UMBS opened up 15 bps on the morning.  S&P futures down 15 points

Bonds were roughly unchanged overnight, but began to improve modestly after the ADP data.  Considering the numbers were higher than expected, that may be more of a relief bid, or even “new month” trading (8:15am is the time of the release and 8:20am is CME open that frequently sees increased volume).All that having been said, ADP is no longer big business when it comes to market movement.

We were far more interested in the Treasury announcement, but it too has underwhelmed.  Auction sizes remained unchanged in everything 10yrs and up.  Increases were focused on the shortest end of the yield curve, which is what you’d probably want as a borrower if rates were really high but might be lower in a few years. (FRN = floating rate notes)

Treasury also announced the buyback program, or rather, announced that it would be starting the buybacks first announced back in 2023.  At $2bln per week, it’s not a huge addition to the bid side of the equation.  Bonds have barely budged in response.

The economy added 192,000 jobs in April, according to the ADP Employment Report. “Hiring was broad-based in April,” said Nela Richardson, chief economist, ADP. “Only the information sector – telecommunications, media, and information technology – showed weakness, posting job losses and the smallest pace of pay gains since August 2021.”
* Job Stayers saw pay increase of 5.0%, down from 5.1%.  Job Changers saw an average increase of 9.3%, down from 10.1%.

The Street is looking for 243,000 jobs in Friday’s jobs report.

House prices rose 1.2% month-over-month in February, according to the FHFA House Price Index. On an annual basis, prices rose 7%. The Northeast and upper Midwest performed the best.

Home prices rose 6.4% annually in February, according to the Case-Shiller Home Price Index.

ISM Manufacturing = 49.2 vs 50.0 f’cast,    [50.3 prev]

ISM Prices =  60.9 vs 55.0 f’cast,     [55.8 prev]

Job Openings = 8.488 vs 8.690m f’cast,    [8.813m prev]

Bonds managed modest to moderate gains after digesting all of the morning’s economic data and events.  None of the reports were too exciting and one might conclude that traders were slightly more interested in buying bonds regardless of the data.  Yields flat-lined in stronger territory ahead of the Fed.  The announcement itself was largely as-expected.

The same could be said of the press conference, but with the qualification that Powell definitely stopped short of expressing as much concern about inflation as the recent data justified.  Rate cuts aren’t likely any time soon, but the next move is still seen as much more likely to be a cut rather than a hike.  Markets also appreciated Powell’s reiteration that the Fed wouldn’t hesitate to do what it needed to do based on the data/economy without considering political implications.

UMBS ended the day up 40 bps.  Which was about 15 bps below the highs of the day.