Inclusive of today’s stronger than expected labor report, the market digested a significant amount of employment data this week. The U.S. economy added 336,000 jobs in September, significantly higher than market expectations of 170,000, and the July and August payroll reports were revised higher as well by 119,000.
Longer term Treasury yields migrated higher on a week-over-week basis as market participants continue to ‘price in’ a higher for longer narrative on restrictive monetary policy settings from the Federal Reserve. Absent a last minute compromise, the US government is expected to shut down this weekend. Given the progress made by the US Senate on a continuing resolution to keep the government open, we believe the shutdown is likely to be relatively short, but nonetheless will have implications for the visibility on the trajectory of the economy.
The Federal Reserve (Fed) opted to maintain its key policy rate, the federal funds rate, within the range of 5.25% to 5.5% this week. Nonetheless, the Fed conveyed a consensus view that another rate hike is possible later in the year, along with its commitment to keeping rates at their current level until inflation subsides closer to its 2% target, endorsing a ‘higher-for-longer’ strategy.
