Treasurys hit by better-than-expected payrolls result ($TNX) By Rachel Koning CHICAGO (MarketWatch) -- Modest losses for Treasurys quickly turned into deeper losses following the release of a report Friday that showed post-hurricane job losses weren't as severe as some expected. The benchmark note fell sharply in immediate reaction to the headlines but had since pared losses to trade down 6/32, or just less than $2 per each $1,000 worth of securities, at 98 22/32. The note's yield ($TNX) stood at 4.42% vs. 4.39% Thursday. U.S. nonfarm payrolls fell by an estimated 35,000 in September, the first decline in more than two years, but well shy of the 150,000 expected. Payrolls in July and August were revised higher by a total of 77,000 jobs. The unemployment rate rose as expected to 5.1% from 4.9%. I just love knee "jerking"!
Your premature celebration combined with bonds ending higher confirms expectations expressed at the beginning of this thread:
No one wants to be short huge size heading into a long weekend with possible terrorist threats. The shorts did not really want to push to the downside. Then we caught a big bid right before that NYC Penn Station threat, aided by massive put selling at the highs forcing option locals to buy a shitload of futures, then the threat hit the wire. That is a deadly combination for shorts throwing in the towel. Not to mention some big locals were short size first time off of the highs in the 10-year (about 10,000 traded first time up to 109-17). Heard nothing but f-bombs coming out of the pit after we made highs to 22, further short covering heading into screen close at 1pm. That JP Morgan client survey earlier this week I believe was interesting with more guys going neutral, would rather wait for overexaggerated moves and fade them with volatility being incredibly low. Overall though a fun number to trade.
I was also thinking that no one wants to be long OR short huge size before the weekend and maybe also before the FOMC minutes Monday. Bonds made a nice come back from this morning but, along with stocks and oil, posted a very small daily variation. The barrage of important announcements and events is not out of the way yet.
"If employment is particularly high, bonds are likely to dip and come back at the end of the day or Monday." Nice call Steve! I played the long side on the employment number spike down and was happy with the outcome. I agree nobody really wants to be committed before Tuesday's Fed dribble. Have a nice long weekend all.
I expect the rally to be something that will bring 10 Yr Notes from 109 to 113 (or 114) in about three weeks.
The bond market has more large price moves attributed to just-released announcements than any other market. With that in mind and being convinced that bond prices are about to jump, I am having difficulty determining what the catalyst will be or, to put it differently, what has been making traders so hesitant since late last week. Is anybody aware of recent reports or news articles about the specific data the market might be waiting for? CPI? Industrial Production/Capacity Utilization?
Friday's CPI and Tuesday's PPI should give us some more volatility. I sent you another link! http://mam.econoday.com/calendar/US/EN/New_York/year/2005/month/10/day/10/daily/index.html
I also think that industrial production will play a big role at this stage of the economic cycle because the bond market has mainly been reacting to stock prices lately -- as a proxy measure of <i>freedom</i> enjoyed by the Fed to increase interest rates -- so something such as a big decline in capacity utilization rate would have a big impact. CPI at 8:30 and industrial production data at 9:15, Friday. Good thing I don't do intraday trading because I'll be somewhere in the air between Madrid and Venice at that time.
How's The Sangria? Monte Carlo is nice this time of year. TYZ 109 '02 last, Friday should be interesting.