Updated on December 2, 2022 10:06:06 AM EST

Today’s sole economic release was the almighty monthly Employment report at 8:30 AM ET. It revealed that 263,000 new jobs were created in November while the unemployment rate held at 3.7%. The payroll number was higher than the 200,000 that was expected, making it bad news for rates. Forecasts for the unemployment rate were 3.7%. Having the biggest influence on this morning’s sell-off was the average hourly earnings reading that came in up 0.6%, greatly exceeding forecasts of 0.3%. Rising wages is a strong sign of inflation strength, undermining the recent theory that it may have peaked.

After this week’s huge and unexpected rally in bonds and rates, this morning’s negative reaction came as no surprise. What seemed to be fueling the rally was, for the most part, a very small part of Fed Chairman Powell’s afternoon speech. If we looked past the comment about slowing the pace of their rate hikes, nearly every other part of the speech can be labeled cautious. Traders were hoping to see one thing and they got it, causing the bond rally. Move forward a few days and a major economic release supports the rest of his cautious speech, it is not surprising at all that we are seeing a very negative morning in bonds and mortgage pricing.

Next week has a much lighter calendar than this week did, but still has a couple of items that are expected to influence rates. Unlike most Mondays, this one does have a piece of data scheduled for release. The new week will start with the moderately important Factory Orders report late Monday morning and end with an important inflation index and consumer confidence reading. We likely will see rates remain calmer than they were this week. Look for details on all of next week’s activities in Sunday evening’s weekly preview.

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