Investors said the market was unimpressed by Friday's employment situation report, which showed the unemployment rate dropped sharply to 6.3% in April from 6.7% in March.
This unemployment rate was much lower than analysts' predictions of 6.5% to 6.7%. Despite this unanticipated decline, the market did not heavily sell-off.
"The bond market was unimpressed," a trader in California said.
Yields for bonds maturing in three-to five-years rose by up to three basis points, yields hovered between a two and four basis point jump for six to eight year maturities, and increased from one to three basis points for nine to 30 year maturities.
"I expected with the headline number people would sell-off more than they did," a second trader in California said.
Nonfarm payrolls grew 288,000, an increase from 203,000 new jobs created the previous month.
"When you get a payroll number that comes in at nearly 300,000, there should be a bigger jump in yields," the first trader in California said. "The selling off is pretty modest for such a strong report."
The first trader in California says that there was not more of a sell-off because underlying economic data still is not that strong. "The headline number is definitely stronger than the underlying details."
"The household survey showed a pretty big decline in the participation rate, which is what [Federal Reserve Chair Janet] Yellen said she would look to as an indicator of economic strength," the first trader in California said.
The gross domestic product report released on Wednesday was fairly weak, showing only a 0.1% growth for the first quarter of 2014. The Federal Open Market Committee also said in their Wednesday announcement it intends to keep the Fed funds rate highly accommodative.
The two California traders also cited the crisis in the Ukraine as a reason why investors are staying with fixed income.
"The Ukraine has been simmering in the background the whole time, and still presents a risk," the first trader in California said. "Intermediate to long Treasuries are still a safe haven for people to hedge against those risks."
The second California trader said global uncertainty is keeping investors in safe assets. "I was really hoping [the unemployment rate] would shake prices lower than it did," he said. "With tension in the Ukraine, nothing seems to shake this market."
Looking ahead, Citigroup Global Markets is expected to price $450 million of Illinois State Toll Highway Authority senior revenue bonds Wednesday, the largest deal in the negotiated market next week. Bonds mature serially from 2025 to 2034 with a term bond in 2039. The deal is rated Aa3 by Moody's Investors Service and AA-minus by both Standard and Poor's and Fitch Ratings.
The Delaware Transportation Authority will issue $113.3 million of revenue bonds on Tuesday, the largest deal in the competitive market next week.
Total potential volume for next week is scheduled to be $3.92 billion, down from $6.22 billion this week, according to data provided by Ipreo and The Bond Buyer.
