The big week of earnings has passed, and this week the economic calendar is set to come into focus, with the ISM Services report, the JOLTS report, ADP private payrolls, and the BLS jobs report. The ISM Manufacturing report came in on Friday and revealed that inflation was running very hot in April, with a prices paid index of 84.4, its highest reading since the summer of 2022.
This has pushed the CPI swap rate expiring in July, which reflects April pricing, up to 3.72%, essentially in line with Kalshi's CPI prediction of 3.7%.
So this week's services data should help to round out and solidify whether inflation impacts are more than just manufacturing goods, and whether they are also affecting the services sector. The prices paid index in March was at 70.7, and it would not be surprising to see it rise from that level in April.
Meanwhile, the jobs report is expected to show that just 60,000 jobs were created in April, down from 178,000 in March. The unemployment rate is expected to remain unchanged at 4.3%, while wage growth is expected to accelerate to 0.3% m/m from 0.2%. Kalshi is predicting 67,000 jobs created in April and unemployment of 4.3%, so there is no reason, based on this, to expect a meaningful surprise.
One would think that, given where interest rates have settled and the technical patterns that have formed, there is a good chance we will see follow-through from what started last week. The 10-year rate is one of those, as it breaks out of a bull flag and nears a multi-year downtrend, which could signal the start of a more explosive move to the upside.
But one thing that may be flying under the radar is the quarterly refunding announcement, which will release its estimates on Monday afternoon, around 3 p.m. ET, and the total expected issuance on Wednesday morning. Markets will obviously be paying close attention to any changes in wording around the timing of increased issuance on the coupon side of the equation. So if rates start moving around, do not be surprised.
It is a similar setup in the 30-year Treasury, with what appears to be an ascending triangle pattern that has formed over a similar period, with an area of resistance around the 5% level. You can say what you want about where you think rates are heading, but the clear overriding factor is that the trend in the 30-year has been higher since July 2024.
The 2-year had been in a downtrend for quite some time, but that broke some time ago, and now an RSI that has been steadily signaling a change in momentum, along with the breakout from the descending triangle, suggests the move higher in the 2-year is also picking up momentum.