The June U.S. Non Farm Payrolls Report showed that employers cut more jobs last month than estimated, curtailing demand for higher –risk, higher-yielding assets while sending the U.S. Dollar sharply higher.

Pre-report guesses indicated that traders were positioning themselves for a job loss of 365,000. The Dollar rose sharply higher when the U.S. Labor Department reported a total loss of 467,000. The unemployment rate rose to 9.5%, slightly better than the estimate but nonetheless set the stage for a possible move to double-digits sometime in the near future.

September Treasury Bonds and Treasury Notes rose on the surprise news. This move reaffirmed the current uptrend and indicated that market participants feel the Fed is going to have to do more to provide stimulus to the economy. Yields fell on the notion that more money may have to be pumped into the economy. Although this is inflationary in the long-run, traders are not focusing on the long-run at this time and are more concerned with a deflationary environment.

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