Needless to say, Friday’s astoundingly strong read on the US labor market rippled across the rates complex, triggering dramatic moves at the front-end.

Two-year US yields jumped nearly 20bps in the aftermath of the NFP release, which featured a blowout headline print, upside revisions to 2023’s job additions and, crucially, a scorching-hot month-to-month increase in average hourly earnings.

The knee-jerk selloff in twos was the most pronounced of 2024.

Note that the move completely erased the rally triggered by regional bank jitters earlier in the week.

The read-through for the dollar was straightforward: Stronger. Friday was poised to see the second-biggest rally of the year for the greenback, which is up 2.5% in 2024.

The figure below, updated for Friday, is instructive. It depicts total rate-cut pricing for 2024 with the S&P.

Stocks and easing wagers have diverged of late, with equities rising despite no additional rate cut premium. The red arrow annotations highlight the impact of the new regional banking worries and, 48 hours later, the big NFP beat.

Again, equities are unbothered, but a lot of the resilience on jobs day was down to big-tech gains, as the market cheered Meta’s shareholder bribes — investors will now be paid on a quarterly basis to look the other way as Mark Zuckerberg plows resources into 2021’s pop culture craze. (I’m just joking, Mark. I’m sure the metaverse has potential.)

As noted here on Friday morning, the odds of a March rate cut are now quite low, and here I mean my own subjective “odds,” not market pricing. Notwithstanding what I’m sure was all manner of derision aimed at various statistical acrobatics employed (no pun intended) by the BLS, the read-through from the jobs report was unambiguous — for markets, anyway.

“January’s US employment report is crazy strong,” ING’s James Knightley remarked, even as he detailed a number of “contradictions” from the release. The subject line of the quick reaction email from BMO’s US rates team read: “STRONG payrolls hit Treasury market.” The all-caps was in the original, and it should be noted that the bank’s Ian Lyngen isn’t generally prone to hyperbole, and certainly not for the sake of it.