10-Year Yields Dropped After Poor Jobs Data

by on January 10, 2014 6:13 pm BST

US treasuries were higher immediately after the disappointing jobs data that showed that only 74K jobs were added in December, according to the Labor Department. This veered far from yesterday’s ADP payrolls report of 238K, analyst forecasts of 196K and November’s upward revision of 241K jobs added.

Bond traders drove yields lower on speculation that the Federal Reserve will pause further tapers in bond purchases and that the labor market is not as strong as many suspected. “It clearly was not as strong as people had hoped,” said Ira Jersey, an interest-rate strategist at Credit Suisse Group AG. Jersey believes the 10Y note yield will remain within the 2.8 to three percent range as shorts are covered.

As the short-covering rally continues, price action is pushing against the downward trend. A break above this could signal lower yields as traders look for safety as the economy and equity momentum begin to fade.

The daily chart shows resistance at 124’060 with price action currently traded at 124’055. A close above here could send action 100 ticks higher to the 50 EMA. The 50 and 72 EMA will act as dynamic resistance pending a breakout.

However,if the short-cover ends, a pullback to 123’230 is probable.

1D Chart of ZN

1D Chart of ZN