Wednesday, January 03, 2007

A bit of a bull steepener on ADP report

The ADP employment survey is out, showing a 40,000 decline in employment. According to Bloomberg, economists had been expecting a 120,000 increase. That's a hell of a miss, and its giving the rate cut crowd something to work with this morning. We're 1bp steeper 2-10.

I expect the real action may be at 2pm today, when the Fed minutes come out. The minutes rarely say anything of substance that various Fed speeches haven't already said, but for whatever reason the market seems to react more to the minutes. To my eyes, the Fed speeches have not said anything new lately. While the Fed acknowledges that the housing market is soft, they don't see any bleed through to the broad economy. The odds of a recession are low. While inflation remains a bit higher than desired, policy actions to date need time to work. All this leads the Fed to keep rates where they are, and the direction of the next move will be data dependent.

So my bet would be that the minutes wind up flattening the curve, with the whole rally tempering a bit.


Unknown said...

given the markets reaction to decidedly mixed ISM @ 10 and the ensuing trade back to UNCH on the day, it would appear that you are on a roll to start the year! nice call ... couldn't agree with you more about the fomc minutes being a bit more interesting ... have to be honest, though, being a bit more bullish (of rates generally speaking), am curious IF we gather any new evidence about WHY the word 'substantial' was added as desription of housing. what a life and what a way to make a living!

oh well ... on another note, had a question for you. do you know of any place to find a good working list of current/new FOMC members and their voting bias? i've googled and checked the various dealer sites (via bondhub) and NOT come up with anything decent?? (like to keep on my desk so as to have some background if/when we get some Fed-speak yada yada yada - not to bore you to tears!!)

Anyways, keep up the good work on your great blog, bringing bonds to the masses! Happy New Year


Accrued Interest said...


I'll see if I can find the Fed thing. And if I do, I'll either post it or post a link.