US Treasuries plunge on upbeat employment data

The US Treasuries plunged on Monday following the considerably stronger than expected July employment report. The yield on the benchmark 10-year Treasury note rose more than 1 basis point 1.594 percent, the yield on 5-year note jumped 1-1/2 basis point to 1.143 percent and the yield on short-term 2-year note 1 basis point to 0.730 percent by 12:40 GMT.

The July US Labour Department employment situation report revealed a considerable +255k increase in non-farm payrolls, which comes well above market expectations for a +180k increase, as compared to the revised +292k result that occurred in June (previous was  +287k). This comes alongside no change in the unemployment rate at 4.9 percent, above expectations for a 4.8 percent result.

We expect that it is likely to be difficult for the investors to find any dovishness in this report, keeping alive September 21 Fed hike expectations (Bloomberg’s implied probability is at 26 percent).

The crude oil prices rebounded by reports of renewed talks by some members of the Organization of the Petroleum Exporting Countries (OPEC) to reduce output. The International benchmark Brent futures rose 1.54 percent to $44.95 and West Texas Intermediate (WTI) jumped 2.11 percent to $42.68 by 12:40 GMT.

Markets now look ahead to a lighter flow of data in the week ahead, highlighted by non-farm productivity/unit labour costs, wholesale inventories, retail sales, producer prices, business inventories and University of Michigan consumer sentiment releases.

Additionally, markets receive 3-year note, 10-year note and 30-year bond auctions on Tuesday, Wednesday and Thursday, respectively.

Meanwhile, the S&P 500 Futures traded 2 points higher at 2,179 by 12:40 GMT.