Interest Rate Alert – February Payrolls Report Stronger Than Expected

The February payroll report came in stronger than forecasted as payrolls increased 295,000 versus a consensus forecast of 235,000. Partially offsetting this strength was a downward revision of (18,000) to the previously reported January payroll figure. The jobs increase in February marks the 12^th straight month that payrolls have increased by at least 200,000. The unemployment rate fell to 5.5%, which is the lowest level in almost seven years. The decline reflected both an increase in hiring and a decline in the number of people in the labor force as the participation rate decreased to 62.8% from 62.9%. Hourly earnings increased a less than expected 0.1% for the month and are up 2.0% over the last twelve months.

Treasury yields increased following the jobs report with the yield on the benchmark 10-year Treasury note up 8 basis points (bps) from yesterday’s close. The Fed Funds futures also increased and are now placing a 96% probability of a 25 bps rate increase in June.

Source: Bloomberg

Written by:

Marco Bravo, CFA
Senior Portfolio Manager

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Disclaimer: Asset Allocation & Management Company, LLC (AAM) is an investment adviser registered with the Securities and Exchange Commission, specializing in fixed-income asset management services for insurance companies. Registration does not imply a certain level of skill or training. This information was developed using publicly available information, internally developed data and outside sources believed to be reliable. While all reasonable care has been taken to ensure that the facts stated and the opinions given are accurate, complete and reasonable, liability is expressly disclaimed by AAM and any affiliates (collectively known as “AAM”), and their representative officers and employees. This report has been prepared for informational purposes only and does not purport to represent a complete analysis of any security, company or industry discussed. Any opinions and/or recommendations expressed are subject to change without notice and should be considered only as part of a diversified portfolio. Any opinions and statements contained herein of financial market trends based on market conditions constitute our judgment. This material may contain projections or other forward-looking statements regarding future events, targets or expectations, and is only current as of the date indicated. There is no assurance that such events or targets will be achieved, and may be significantly different than that discussed here. The information presented, including any statements concerning financial market trends, is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. Although the assumptions underlying the forward-looking statements that may be contained herein are believed to be reasonable they can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. AAM assumes no duty to provide updates to any analysis contained herein. A complete list of investment recommendations made during the past year is available upon request. Past performance is not an indication of future returns. This information is distributed to recipients including AAM, any of which may have acted on the basis of the information, or may have an ownership interest in securities to which the information relates. It may also be distributed to clients of AAM, as well as to other recipients with whom no such client relationship exists. Providing this information does not, in and of itself, constitute a recommendation by AAM, nor does it imply that the purchase or sale of any security is suitable for the recipient. Investing in the bond market is subject to certain risks including market, interest-rate, issuer, credit, inflation, liquidity, valuation, volatility, prepayment and extension. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.