10 Year Notes and Unit Labor Costs

The 10 year note is down a modest 5 ticks, with the yield at 4.513%. That's actually a pretty mild gain considering the unit labor cost component of the non farm productivity report showing a whopping 6.6% gain. This would be an inflation red alert day were things somewhat 'normal'. Worker productivity came down as expected to 1.6%.

The formula is simple: productivity well below the often bragged about 3% mark, along with soaring unit labor costs means even at 2.2% 4th GDP the economy was growing too quickly to contain inflationary pressures. Were it not for weak manufacturing and housing numbers, bonds would be getting hosed today. I also suspect that this tentative rally we're seeing in the stock market is keeping the crowd holding onto treasuries.

By the way, that $TNX chart is sure showing something else... major bottom resistance coming into view, but that's another post for another time.