Employment Figures in the Spotlight for Bond Traders
Treasury Bond futures are trying to make a comeback after the pounding they took just two weeks ago, as equities recovered and the yield curve steepened to deliver a one-two punch to reeling Bond bulls! Traders now turn their focus to this Friday’s release of the September non-farm payrolls report. This morning, outplacement firm Challenger, Gray & Christmas announced that U.S. corporations cut 71,739 jobs in September, down 9.7% from the prior month. Also out later this morning is the employment estimate from ADP, which is expected to show that U.S. payrolls – excluding government hires – rose by 80,000 jobs last month. Any signs of a recovery would normally weigh on Bond prices, as signs of stabilization in the U.S. economy may allow the Fed to ease off the gas pedal and start to reassert its focus on fighting inflation. Should the recent recovery in Bond prices stall, some technical traders look for the possibility that a head and shoulders top might be forming on the daily charts. If so, the days of relatively low long-term interest rates might be on the wane.
Looking at the daily chart for December Bonds, we notice the recent rally off the 9/20 lows starting to stall near the 20-day moving average. The ADP payrolls estimate was just released, showing a gain of 58,000 jobs in September. Bond traders showed little reaction to this news, with only a slight sell-off seen in Bond futures just after the release. The 14-day RSI is moderately strong, with a current reading of 60.16. 112-10 is seen as near-term resistance, with support found at the 50-day moving average near 110-30. In early trade, December Bond futures are trading at 111-31, down 0-01.
Mike Zarembski, Senior Commodity Analyst
