Mel's Blog

Bond prices are modestly higher this morning as the quiet trading of late continues.  But this could be the quiet before the steam, with bonds "overbought" and the Jobs Report looming. 

For what it is worth, the usually unreliable ADP National Employment Report from Automatic Data Processing, Inc. is showing job growth at 57,000.  When adding a three-month average of 7,000 new government hires, the ADP report is estimating 64,000 new jobs - this is considerably less than estimates of 100,000 for this Friday’s jobs number coming from the Department of Labor.  Although the ADP number has been way off in the past - Traders can't seem to help themselves in putting some belief in the number. 

The ADP data has been notoriously inaccurate over the past six months, with estimates missing by 78,000 jobs while the Labor Department’s estimates have been off by 40,000.  Stung by criticism, ADP in conjunction with Macroeconomic Advisers, LLC, has revised their ADP National Employment Report using a “newly enhanced methodology.”  We’ll have to see if their new methods become more accurate in forecasting the official government monthly new jobs growth.  Until their accuracy greatly improves, the ADP jobs number will be taken with the proverbial “big grain of salt.”  

A market mover this afternoon could be the Federal Reserve's “Beige Book,” which describes current economic conditions in regions throughout the US when it is released at 2:00pm ET.  Later this evening, US Treasury Secretary Henry Paulson speaks on China's financial market reform in Shanghai, China and his comments could affect Asian stock market trading overnight, and as we've seen by the action a couple of weeks ago, it could carry over and have a significant effect on our markets. 

There are also concerns that the European Central Bank (ECB) might raise interest rates tomorrow.  If the ECB does raise rates, their move could put some selling pressure on US bond prices tomorrow, because attractiveness of European yields will increase and potentially draw from US Bonds.   

Stocks have opened lower after a nice rebound higher yesterday.  Should stocks regain their footing and move higher again later today, Bond pricing may worsen.