Treasury announced that it’s tweaking its TIPs program so investors can get inflation protection for 30 years rather than 20 years. It will certainly make break-even calculations much easier since the government doesn’t sell regular run-of-the-mill Treasurys with 20-year maturities.
The rise in U.S. Treasury yields has been very impressive considering where stocks are – the Dow is just 80 points away from 10,000 – and the improvement in economic data. But it’s even more incredible that it happened without the aid of investors in mortgage-backed securities and mortgage servicers that typically snap up longer-dated debt like U.S. Treasuries and swaps to hedge their portfolios when interest rates fall sharply. It’s known as convexity hedging, and it was a powerful accelerator in the U.S. Treasuries market in 2002 when the Federal Reserve was pushing rates down. (It also works the other way. When rates rise suddenly, it forces mortgage investors to quickly start selling longer-dated debt.)
Data just out shows the pace of joblessness picked up in September, snapping what had been a steady improvement from “really terrible” to “at least it’s not as terrible as the prior month.” The drop in non-farm payrolls was even worse than Goldman Sach’s downwardly revised -250K forecast, coming in at -263K. But also take a look at July: revised to -304 from -276k. August was revised to -201K from -216K.
The Labor Department’s August report on the jobs market has a bit of a good news/bad news slant to it. Job cuts slowed to “just” 216K, below expectations and better than last month’s 276K (up from the originally reproted 247K). But the unemployment rate, which is calculated through a distinct survey of households rather than businesses, jumped to 9.7% from 9.4% the previous month. You’ll remember that a slide back in July made some hopeful that maybe, just maybe, joblessness has stabilized.