Wednesday is All About Dot Plot and Powell

Bonds lost ground moderately and logically on Tuesday in response to the JOLTS data. From here, this week’s volatility potential hinges on the Fed. Fed Funds Futures suggest that there’s been no change in rate cut prospects for Wednesday’s meeting.  It remains a nearly a 90% probability and thus a non-event when the cut is announced. The more important events will be the 2pm ET release of the dot plot (individual Fed member forecasts for the Fed Funds Rate) and the 2:30pm press conference with Fed Chair Powell.  While it may be fashionable to hold the cynical view that Powell’s pressers “always” hurt rates, that’s certainly not the case and we have no way to know if it will be the case on Wednesday. At the very least, the bearish set-up over the past 2 weeks should tell you that anything can happen (considering Fed rate cut days have often pushed back against the prevailing trend in rates). 

Econ Data / Events

ADP Employment Change Weekly

4.75K vs — f’cast, -13.5K prev

CB Leading Index MoM (Sep)

-0.3% vs -0.3% f’cast, -0.5% prev

JOLTs Job Quits (Sep)

3.128M vs — f’cast, 3.091M prev

JOLTs Job Quits (Oct)

2.941M vs — f’cast, — prev

USA JOLTS Job Openings (Sep)

7.658M vs 7.2M f’cast, 7.227M prev

USA JOLTS Job Openings (Oct)

7.670M vs — f’cast, 7.658M prev

Market Movement Recap

10:50 AM Sideways to slightly stronger overnight, but now weaker after JOLTS data. MBS down an eighth and 10yr up 1.5bps at 4.178

02:10 PM Weakest levels. MBS down 6 ticks (.19) and 10yr up 2.2bps at 4.185

04:17 PM Drifting out at weakest levels. MBS down 7 ticks (.22) and 10yr up 2.2bps at 4.185