The Day Ahead: Jobless Claims, Treasury Supply, Fed Speak

Benchmark interest rates are marginally higher and equity futures are mixed following an awful report Wednesday on private employment from Automatic Data Processing.

S&P 500 futures are up 1.00 point to 1,156.25 but Dow futures are 18 points lower at 10,888.

The 10 year Treasury note is -0-05 at 101-28 yielding 2.41%. The 2s/10s curve is 3bps steeper at 204bps. The November FNCL 4.0 is +0-02 at 103-04

Light crude oil is 0.52% higher at $83.23 per barrel, and gold prices are up 0.63% at $1,347.70 per ounce.

The ADP report suggested the economy lost 39k private jobs last month, against expectations for 10k jobs growth.

Key Events Today:

8:30 ― Initial Jobless Claims are anticipated to fall by 3k to 450k in the week ending Oct. 2, after the prior week saw claims decline 16k. The expected drop comes closer to pointing towards net job growth at the national level, though the data won’t be free from distortions until Census jobs exit the data.

“The level of initial jobless claims is averaging not far above the 450K mark that would indicate a neutral labor market, but the fact that it has come down in September simply reflects the fact that there are less census worker layoffs and that overall payrolls are getting closer to posting a positive figure,” said economists at BTMU. “We think October, which is the first month without census worker layoffs, will be the first month to show an overall gain in jobs.”

11:00 ― Treasury announces the terms of auctions to be held in the following week. Issuance will included 3 year notes, 10 years notes, and 30 year bonds.

3:00 ― Outstanding Consumer Credit is expected to decline by $4 billion in August, suggesting that banks aren’t enthused about lending or that consumers aren’t thrilled about borrowing ― probably both. The index has been declining for the past six months, including by $4.6 billion over the last two months. 

Economists at BBVA believe outstanding credit will disappoint markets and get slashed by more than $7 billion, representing an annual decline of 3.2%.

“The drumbeat of disappointing macroeconomic indicators caused trepidation in consumers, who in August increased their holdings of precautionary transactions deposits at banks,” they wrote. “Commercial banks will display an unexpected month over month decline in consumer credit after having increased consumer credit slightly between June and July.”

1:20 ―Federal Reserve Bank of Dallas President Richard Fisher (non-FOMC vote)  speaks on "Current Economic Conditions" before the Economic Club of Minnesota October Luncheon. Audience Q&A expected. Media Q&A TBD.

1:30 ― Federal Reserve Bank of Kansas City President Thomas Hoenig (FOMC voter) speaks before an economic forum hosted by the Federal Reserve Bank of Kansas City. Speech topic, Q&A TBA.

OTHER EVENTS
* 00:00 Monster Employment Index (Sep) (prev 136; -1.4% m/m, +12.4% y/y)
* 10:00 Job Openings and Labor Turnover Survey (JOLTS) (Aug)

ISSUANCE
* Heico, $250m 10-year; JPM/UBS
* Barclays, 10-year [guidance T+275-287.5]; Barc
* Pohang, $700m 5-year rumored; BAML/BNP/DB/GS/MS
* Lancer Fin, $275m 6-year rumored
* CBA, benchmark bond rumored; JPM
* Reliance Holding, benchmark 2-part 10s/30s; BAML/Citi/HSBC/RBS