Although the monthly employment report can sometimes create a big move in the marketplace, it certainly doesn’t always do that, so today could end up being a real yawner of a day. (If we don’t see much movement in the morning, you could/should see a lot of people in New York head out of town by noontime today…given how bad the weather was last weekend in the Northeast.)
That said, if we do get data on the employment front that is a lot different than what the consensus is looking for, the move in the markets could be a big one. As we have highlighted many times recently, both the bond and stock markets have been stuck in sideways ranges for 6-7 weeks now. Whenever any market gets stuck in a multi-week range, the move in the direction of the “break” tends to be a big one…once it finally takes place. Therefore, we could certainly see some fireworks today.
Earlier this week, we highlighted the support and resistance levels for the yield on the U.S. 10yr note. Today, we’d like to do the same thing for the yield curve (the 2yr/10yr spread). The situation is basically the same as it is for 10yr yield. In other words, the support & resistance levels are the lows and the highs since mid-April…but it will take a break above the March highs to confirm that another steepening leg for the yield curve has begun. (Therefore, there is just one support level. On the resistance side of things, there are two levels, BUT a break of the first level will still be compelling. It just won’t be definitive.)
As the first chart below shows, the support level on the 2yr/10yr spread is 138.67 basis points (the closing low from April 22nd). The first resistance ...