On Friday we received the much anticipated June jobs data, which was stronger than even the most optimistic forecasts. The change in nonfarm payrolls was 287,000 versus an estimate of 180,000. This compares to the weak payroll reading in May of a revised 11,000. The unemployment rate increased to 4.9% after falling from 5.0% to 4.7% in May.
The global rally in yields that accelerated with the Brexit vote continued last week as Treasury yields fell to new lows. Despite a short-lived selloff in bonds after the employment number, long-maturity Treasury bonds rebounded in price and ended the day lower in yields. While Treasury bonds have been rallying on fears of the Brexit impact on global growth and its potential impact on global banks (concerns about Italian banks took center stage last week), the S&P 500 Index reached new highs. This disconnect between stocks and bonds should be watched closely in the weeks ahead, as most likely one market will correct to the thesis of the other.
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