Bond yields continue to back up after hot jobs data

What’s driving markets

Investors are still reacting to the surprise 353,000 surge in nonfarm payrolls in January.

“The January employment numbers provide evidence of strengthened labor demand and weakened labor supply, both of which undermine the FOMC’s narrative. Although some of the key numbers should be interpreted with caution, due to weather effects and other changes, upside risks to the rate path are intensifying,” said economists at Barclays.

Federal Reserve Chair Jerome Powell used an appearance on the 60 Minutes program to again push back on the idea the central bank would cut rates in March.

Analysts at BMO said the only path to a March rate cut at this point would be regional bank turmoil so bad that it would warrant Fed action, after last week’s revelations of big office market turmoil. “The verdict is still out as to whether NYCB was the coalmine canary or an idiosyncratic episode. As more information becomes available and the market’s understanding of the risks broadens, we’re biased toward the latter outcome,” they said.

There’s more economic data in store, coming from the ISM services report. That report last month triggered worries about the economy after an unusually low reading for the employment component.