The Week Ahead: Lots of Fed Speakers, GDP, and NFP

Last Week

- Flat range gave way to gains through Wed morning

- FOMC Announcement reversed gains, threatened weak side of range

- Chicago PMI and ISM Manufacturing PMI continued push weaker

- Treasuries completely erased NFP (10/22) rally.  MBS came close

This Week

- Another NFP coming up on Friday

- Lots of Fed speakers at various times/locations

- Some other rescheduled data comes back from shutdown, including GDP Thursday

- Equities markets may have extra attention due to Twitter IPO

Strategy

Only 2.5 weeks separates this week's Employment Situation Report one from the last due to the government shutdown. The last jobs report helped rates break to new multi-month lows, gains that were erased by the end of last week. The selling pressure in bond markets in the last 3 days of last week confirmed a negative shift in momentum. 

That sell-off began with Wednesday afternoon's FOMC Announcement.  Now this week, Fed governors will have ample opportunity to clarify and qualify the subtleties of that announcement.  Markets had done an about-face with respect to tapering expectations during the government shutdown, with the most recent poll showing a clear consensus on March 2014 as the likely inception.

There are an average of 2 Fed speakers per day, though some will be more relevant than others.  The GDP data we missed last week arrives this Thursday, with the consensus of +1.9 vs +2.5 in Q2.  This will be the first reading on GDP for Q3.  Earlier in the week, the most important piece of economic data arrives on Tuesday morning with ISM Non-Manufacturing.  This is the sister report of the ISM Manufacturing report that helped solidify last week's bond market selling.  This one is at least as important, and often times, it packs a bigger punch.

Friday's NFP is the most significant data, by far.  The consensus is for a fairly low +125k vs +148k previously.  If it's negative, chances are higher that it will be discounted due to the shutdown.  If it's positive in spite of the shutdown, it could certainly add fuel to the negative fire.  Either way, it seems like a no-win for bond markets.  The only question is whether or not traders already realized this "no win" scenario and have it priced in to current trading levels.

Charts

A quick look at the damage last week for MBS and Treasuries.

Intermediate and longer-term look at Treasuries.

Same time frames for MBS.