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from Counterparties:

MORNING BID – Be not afraid of more bond-market rallies

After the world’s most boring jobs report in history (seriously, misses consensus by 1,000, unemployment and wage growth in-line with expectations, and revisions over the last two months amount to a total decline of 6,000 jobs, which is a pittance), the bond market is catching a bit of a bid again. That shouldn’t be a surprise given the way this market is still taking its cues from the European bond market, which is soaring on what would otherwise be a quiet Friday. (Those of you who read Richard Leong’s story yesterday noting the likely rally in bonds post-jobs would have been all over this – just sayin’.)

It’s not going to be long before Spain’s 10-year yield falls through the U.S. 10-year yield – the spread has narrowed to about 6-7 basis points and at one point was around 3 basis points before the jobs figures. Even though the in-line figures could argue for higher rates, the report doesn’t change the consensus on the economy all that much and allows fixed income to concentrate on supply and relative valuation issues – and those point to yields remaining under pressure. Mark Grant of Southwest Securities lays it out well on a lot of issues in a comment this morning, but very specifically, he points out that “money from Asia and the Middle East is going to come pouring into the American market because of the yields here versus all of Europe. When the French 5 year yield is 304% less than the American one something is going to give and the ECB will not permit that answer to be a higher French yield.”

Lower European yields are pressuring U.S. yields.

Lower European yields are pressuring U.S. yields.

Supply and demand remains part of the equation as well. Headed into this week, issuance of U.S. debt was down 14 percent from this time a year ago and overall worldwide debt issuance was down 5 percent; US corporate debt issuance has been relatively steady, down 2 percent from this time a year ago. Couple that with the big run for yields coming from banking institutions around the world, other funds and insurance institutions worldwide, and U.S. private pension funds, and that imbalance is also contributing to an ongoing bull move in the bond market. (BofA-Merrill notes that first-quarter private pension fund purchases did slow from the second half of 2013.)

Treasury issuance is down, municipal bond issuance has declined, and the Federal Reserve is still holding a lot of debt overall. “Higher prices and falling yields can be caused by a number of things and this time around the cause is not a financial debacle,” Grant writes, and it’s hard to disagree on this one. Merrill notes that for the year-to-date, fund flows into all fixed income come to about $55.6 billion, about on a par with the $58 billion into equities – so the “everything is awesome” rally continues.

from Anatole Kaletsky:

Despite election results, reason still rules Europe

anatole -- french student

When can a vote of 25 percent be described as a “stunning victory” or even a “political earthquake”?

According to the European establishment, it’s when these votes go to a rabble of odd-ball extremists, ranging from overt racists and even disciples of Adolf Hitler to unreconstructed Stalinists and comically naïve anarchists.

from Anatole Kaletsky:

No reason for these stock market jitters

anatole -- unhappy trader

“Sell in May and go away.”

This stock market adage has served investors well four years in a row. Every year since 2010, stock markets around the world have suffered significant corrections between a high reached in May and a low in the summer or early autumn: by 15 percent in 2010, 19 percent in 2011, 9 percent in 2012 and 5 percent in 2013, as gauged by the Standard & Poor’s 500.

Given that the Dow Jones Industrial Average hit its highest level ever on April 30, while the S&P 500 peaked less than 1 percent shy of its all-time record, it may seem sensible to follow the seasonal adage. Regardless of one’s views about the long-term prospects for the world economy.

from Nicholas Wapshott:

Yellen shows her hand

The difference between the Federal Reserve Board of Chairwoman Janet Yellen and that of her immediate predecessor Ben Bernanke is becoming clear. No more so than in their approach to the problem of joblessness.

Bernanke made clear that in the post-2008 economy, his principal goal was the creation of jobs, not curbing inflation. He settled on a figure, 6.5 percent unemployment, as the threshold that would guide his actions.

from MacroScope:

Deconstructing UK job numbers

On the face of it, the good news for the British government keeps on coming. Britain’s economy grew surprisingly fast last year and inflation fell below the Bank of England’s target for the first time in over four years in January. The government this month even got a nod from the International Monetary Fund which only last year criticized its austerity programme.

The latest confidence boost came from jobless figures on Wednesday. Not only did the unemployment rate fall to a five-year low of 6.9 percent but pay growth caught up with  inflation for the first time in nearly four years. That provides Prime Minister David Cameron’s government with another lift ahead of the 2015 elections, after it has come  under fire from the Labour opposition for overseeing a fall in living standards.

from Reihan Salam:

How to get Americans back to work

Friday’s Labor Department data shows an uptick in jobs, but an unemployment rate that remained steady from February to March. While the size of the labor force is increasing, the economy is not strong enough to get all would-be workers off the sidelines and into jobs.

Part of the story is that the fates of the short-term unemployed and the long-term unemployed have sharply diverged. The short-term unemployment rate, as Annie Lowrey of the New York Times has observed, is lower than its pre-recession level, while the long-term unemployment rate remains very high.

from The Great Debate:

Why we should worry about the future of men

If you’re an American man you’re more likely to be unemployed than your female counterparts. Today more than 4.3 million Americans are considered “long-term unemployed” -- out of work for more than 27 weeks. Fifty-six percent of them are men. The Great Recession emasculated generations of men, displacing many of them from the labor force and undermining their financial security. The effects may be felt for decades.

But does that mean the end of men and the rise of women, as author Hanna Rosin has suggested? Not quite. Male unemployment hasn’t come at the expense of women’s success; it reflects deeper structural changes felt by everyone. Technology and globalization has rendered many better-paying jobs, traditionally held by men, obsolete. Both men and women have the potential to thrive, but in order for that to happen we need policy that complements the modern labor market -- rather than hold it back.

from MacroScope:

Ukrainian tipping point

Violence in Ukraine has escalated to a whole new level. The health ministry says 25 people have been killed in fighting between anti-government protesters and police who tried to clear a central square in  Kiev. The crackdown, it seems, has been launched.

President Viktor Yanukovich met opposition leaders for talks last night but his opponents, Vitaly Klitschko and Arseny Yatsenyuk, quit the talks without reaching any agreement on how to end the violence and said they would not return while blood is being shed.

from Cancer in Context:

Hiring a cancer survivor

Today’s employment report from the U.S. Labor Department showed the job market remained tough in January. If it’s difficult for healthy individuals to get a job, what is it like for cancer survivors?

Personally, I’m not looking for a job. When I was diagnosed with lung cancer about a year ago, my editors and I came up with the idea that I should write a blog about all aspects of cancer.

from MacroScope:

High unemployment putting the ECB in isolation

 

Unemployment in the euro zone is stuck at 12 percent, an already high rate that masks eye-popping rates in many of its struggling member economies.

But in a press conference lasting one hour, European Central Bank President Mario Draghi mentioned the problem of high unemployment only a few times – satisfied with the central bank’s usual stance of imploring euro zone governments to implement structural reforms to their labour markets, on a case by case basis.

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