Could the Fed Halt Tapering?

As the 10-year Treasury bond rallied following poor employment figures in the US, some traders speculated that tapering may be coming to an end already

Dave Sekera, CFA 21 January, 2014 | 12:58PM

The 10-year US Treasury bond rallied Friday after the dismal jobs number was released, sending its yield down 10 basis points to 2.86%. Based on the weakness of this report, many traders are beginning to consider that the Federal Reserve may halt its tapering program. But even though headline employment growth was significantly below expectations, based on his interpretation of the minutes from the Federal Open Market Committee's most recent meeting, Robert Johnson, Morningstar.com's director of economic research, does not believe that this data by itself will be enough to derail the Fed from continuing to taper its asset-purchase program. 

Johnson is highly suspect of this month's employment report and notes that the report was riddled with many big swings and inconsistencies. In addition, he pointed out several examples of data that were "nonsensical" in his mind. For example, 30,000 accountant jobs were lost in the month, 13,000 local school teachers lost their jobs midyear, and construction employment fell, which is in stark contrast to the massive gain in construction jobs as reported by payroll services company ADP.

As such, he is not putting much stock in this report and believes that a more realistic scenario would be to average the prior two months' reports together, as the 241,000 gain in the November employment report was probably higher than reality. That average in the low 150,000 area looks more reasonable to Johnson and is more consistent with the household survey data that showed 140,000 jobs added. He is sticking with his forecast for employment job growth to increase by an average 190,000 per month in 2014. 

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Dave Sekera, CFA  is a senior securities analyst with Morningstar.

Audience Confirmation


By clicking 'accept' I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See 'Cookie Consent' for more detail.

  • Other Morningstar Websites
© Copyright 2020 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Cookies