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Economists at TD Securities discuss the Nonfarm Payrolls report and its implications for the rates market.
We look for NFP to remain firm in September, reflecting a jump above the 200K mark for the first time in four months. We also expect the unemployment rate to stay unchanged at 3.8%, as we are assuming job creation in the household survey will print a softer gain vs. that of the establishment survey. Average hourly earnings likely advanced 0.3% MoM, with the YoY measure staying unchanged at 4.3%.
A strong payroll report could spark a continuation of the recent bear steepening in rates as 10y Treasuries remain in their 4.50-5.32% technical air pocket. However, an unexpected softening in payrolls could pour some cold water on the sell-off, allowing the market to retrace a portion of recent weakness and find some temporary stability.
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