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Treasuries Susceptible to Bernanke's Meeting with Congress, ADP Numbers

by: John J. Phillips IV posted on: April 02, 2008 | about stocks: IEF / SHY / TLT

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Treasuries are expected to remain vulnerable to the news flow for the remainder of the week. In New York, the Fed is getting ready for the second Term Securities Lending Facility, the results of which are due out on Thursday. Auction results are expected to provide some insight as to how badly global money markets are hurting. Recall that the initial auction covered 1.15x, perhaps indicating that markets were not as desperate for liquidity as some people thought.

Fed Chairman Ben Bernanke is scheduled to provide Congress’ Joint Economic Committee with an update on the US economic situation today. Bernanke is widely expected to assure Congress that the Fed will continue to take all plausible measures to thwart the development of further problems, and to keep the US economy from falling into a recession.

The ADP employment change is also due today, and is seen as the unreliable precursor to the jobs number due out on Friday. Consensus estimates for Friday’s jobs number range from –150K to +65K, while the mean estimate is around –50K. Recall that both the January and February readings were negative, making for the first consecutive negative readings since 2003.

All of these factors will certainly be relevant for treasuries through the end of the week, and will also play a role in the FOMC’s April 29^th/30^th policy-setting meeting. We will, before then, see interest rates from both the Bank of England and the European Central Bank. The ECB is widely expected to maintain rates given its recent hawkish commentary, while the BOE is expected to cut rates by 25bps to 5.00%. Current consensus expectations for the FOMC’s April policy-setting meeting are for a 50bps rate cut to 1.75%; April fed fund futures are currently pricing in a 36% probability that the Fed will cut rates by 50bps at that meeting.

The March ADP Employment Change is due at 8:15 ET today.

Bernanke is due to speak to the Joint Economic Committee at 10:30 ET today.

Results from the Fed’s TSLF are due out Thursday afternoon.

The Jobs data is due at 8:30 ET on Friday.

The ECB and BOE are due to announce their rate decisions on April 10^th.

The FOMC is due with its next rate decision on April 30^th.