On the surface, rising Treasury yields today seem impossible because non-farm payrolls and their revisions were weaker, manufacturing ISM was weaker, and Trump’s odds to win in betting markets has fallen 7 points since Wednesday meaning the “Trump trade” should be in reverse. US sovereign credit for 5-years widened by a very-tiny 0.05 basis points today to 42.8 basis points but is well below its recent high of 45.7 basis points on 10/11/2024, suggesting U.S. credit (fiscal) is not the reason either.

I continue to argue the “totality of the data” is causing interest rates to rise. Interest rates are still reversing-out the pricing of an imminent recession from September. While the most popular economic data points today were weaker (payrolls and manufacturing ISM), the unemployment rate stayed the same, wages were hotter, and the prices-paid component of the manufacturing ISM survey rose. Even assuming payrolls weren’t depressed from the hurricane, it all adds up together in my index for just a slight decrease (see chart below.) Yesterday’s PCE report and initial jobless claims were strong and today’s data didn’t materially retrace that.

Counter to the efficient market hypothesis, I don’t think economic data gets “cleared” immediately into the bond market and there is a multiple to the totality of the data—that the longer a trend continues, the more importance it has on the market as it gets extrapolated out further. The yield curve steepened today with long-term rates rising more than short-term rates because the short-end is somewhat pinned-down from the Fed’s easing bias.