The Day Ahead: Private Payrolls Preview. MBS Prepay Flash Later

Good Morning. Both stocks and bonds are both rallying (again) ahead of the ADP Employment Report.

S&P 500 futures are +4.50 at 1159.25. Dow futures are +41 at 10905. S&Ps sold off early in the NY session and are currently rallying back to yesterday's high print.

The 10 year TSY note is +0-07 at 101-17+ yielding 2.449%. The November delivery FNCL 4.0 is +0-04 at 102-28.

Key Events in the Day Ahead

8:15 ― The ADP Employment Report, used as a tool to predict Friday’s nonfarm payrolls report, is expected to report a slight uptick in private jobs for September. In August the report suggested that 10k private jobs would be lost, while in the official BLS numbers the number was +67k. That continued a trend of undershooting the BLS numbers, which has limited the usefulness of the report.

Economists at Nomura look for a 10k increase in this report. “Considering the persistent difference in monthly changes in employment between ADP and the official BLS report, a 10k increase in ADP report is consistent with an advance of around 80k in official private employment.”   

Federal Reserve Treasury Coupon Purchases: The Fed buys coupons in the 2013 to 201 sector. Expect purchases to total between $2 and $2.4 billion

ISSUANCE
* 11:30 Treasury auctions $25 bln 56-day SFP bills
* 15:00 Treasury STRIPS (Sep)
* VTB Bank, $1.5bn 2-part 500m 6s, 1bn 10s [lnch both ms+425]; Citi/DB/VTB
* Heico, $250m 10-year; JPM/UBS
* Fannie Mae, benchmark 2-year [guidance CT2+14]; Barc/JPM/UBS
* Pohang, $700m 5-year rumored; BAML/BNP/DB/GS/MS
* Qatar Telecom, benchmark 2-part 6s/10s expected; Barc/DB/MUFJ/QNB/StanChart/RBS
* Lancer Fin, $275m 6-year rumored
* CBA, benchmark bond rumored; JPM
* Reliance Holding, benchmark 2-part 10s/30s; BAML/Citi/HSBC/RBS

PREPAYMENT FLASH: MBS prepays are called out this afternoon