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Economic Review

4/5/2010

Will increases in US Treasury Yields be a result of fundamental economic strength or a lack of Fed purchasing and pure economic hype?

Last Friday, the US payroll data came in with a positive increase in workers hired and as expected by the Doc, this was met with a pop in the level on 10 year notes.  However, March marked the end of Fed purchasing in the Mortgage Backed Security sector as well.  So, what’s the real deal?  Is the US economy really on track for a sustained rebound which should result in an increase in Treasury Yields or is it the lack of Fed purchasing that may cause the move up in rates, where recent positive economic numbers are smoke and mirrors?

Before getting too excited about the employment report, keep in mind the census affect which has been adding jobs starting last fall and will continue to increase the demand for workers into May.  The total effect of this anomaly could result in a drop of the unemployment rate up to almost 1/2 percentage point.  In case you are unemployed….you know the real story of lack of job creation, and in case you are still employed consider the plight of unemployed friends and also the lack of job security you may be feeling. 

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