Prior Week Summary
The first quarter of 2016 came to a close with relatively little fanfare after bringing the market through a fairly volatile three months. After all, since the turn of the year the Treasury curve has shifted over 50 basis points lower in yield at the 10-year point, while simultaneously flattening meaningfully. As measured by the slope between the 2-year and 5-year notes, the Treasury curve flattened approximately 23 basis points over the course of the first quarter. West Texas Intermediate Crude traded as low as $26.21 on a closing price basis in mid-February before trading as high as $41.45 a few weeks later. The stock market has fully recovered its losses for the year, and now the major indexes are higher than where they began 2016. For context, the S&P 500 has traded in a nearly 12% range in the last few weeks.
The second quarter began with the March non-farm payroll report that was elevated, relative to expectations, and featured a slight upward revision to the February figures. Indeed, the Labor Department reported a 215,000 gain in payrolls in March, following an increase of 245,000 jobs in February. Average hourly earnings increased more than expected, gaining 0.3% from the prior month, while an increase in job seekers drove the unemployment rate slightly higher – back to 5%. The marginal increase in the unemployment rate was generally seen to be good news for the bond market, as it coincided with increased labor force participation rate which increased by 0.1%.
The Look Forward
The calendar is relatively full this week, kicking off with the Villanova men’s basketball team playing for the national championship. In addition to a full docket of mid-tier data releases, there are Fed Committee members speaking on the economic outlook almost every day this week, culminating on Thursday with a panel discussion between current Fed Chair Janet Yellen, Ben Bernanke, Alan Greenspan, and Paul Volcker.