Fixed-income markets traded much lower Friday morning as stocks rallied and the Dow Jones Industrial Average topped 15,000 on better-than-expected employment numbers.
Non-farm payrolls increased 165,000 in April and the jobless rate fell 0.1 percentage point to 7.5%.
"While the report was not without a blemish it shows on balance, through the monthly volatility, continued solid job gains that, given demographic trends, are enough to further shrink the pool of unemployed labor," economists at RDQ Economics wrote. "The headline gain of 165,000 in payrolls and the net 114,000 upward revisions to employment in the prior two months should provide something of an antidote to the spring swoon story for 2013."
They added, "The decline in the unemployment rate to 7.5% further adds to the view that there is a significant chance that the rate will hit 6.5% sometime in the middle of 2014. Even though we expect PCE price inflation to drop below 1% in April, it now seems very unlikely that the Fed will upsize QE at the June FOMC meeting."
Treasuries sold off on the news. The benchmark 10-year yield soared 10 basis points to 1.73% and the 30-year yield spiked 11 basis points to 2.93%. The two-year yield increased one basis point to 0.22%.
Munis were following, though at a lag.
"There is not much trading really," a New York trader said "The Municipal Market Data scale is showing cuts, but everyone is saying there's not much significant trading. Treasuries are selling off but munis really aren't trading much."
On Thursday, munis were steady across the curve.
Yields on the Municipal Market Data triple-A GO scale finished unchanged. The 10-year yield finished steady at 1.66% for a second straight session, as did the 30-year yield, which held at 2.79%. The two-year finished flat at 0.29% for the 20th session.
Yields on the Municipal Market Advisors 5% scale ended flat as well. The 10-year held at 1.73% and the 30-year steady at 2.95%. The two-year was frozen at 0.32% for the 20th session.