Bonds have been waiting in line for a shift in the economic data and the rally that might result, but the ill-tempered econ data continues the refrain: “no rally for you!” Playing the role of every Seinfeld fan’s favorite soup serving fascist is the weekly jobless claims data. Simply put, it continues to come in at levels that are unimaginable in the context of a labor market that is anything other than tight. The only caveat is that seasonal adjustment factors have been an ongoing guessing game. That may or may not be an actual consideration for today. Bonds sold off initially, but have bounced back. The bigger factor is likely the ebbs and flows in corporate bond issuance.
To put the corporate bond issuance thing in perspective, Labor Day weeks are always big. 2021’s Labor Day week was the biggest on record with over $63bln in new issuance on those 4 days. As of yesterday afternoon, 2023 is in second place with $54 bln (hat tip to BMO for the stats).
Record or not, $54bln in 2 days is outrageously big and something that would unequivocally put a ton of upward pressure on bonds. The nice thing about corporate issuance is that there can be bond buying on the other end of the issuance process as traders buy back the Treasuries that were previously sold to effectively lock in rates of return ahead of the issuance (more here).
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