The Day Ahead: Bond Markets Back Online but Not Business as Usual

After the once-in-a-lifetime unscheduled hiatus of the past 1.75 days, bond markets will be open again on Wednesday, but we're not expecting the same sort of "business as usual" return that we would after a scheduled mid-week holiday.  In fact, it's altogether possible that we'd still be operating on some sort of emergency schedule if not for the pressing matter of "month-end."  Quite simply, this means that some trades HAVE TO HAPPEN for certain market participants before the end of the month, and those trades didn't all happen in the first few hours of Monday morning (though we DO suspect the anticipation of the storm contributed to a sort of "early month-end" at the end of last week).

Even so, more than a few market participants need to get things done today, and that means we could see volatility or counterintuitive movements.  Keep in mind that "counterintuitive" doesn't connote "negative," but simply a certain level of movement in one direction when fundamentals and technicals might suggest another.

On the other side of the coin, more than a few market participants DO NOT need to get things done today--at least not things that can't be done in early November--and will instead be attending to other "post-Sandy" matters.  This makes for a rather uncertain level of participation, and raises the risks that strong volume arrives in disparate chunks instead of a steady stream.  Either way, we'd expect to get a good idea for the pace of the day in the first few hours.  

As for the day itself, it remains one of the lighter calendar days of the week, apart from the fact that it's month-end.  The Labor Department's Employment Cost Index at 8:30am is a quarterly report that measures wages and benefits and is forecast to increase 0.5%, as it did last quarter.  This report usually doesn't move markets because the forecast is usually fairly accurate.  In other words, it doesn't often surprise on either side of the consensus. 

The only other noteworthy domestic data of the morning is Chicago PMI at 9:45am.  The headline index is expected to rise back above the 50.0 mark which distinguishes expansion from contraction.  A notable absence from the lineup on the first Wednesday of the month is the ADP Private Payrolls data which was already rescheduled for a Thursday release in advance of Hurricane Sandy.  The Consumer Confidence numbers from Tuesday are also rescheduled for Thursday morning.