Treasuries weak going into jobs number; what do they know?

The bearish implications of this pattern was confirmed on Tuesday when the June 10-year Treasury future(CBOT:TYM14) had its largest single session open to close decline since early November. This confirmation session followed with a lighter volume pause on Wednesday that failed to recover much of the prior session decline.

As of 9:00am EST on Thursday, Treasury prices are slightly lower (TYM4 -9+ to 124-01). Generally speaking, Treasury prices have a tendency to consolidate on the approach of the payroll data.

However, when there is a ‘significant’ move in the session prior to the employment report, it may indicate that economic agents have found something that has materially changed their collective view and are found not waiting for confirmation in the payroll data. At this stage, no such argument can be made that 9 to 10 tics lower in TYM indicates such a sentiment change. A move to 123-19 might indicate such a changed view.

Because accounts have already adjusted to weaker economic data and have factored in heightened geopolitical risk, the prospect are high for an exaggerated reaction to a slightly better than expected economic data event.

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About the Author

Martin McGuire, managing director at TJM Institutional Services

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