there won’t be a taper on Jan 29? I don’t think it is. The market was beginning to price in the chance of a larger than $10 billion taper at the next FOMC meeting because of the sanguine market reaction to the Taper 1.0 and solid economic data.
Now, forget about that. There are two options for the Fed now, either taper by $10 billion more or don’t taper at all. The chance of a taper is still at least 80% but it’s not the sure thing it was before the jobs report.
