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Have Yields Topped? Plus Nonfarm Payrolls Preview
Daily Update on SPY, QQQ, TLT, USO, BTC, COIN, Mag-7, Gold, PLTR
Yimin Xu
June 05, 2025
Hi YXI friends,
Yields dropped by 10bp across the curve on Wednesday, after disappointing ADP jobs data. The yield change was primarily driven by traders pricing in a greater number of Fed cuts in the next 12 months.
However, as you will see in our analysis today, Friday’s Nonfarm Payrolls could show continued strength that reverses the dovish market expectations of the past two weeks.
Moreover, there is a strong relationship between the MOVE Index and the changes in bond yields with a 2-month lag. This also points towards potential further upsides in yields
Let’s dive in!
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Let’s dive in!
Table of Contents
DISCLAIMER: This newsletter is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.
1. YXI Daily Dashboard
The Three Daily Observations
Risk asset stayed mostly flat on Wednesday, with META being the biggest outperformer, +3.2%.
TLT rose by 1.6%, a near 2-standard-deviation move, on the back of poor ADP jobs data.
Yields are flat on a 4-week trailing basis.
Click here for the past YXI article explaining many of the components of the dashboard.
2. SPY, QQQ, (SPDW)
SPDW is updated every Monday.
SPY made an intraday push higher on Wednesday, but closed at flat, still right at the 1.236 extension of wave (i). While momentum slows, I do expect the next move to be higher into the 1.382 extension.
QQQ closed in green on Wednesday. Its next target is really just that resistance trend line, which acted as support in October - February.
QQQ could attempt the resistance but fall back for a wave (iv) retrace.
3. FOMC Projections & Rates Futures
FOMC Projections
We use the Fed Funds futures market to understand the market expectations of future FOMC interest rate decisions.
FOMC Date | Before Meeting | Post Meeting | Hike/ Cut in % |
|---|---|---|---|
06/11/25 | 4.33 | 4.33 | 0 |
07/30/25 | 4.33 | 4.23 | -0.1 |
09/17/25 | 4.23 | 4.08 | -0.15 |
11/05/25 | 4.08 | 3.93 | -0.15 |
12/17/25 | 3.93 | 3.78 | -0.15 |
01/28/26 | 3.78 | 3.63 | -0.15 |
03/18/26 | 3.63 | 3.53 | -0.1 |
05/06/26 | 3.53 | 3.43 | -0.1 |
06/17/26 | 3.43 | 3.33 | -0.1 |
Fed Funds Futures were lower by 10bp yesterday, following the poor ADP job data.
The market is now leaning towards 4 cuts in the next 12 months.
3-month SOFR Futures Yields
3.5 Nonfarm Payrolls Preview
Our correlation analysis suggests the biggest leading indicator for unemployment rate is the initial jobless claims.
In May, initial jobless claims rose by 5k. While this theoretically pressures unemployment rate higher, it is not a sizeable change that materially moves the needle.
Our proprietary machine learning model suggests there is a tiny uptick in unemployment rate, but it will get rounded down to 4.2%, same as April.
Our model also suggests above-estimate Nonfarm Payroll numbers, which could be used by the market to reverse the bond rally on Wednesday.
I must caution that the model is new and only trained on infrequent monthly economic data.
4. Summary Of Today’s YXI Signals
SPY, QQQ, BTC, TLT, AAPL, AMZN, GOOGL, META, MSFT, NVDA, TSLA, PLTR
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