Long U.S. Treasury, Short German Bund
U.S. Treasury yields plunged on Friday after a relatively weaker jobs report. 10-year fell as low as 1.829% after closing at 1.904%. With the unemployment rate remaining steady at 5.5%, the 126,000 non-far payrolls falls short of economists expectation of 245,000. It is also less than half February’s pace, and could be interpreted as sluggish or negative trend in the labor market and U.S. economy.
Markets consider the jobs monthly report a key indicator to the timing of a rate hike by the Federal Reserve. CNBC cited Goldman Sachs economists said in a note that while they expect the first hike in September, but the weak March jobs report raises the risk of a later liftoff in rates.
This also signals the potential for a rocky start to trading Monday after market players have some time to mull over various data points. Slow economy is usually a bullish indication of Treasury. Here is Bill Gross on Bloomberg TV talking about how he is very bullish on treasury, very bearish on German bund (he is shorting German bund).