A few bullet points before the first post-Yellen payroll figure:
* ADP should stand for A Dismal Prognosticator. Over the last 3 years it has a larger average error and standard deviation in forecasting the initial NFP print than a simple 12 month average of prior NFP prints
* A little model that Macro Man knocked up suggests payrolls of 175; however, you might be better off consulting Polemic's forecast generator
* Macro Man cannot shake the feeling that this number might prove to be more significant than it should be (given statistical variation); a big'un will be seen as some sort of validation of the upbeat growth story and the six months theme, whereas a weak set of figures could lead to a decent set of profit-taking in fixed income shorts and flatteners
* It bears repeating that EDM6 is at an absolutely critical level. Below 98.12 and there is fresh air for 30+ ticks. Then again, the April 9812/9825 strangle is worth 10 ticks, so the vol market is priced for a pretty big move
* It was interesting to note that financial stability hawk Jeremy Stein has resigned from the Fed. Perhaps the other governors were tired of his pouring prune juice into the punch bowl rather than champagne? On the margin, this surely makes the Fed a little less sensitive to blow-off rallies in equity and credit
*Although Macro Man is sceptical that risky assets will fare well if the eurodollar strip prices lower by another 20 ticks, it is the case that April seasonality is superb. It looks like someone certainly thinks so...there was a monster buy volume in the EM debt ETF on Tuesday
* Double secret probation seems to be working...despite a higher Eonia print again yesterday (0.218%), 1y1y came lower again, closing at 24 bps
* How much yen risk has the market still got? It's been terrible to trade all year, and yet here we are at the time of writing, a mere percent and a half away from the ding-dong highs of the Abenomics move.
Good luck out there...
* ADP should stand for A Dismal Prognosticator. Over the last 3 years it has a larger average error and standard deviation in forecasting the initial NFP print than a simple 12 month average of prior NFP prints
* A little model that Macro Man knocked up suggests payrolls of 175; however, you might be better off consulting Polemic's forecast generator
* Macro Man cannot shake the feeling that this number might prove to be more significant than it should be (given statistical variation); a big'un will be seen as some sort of validation of the upbeat growth story and the six months theme, whereas a weak set of figures could lead to a decent set of profit-taking in fixed income shorts and flatteners
* It bears repeating that EDM6 is at an absolutely critical level. Below 98.12 and there is fresh air for 30+ ticks. Then again, the April 9812/9825 strangle is worth 10 ticks, so the vol market is priced for a pretty big move
* It was interesting to note that financial stability hawk Jeremy Stein has resigned from the Fed. Perhaps the other governors were tired of his pouring prune juice into the punch bowl rather than champagne? On the margin, this surely makes the Fed a little less sensitive to blow-off rallies in equity and credit
*Although Macro Man is sceptical that risky assets will fare well if the eurodollar strip prices lower by another 20 ticks, it is the case that April seasonality is superb. It looks like someone certainly thinks so...there was a monster buy volume in the EM debt ETF on Tuesday
* Double secret probation seems to be working...despite a higher Eonia print again yesterday (0.218%), 1y1y came lower again, closing at 24 bps
* How much yen risk has the market still got? It's been terrible to trade all year, and yet here we are at the time of writing, a mere percent and a half away from the ding-dong highs of the Abenomics move.
Good luck out there...
12 comments
Click here for commentsADP was spot on!
ReplyActually this was a very vanilla number, but since the whisper number was so much higher, yields have fallen and a few Treasury shorts were mildly toasted. What this payroll number likely does is:
Reply1) Push out expectations of a big "catch-up" number to May (after which we give up).
2) Elicit a bit more suspicion that US escape velocity isn't exactly right around the corner.
3) Perhaps allow the market to make one more leg higher on continued hopes of dovish policy.
4) Make 2014 seem a lot like 2010, when 10s actually kissed 4% and we were being told to get ready for escape velocity as QE1 ends. What we got in the summer of 2010 was a liquidity shortage, Flash Crash and a yield curve flattener.
Depending on who his replacement is but Steins resignation adds another dovish tone to the 2015 voters with Evans, Williams, Lockhart, Lacker rotating in to replace Fisher, Plosser, Koch and Mester.... and its all about 2015 aint it guv?
Replysomeone blowing up?
ReplyC Says
ReplyI think the number is irrelevant. What matters at extremes is how invested ,or otherwise people are. Here they are all in and as far as I am concerned they have only one way to go. Talking about employment data is only a distraction.
The seething sectoral volatility under a broad index level that's largely unchanged since early March is very interesting indeed. I intend to post something about that on Monday; suffice to say that a lot of L/S equity guys are having even less fun that a -25 Spoo print would suggest.
ReplyThis is actually a pretty good day if you are long Treasuries, munis, emerging markets and REITs. I guess C is right, every US growth stock merchant was already long this morning and so it didn't matter what the number was. Sell The News.
Replyinteresting to see eu equites outperform on qe hopes
ReplyThe recent momo disconnect brings back memories of 2007, a year before the fun really started. But similar stuff also happened in the 90s so hard to draw parallels.
ReplyLooks like your flamingo was wearing vr goggles and playing the cloud.
Time to think about building a position Chinese Internet names. That theme I believe in.
Abee
Indeed, best play seems to be long SX7E - short RTY.
ReplyWelcome back original MM - I have been a lurker and occasional poster since well before your initial departure and I must say I am already enjoying the more fixed incomey style since you've returned.
ReplyIf you are a payroll professional or work in payroll company then you must be aware of these points mention in the post but still it's better to have a look at these points.
Reply