The benchmark bond rebounded yesterday and closed up just a tad (8 basis points). This morning it is down two basis points and likely won’t have much activity ahead of the Fed interest rate announcement which is likely to be a non-factor since everyone is expecting the Fed to leave rates unchanged but all of the experts are hoping for some guidance relative to the December FOMC meeting. Additionally, the ADP private payroll report was released this morning and missed big to the downside which is a slight positive for rates – it’s only slight because the report is not typically that accurate as it compares to the Non-farm Payrolls report on Friday. However, most of the ADP reports over the last handful of months have been somewhat of an indicator as to the NFP reports that followed. Hence, if a correlation exists this time, I would expect the NFP report to also be weak which would help bonds as well.
The bond is currently 10 basis points above the new 1st support level and if it breaks through the 200-day moving average it would have some room to run as long as it can also break through the 1st level of resistance at 103.19 (21 basis points above where it is now). Currently, the 2nd resistance level is at 103.51 and the other moving averages are about 10ish points above that. With a solemn report from the FOMC today and weak news tomorrow and especially in Friday's NFP report, it's possible we could see a bit of buying from the traders which would help interest rates. I'm going to switch my stance to floating with EXTREME caution which means that you should keep a sharp eye on the bond market either by downloading my app (buyerZapp - upper right-hand corner of my blog) or by contacting me if you want to know how these things are impacting rates if I don't write about it: 702-812-1214 or 801-893-1737.