Today's bond market activity is most notable for its predictability. In advance of tomorrow's important May
report, the expectations were for a quiet day, without buyers to take bets before the release.
It worked out as planned -- a rarity in these bearish times. Volume, according to tracker
, was down 33.2% when compared with the average second-quarter Friday. A total of $47.8 billion changed hands by 3 p.m. EDT, GovPX reported. The Treasury market drifted lower, not so much due to heavy selling, but more on a lack of buying in advance of the jobs figure, which many are hoping provides the market another clue as to whether the
will raise interest rates at the end of June.
The 30-year Treasury bond fell 6/32 to 90 12/32. The yield rose by 1 basis point to 5.94%, its highest closing yield since May 15, 1998.
Today's ups and downs were governed mostly by the latest rumor on how tomorrow's payrolls figure will turn out. The consensus estimate for new nonfarm payrolls, according to
, is for a 216,000 gain in May. Early in the day it was rumored payrolls would turn out weaker than the estimate, and later in the day, a rumor emerged suggesting payrolls might turn out stronger than consensus.
The Treasury market also has to account for the yearly seasonal adjustments to the nonfarm payroll data made by the
, undertaken to obtain a clearer picture of this country's labor situation. "If you look at the factors for this year versus 1998 they would lower the adjusted totals by 50,000 to 60,000," said William Sullivan, chief money-market economist at
Morgan Stanley Dean Witter
. These adjustments aren't unique to this year, but "it's in the market's mindset as we go into tomorrow's figures and the market will be affected by these calibrations," Sullivan said.
The market has been particularly edgy about the payroll figure since the
National Association of Purchasing Management's
May survey of manufacturing sentiment was released Tuesday. This survey indicated positive sentiment among purchasing executives with regard to future employment, though the evidence is more or less anecdotal.
Tom Ruff, vice president in proprietary trading at
, believes the only way the market is going to rally tomorrow is if all the major components come in way below forecasts, because that would reduce the chances of an imminent interest-rate hike. Expectations are for the household unemployment rate to hold steady at 4.3% and for average hourly earnings to rise by 0.3%.
"Those are not weak numbers," he said. "The growth of the labor force is about 150,000 per month, and if the economy is adding 215,000 it means the labor force is getting tighter."
Precisely what Fed officials have been worried about. Today's only major speaker was
Fed Governor Ed Gramlich
, who today said in comments that "there could be signs of an acceleration which we hadn't seen before." Gramlich, thought to be somewhat of a dove, said later to reporters: "The question is, was the
0.7% increase in April's
Consumer Price Index
a one-month fluke, or was this a real warning sign?"
"The Fed, in various comments, whether it's
New York Fed President William
or Gramlich today, have basically told you the gun is loaded," Ruff said. The Fed adopted a bias in favor of tightening interest rates at its May 18 committee meeting.
Today's data didn't impact the bond market.
fell by 1.2% in April, compared with the market's expectation for a 0.9% decline. In March, factory orders rose by 1.9%, revised downward from the
original 2% estimate.
, a survey of business sentiment in the non-manufacturing sector, fell to 60 in May from 64 in April. This indicates expansion in this sector of the economy, but since this data isn't being seasonally adjusted yet, it's paid little attention.