GOOD MORNING! Sincere condolence to those affected by the tragic floods across central Texas. John Kenneth Galbraith- “The only function of economic forecasting is to make astrology look respectable.” Forecasters missed big time on Friday’s employment report. Most were expecting a downside surprise in the number of added jobs and for the unemployment rate to tick up. What they got was an upside surprise in non-farm payrolls with the previous two months revised slightly upward and the unemployment rate ticked down as people exited the labor force. The Treasury market was whipsawed as it was pricing in a soft report that would cement 3 rate cuts by the Fed this year. Instead, yields surged and fed funds futures adjusted the bets to reflect just 2 cuts. To be fair, leading indicators of labor market conditions were consistent with further cooling in the labor market. It may also say something about the credibility of reports emerging from the Bureau of Labor Statistics. The non-manufacturing PMIs from the S&P Global Group and ISM held relatively steady with contacts saying that uncertainty remains an issue. For the week, stocks continued to melt up and Thursday’s Treasury market performance pushed yields in the short-to-intermediate maturity sector higher.

     The markets are mixed and little changed in early trading with threats of tariffs once more having the markets’ attention now that the tax-spending and debt ceiling bills have passed and been signed. Blips on the markets’ radar include the attack on a ship in the Red Sea and the decision by OPEC+ to increase production. The economic release calendar is light with the National Federation of Independent Businesses (NFIB) Small Business Optimism Index tomorrow, the minutes of the last FOMC meeting on Wednesday and jobless claims on Thursday. However, Treasury supply will be plentiful with the Treasury auctioning 3-, 10, and 30-year maturities and every Treasury Bill imaginable.