Sources: Bloomberg [1], [2], [3]

Key figures✖️ 

🗣 JOLTS: The latest report shows 9.61 million job openings in the US, an increase of almost 700 thousand.

🗣 The 10-year Treasury yield rose to 4.8%, increasing from a local bottom of 3.25% in April.

Analysis 💬

Job openings soared by 700K in August, climbing from the prior 8.92M in July. The reading blew past all economist estimates polled by Bloomberg. This sparked a bond rout and drop in the S&P as yields spiked.

Cushioning the markets, the quits rate dipped to 2.3% of total employment, the lowest since 2020. Workers seem sticky, so labor supply has more slack — an anti-inflation buffer.

The jobs data signals a tight labor market still running hot, stoking business activity. This is exactly what the Fed is trying to cool to squash inflation. Ironically, the Fed's hoped-for "soft landing" appears in progress, yet hawkish rate hikes remain on the table. But the data alone doesn't fully explain the bearish bond reaction.

Apart from the red-hot vacancies numbers, the data doesn't say the economy is overheating. But the reaction, especially in the bond market, seems overdone. Weaker data should've sparked a bond rally as investors bought bonds. Instead, sell-off came from traders worried about US government spending — the bond vigilantes. The fear is that bigger deficits mean more Treasury bonds than buyers can digest, which could send yields way up and hammer bond prices.

According to JPMorgan, this extreme bond market reaction could keep happening until Washington deals with the deficit better. So, forever?