U.S. Bonds responded as expected with yields rising modestly in response to a very healthy June jobs report. The June jobs report saw an additional 255,000 jobs created above the 185,000 expected. The closely watched U-6 number, or the total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, rose to 9.7% from 9.6%. For reference, the U6 number was 10.4% in July 2015. The Labor Force Participation Rate (LFPR) rose to 62.8 from 62.7 and is a measure of the active portion of an economy’s labor force.
Globally, the UK surprised the markets on Thursday by lowering the overnight lending interest rate plus re-starting their QE program. This is in response to the overall poor economy in the European Union and the recent Brexit vote.
With so much of the world’s government debt yielding negative interest rates, the U.S. interest rates are high relatively to those of weaker countries. Therefore, even with a strong U.S. job’s report, we are modestly biased to floating interest rates at current levels.