Get Positioned Now for the Coming Bond Slaughter: TBT

On Friday, we received what can best be described as a mediocre August jobs report that showed a gain of 169,000 nonfarm payroll jobs created during the month. The data also reflected a decline in the unemployment rate to 7.3%.

The jobs report was weaker than anticipated, and as such, brought into question what the Federal Reserve might do when it meets on Sept. 17-18 to discuss the much-anticipated "taper" of its $85-billion-per-month bond buying scheme, aka quantitative easing.

Now, one reaction to the relative weakness in the jobs report was a decline in Treasury bond yields. The yield on the benchmark 10-Year Treasury note fell to 2.94% Friday, down from Thursday's close of 2.98%, which is the highest level since July 2011.

Traders moved back into Treasury bonds with the mindset that the Fed's tapering could either be delayed, or be less aggressive than it might otherwise have been had the jobs data been stronger. (more)

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