The Day Ahead: Last Big Data Day Before FOMC

At this point, next week's FOMC events are on a pedestal so high that their actual stature may be hard-pressed to live up to the legend.  After all, markets have mostly come to terms with the idea that the Fed is heading for the door as opposed to staying for an indeterminate amount of time, right?  Probably, bust the definition of "mostly" can vary.  '

No one knows exactly what to expect because we've never done this thing in this way before.  That uncertainty is increasingly reflected in the early September trading patterns.  Of course it made good sense to wait for the jobs report before heading too firmly in one direction or the other, but the report didn't exactly offer resounding confirmation that tapering is a flawless idea, nor did it offer a loud enough counterpoint to derail the consensus that it will still happen.

The result of that uncertainty playing out is a range that's moving more quickly between its highs and lows, but generally honing on on something between 3% and 2.85%.  The following chart isn't meant to predict a course for yields, but rather to show the two existing trends converging at FOMC.  The other way to look at the upper yellow line would be to substitute the teal line, reckoning that the pre-NFP trade and this week's auction/corporate bond offerings made for some extra concession that's no longer in the market.

Either way, the resistance above 2.85 has been firm, and it would take either a very big miss in Retail Sales and perhaps even a concerted message from all the morning's reports, to reopen the debate over tapering certainty.