Briefly while the news rolls in:
The US Govt Labor Department's April Employment report echoed that of yesterday's ADP report indicating that the pace of job losses is slowing. With that news the equity markets opened higher and the bond markets continue to get beat up.
The pace of layoffs slowed in April when U.S. employers cut 539,000 jobs, the fewest in six months. But the unemployment rate climbed to 8.9 percent, the highest since late 1983, as many businesses remain wary of hiring given all the economic uncertainties.
What this means to you:
Increasing bond yields will put pressure on the govt to buy US Treasuries and Mortgage Backed Securities. If there are no buyers for the above bonds, interest rates will be forced higher. At this time the govt wants to try and keep rates low so we can all get out there and spend. Without spending and borrowing the rate of economic improvement will slow.
With unemployment expected to reach 9.5 or 10% the bond markets could rally because, while the rate of unemployment may be slowing those looking for work are unlikely to find it anytime soon. 9-10% of the population out of work will slow the rate of recovery and possibly cause the recovery to regress.
It is going to be an interesting day.
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