Friday’s NFP saw a large headline beat of +275k in February, but was marred by a large -167k in prior month revisions and a large spike in the unemployment rate to 3.9% from 3.7%. Average hourly earnings gains also tapered to only 0.1% from a prior surge to 0.5%, slowing the year-over-year gains down to 4.3% from 4.5%.

While media outlets might be focused on the large headline beat, most economists have noted this report to be on the weakside given the large negative revisions and spike in unemployment rate. Furthermore, Citi notes that there are worrying signs of a crack in the (strong labour) facade, as the 3-month average of the unemployment rate is heading to be 0.5% higher than the recent 12 month low, an early recession warning sign (‘Sahm Rule’).

Treasury yields were under pressure (lower) for most of the session, with <1yr SOFT rates heading lower as re-assessed recession odds given the disappointing NFP, while chatterings of more aggressive ECB cuts kept bonds better bid. On the other end of the spectrum, might stronger than expected Japanese inflation and wage gains are pushing the BoJ to make their long-awaited NIRP exit in March, pushing USDJPY to sub-147 and US 10 yields reapproaching towards 4%.

Focus this week will be on US CPI tomorrow, where we might get another uncomfortable print for the Fed with both core CPI likely to show a continued rebound from January levels. Cleveland Fed inflation nowcasts estimates are suggesting a 0.43% headline CPI print for February and 0.32% for core, both moving in the wrong direction of travel, with supercore CPI looking particularly concerning.

Risk assets saw a late-afternoon set-back on Friday, where semiconductor stocks reversed 4% lower from their highs, value stocks outperformed, the USD gained and BTC rejected the 70k re-test (for now). Complacency remains high with Bloomberg reporting that short-vol ETFs have seen their AUM quadrupled to $64bln over the past 2 years, as investors have been piling on the short-vol trade for the better part of the past 2.5 years.

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