Wednesday – October 30, 2024
Flat open for UMBS. Up 2 bps in the first hour of trading. S&P futures up 3.25 points
The prevailing sentiment heading into this week’s payroll counts (ADP and NFP) was that the hurricane would make for artificially low numbers. ADP is here to tell us that’s not the case.
ADP Employment = 233k vs 115k f’cast, [143k prev]
Wage inflation fell to 4.6% for job stayers and 6.2% for job changers. The expectation for Friday’s jobs report is 125,000, so we might be looking at a stronger-than-expected report.
Job openings fell to 7.44 million in September from 7.86 million in August, according to the JOLTS. Last year at this time, there were 9.31 million openings, so the labor market has cooled pretty dramatically. The quits rate fell to 1.9%, which is an indication that workers are nervous about taking a new job.
GDP Q3 = 2.8 vs 3.0 f’cast, [3.0 prev]
Core Q3 PCE price index = 2.2 vs 2.1 f’cast, [2.8 prev]
All things considered, bonds are holding up fairly well. The 2.2 vs 2.1 in the core PCE data suggests a risk that tomorrow’s monthly PCE will be slightly higher than expected, but today’s Q3 number doesn’t specify which months of Q3 account for the which percentage of inflation. If it was more focused on July and August, then tomorrow’s report for September may not be higher than forecast.
Bonds added just a bit of selling pressure after this data, but already seem to be having second thoughts.
Bonds lost ground today, but not as much as one might expect given the 233k vs 115k result in the ADP Employment data. Granted, ADP is a notoriously imperfect predictor of the NFP number that follows 2 days later, but that never stops markets from reacting on occasions like this. So what stopped them today? Some combination of month-end trading, a favorable report on new Treasury auction amounts, “bigger fish to fry,” and perhaps the fact that payroll counts are being taken with a grain of salt due to weather-related disruptions in September. Ultimately, bonds did manage to lose a bit of ground, but not until well after the morning’s econ data reaction window had passed.
UMBs closed the day down another 29 bps. The 5.5 coupon is now trading at 99.00
