* Treasury yields are likely to remain in the lower end of the recent range in the week ahead following bullish price action after the July jobs report amid a myriad of reasons. Those reasons include an expected stock market correction, geopolitical/terror concerns, risk to the economic forecast post jobs, lack of forced MBS selling, Fed buybacks, likely rate lock unwinds as corporates issuance is priced and a bias for Swap wideners, among others. Jim Vogel, a fixed income strategist at FTN Financial, said the reception to Treasury supply and equity direction will be key for rates direction while the week brings second tier data.
* The week ahead will be light on U.S. data, featuring the trade balance and the Institute for Supply Management's non-manufacturing report. The June trade balance report, to be released Tuesday at 8:30 a.m. ET, is expected to show a narrower deficit, but any surprises could portend revisions to second quarter GDP data. The trade deficit was one of the primary negative features in the second quarter GDP report, largely due to the sharp jump in the May deficit to $45.0 billion. The July ISM non-manufacturing is expected to post a slight increase from the previous month's level of 52.2, a three-year low for the figure, widely considered another sign that the economy could be losing steam. The figure is consistent, however, with lower growth than was reported in the second quarter GDP report, so a surprise to the upside could be in the works
* In another attempt to focus Congress on the need to raise the government's borrowing limit, the Treasury Department late Friday set Oct. 11 as an important date, just prior to the next holiday for Congress and just after a threatened government shutdown at the start of a new fiscal year. The previous date set for what is called a "debt issuance suspension period," in a notification required by Congress, was Friday. A Treasury official said, in any event, the Oct. 11 date is not necessarily the point at which its debt-limit avoidance measures will end because that is still impossible to specify. Technically the "drop dead" date before an imminent breach of the debt limit is threatened is not directly related to the "debt issuance suspension period" to which the day's notification referred. However the notification deadline served as another opportunity for Treasury to urge Congress not to wait, in Secretary Jack Lew's words in his letter to Congress, "until the last possible moment to act." To do so, he said, would risk "financial market and economic damage that is completely avoidable and irresponsible to our investors and country."
* St. Louis Federal Reserve President James Bullard sees July's jobs numbers as "basically good news," saying Friday that unemployment is "definitely closer" to the 7% "soft target" that Fed officials have discussed for ending the central bank's asset purchase program. "I know that the market was a bit disappointed with the jobs report, but I would view it as broadly consistent with trends over the last six to nine months," Bullard told reporters following a speech at a Brandeis University forum. "(Non-farm payrolls were) a little bit down, but unemployment did come down (as well)." Bullard, a voting member of the central bank's rate-setting Federal Open Market Committee, spoke hours after the U.S. Labor Department reported that America added a lower-than-expected 162,000 jobs in July. However, Labor also said the U.S. unemployment rate dropped from 7.6% in June to 7.4% in July - a roughly four-year low.
* Philadelphia Federal Reserve Bank President Charles Plosser warns of a "dangerous" breakdown in the traditional separation of monetary and fiscal policy and urges a restoration of "bright boundaries" between the two in an essay released Friday by his Bank. Plosser, writing in the Philadelphia Fed's Annual Report, expresses concern that the Fed and other central banks will come under increasing pressure to "monetize" the "unsustainable" debts of their governments. He also urges the Fed and others to refrain from crossing the line and engaging in fiscal policy themselves.
* July's jobs report, with a disappointing below-expectations payrolls gain of 162,000, got the least help from the health-care sector in a decade while federal workers forced into part-time jobs by sequestration was a stronger, yet still minor, factor, the Bureau of Labor Statistics reported Friday. The seasonally-adjusted increase fell short of the median expectation of 185,000 and without adjustment actually fell 1.1 million as local education continued its usual summer employment collapse. The unemployment rate improved another two tenths to 7.4% (7.390%), the lowest since December 2008's 7.3%. In January was been 7.9%. The rate was the product primarily of standard influences, an increase in the employed of 227,000 and a decrease in the unemployed of 263,000, not a sizable decline in the work force.
* The value of new factory orders rose 1.5% in June, well below the 2.3% expected in an MNI survey due to a drop in nondurable orders and a slight downward revision to durable goods orders, data released by the Commerce Department Friday morning showed. Total orders excluding defense rose 1.0% over the month vs. a 2.7% jump the prior month. Total factory orders excluding transportation were down 0.4% in June after a 1.0% increase in May. Non-transportation durables orders fell 0.1% over the month after a 1.3% increase in May, according to an MNI calculation.
* Ocean-borne import volumes dropped in June from May at many major U.S. ports, as back-to-school consumer goods arrivals waned, according to port officials and maritime experts. While seasonal stocking may have been early this year, the June decline in boxed import volumes also hints at further vulnerability ahead, port and maritime personnel said. Export volumes, meanwhile, were flat to softer at most major U.S. ports in June, confirming global trends of slowing growth in the manufacturing center of the world, China, and lingering recession in Europe.
* Prices of U.S. Treasury debt ended Friday higher after a daylong rally, first on a weaker-than-expected 162,000 July nonfarm payroll employment report and then on Mideast worries.
* In the wake of Friday's disappointing jobs data, traders remained somewhat bullish towards the euro, but were also keeping a close eye on U.S. Treasury yields, just in case they start to push higher again. The euro held at $1.3285 in afternoon action, on the high side of a $1.3190 to $1.3294 range. In other currencies, dollar-yen was closing at Y98.88, on the low side of a Y98.66 to Y99.95 range.
* In U.S. stocks Friday, the Dow industrials managed a 30.34 gain to 16,658.36. The S&P 500 rose 2.80 to finish at 1,709.67. The Nasdaq composite rose 13.84 to 3,689.59.
--MNI Washington Bureau; tel: +1 202-371-2121; email: dgulino@mni-news.com