Market commentary - June 3, 2016

Jun 3, 2016

Good morning,

Bonds are rallying this morning after disappointing US employment data.  The change in Nonfarm Payrolls for May came in at +38k against +160k expected.   Payrolls for the prior two months were also revised down by 59k.  The unemployment rate actually fell from 4.9% to 4.7% but this was the result of a decline in participation as people abandon their search.  This news definitely takes the air out of any thought of a hike by the Fed at the June 15th meeting.    The Bank of Canada doesn’t meet again until July 13th and interest rate futures imply the benchmark rate will remain unchanged at that meeting.

5yr Government of Canada bonds are trading 23 cents higher (or 5 basis points lower at 0.62%) and 10yr bonds are 43 cents higher (or 5 basis points lower at 1.20%) following the payroll data.   For those of you preparing to write your CFA exams tomorrow, note the fine examples of the inverse relationship between yield and price and the impact of duration on the price value of a basis point.  ANYWAY, yields are now 15 basis points lower than a week ago.  Get your mortgage applications in!

Finally, because some of you were wondering, the fastest recorded time for eating a box of Kraft Dinner and drinking a full bottle of Heinz Ketchup is about the same at 33.8 seconds and 32.8 seconds respectively. 

Have a great weekend,

Treasury Guy  
Jason Ellis, Managing Director of Capital Markets