The Day Ahead: ADP and ISM Attempt to Break Monotony

Whereas Monday required some level of qualification and explanation to be considered an extremely flat session, Tuesday asked for no such consideration.  After an average amount of overnight volatility (especially considering that it was Europe's first day back in the office after 4 days off), domestic bond markets walked in the door well inside their trading range from the previous session and didn't move much at all.  This was especially true for MBS, where Fannie 3.0s held a 3/32nds range for the entire session.  With each passing day, chances grow that we'll see a break away from the narrow range that's contained everything since Thursday:

There's more at stake for MBS in the near term, however.  The chart above contains only a small portion of the longer term range and it's upper limits at 103-10 have been a historically significant pivot point on the way to historic highs.  Of course, MBS aren't automatically headed to all time highs again if we simply trade above 103-10, but any sort of positive momentum through this week makes 104-00 look downright obtainable.  If the momentum builds in a less-than-positive fashion for MBS, we could only hope to see support at 102-18 (not pictured below) or failing that, somewhere just over 102.

Today then, will be the first major opportunity to get that momentum kicked off.  As is frequently the case, we'd point out that "opportunity" doesn't guarantee results.  This morning's data has all the POTENTIAL in the world to cause a big lead-off ahead of Friday's NFP, but such instances are the exception rather than the rule.  The data in question is March Private Payrolls from ADP, a controversial proxy for Friday's private payroll number.  Here's how the two line up over time though...  You can see why the data can cause some adjustments to NFP projections.  If ADP isn't causing much fuss at the open, ISM Non-Manufacturing data follows at 10am, and is expected to fall right in line with the previous reading of 56.9.