Rates Bounce After Hitting 2 Month Lows

Interest rates were remarkably calm in the last week of March. The market was in the process of shifting focus from the banking sector back to economic data. It just so happened that last week was light on data. This week was quite the opposite. The first week of any given month often brings several of the most meaningful monthly economic releases.  These include reports from the Institute for Supply Management (ISM) and most notably, the Employment Situation (more commonly referred to as “the jobs report”). Virtually all of the economic data that came out in the first 3 days of the week was good for bonds/rates.  In other words, the data was weaker than expected.  Bonds benefit from weak data because a slower economy is less capable of sustaining growth and inflation–two of the main pillars of interest rates. As expected, bonds were eager to get some actionable economic updates and rates wasted no time responding to downbeat news from ISM.  There are two flavors of ISM Purchasing Managers Indices (PMIs).  Each can be thought of as a broad barometer for growth in the corresponding sector where anything over 50 is good/growing and anything under 50 signals contraction.   Rounding out the rate-friendly news in the first half of the week, the Job Openings and Labor Turnover Survey (JOLTS) showed much lower job openings in the month of February.  The numbers are still very high overall, but markets are looking for a trend as opposed to an outright level.  Taken in conjunction with the ISM data, JOLTS added to the sense that persistently resilient economic momentum is cooling off.
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