WEDNESDAY MARCH 31, 2010

Interesting Next Few Days

Today is March 31, 2010.  Not a particularly interesting day.  However, this year, it is the day that the Federal Reserve will end its bond buying program.  Throughout the crisis, the Fed has been buying U.S. Treasuries, Agencies and Mortgage-backed securities.  It is estimated that the Fed purchased over $2 trillion in bonds over the last year or so!  This "monetary easing" had the effect of keeping interest rates low, helping to heal the economy and the bond market.  Well, that program ends today.  This does not come as a surprise, as this move has been very well advertised and expected.  Interest rates have been nudging up for the last month, and some of this is certainly in anticipation of the program's end.  Nonetheless, this artificial support of the bond market is gone and it will be interesting to watch the market's reaction.

Also, the Employment report is scheduled to come out on Friday.  That is not unusual, as it always comes out on the first Friday of the month.  However, this Friday is Good Friday.  The stock markets are officially closed and the bond market, although technically open, is essentially closed as well.  (I can remember my first job as trading assistant on a government bond trading desk.  I was 1of 5 people working that day on a desk that normally had well over 100 people on it!)  Further complicating this oddity is that the ADP employment report (produced by the payroll processor, Automatic Data Processing) came in much weaker than expected this morning.  The estimate was for a gain of 40,000 jobs and the actual report was a loss of 23,000.  This is yet another indication that the job market remains stubbornly difficult.  The market is extrapolating this result into Friday's labor report.  The estimates for this report were optimistic as well, hovering around a gain of 200,000 jobs.  The "whisper" number, the unofficial number, was pushing 300,000.  In addition to all this, we have experienced some really goofy weather this month, with New England currently under water and tornados ripping throught the South!

So, we are left with a high degree of uncertainly going into an employment report on Friday while the markets are essentially closed.   It should make for an interesting next few days! 

POSTED AT 1899-12-30 08:28:00.0

KEN ENTENMANN, CFA
SENIOR VICE PRESIDENT AND
THE DIRECTOR OF INVESTMENT MANAGEMENT SERVICES

Ken is a Senior Vice President and the Director of the Trust and Investment Services at Alliance Bank, N.A. He has 23 years of investment experience and oversees the management of assets totaling $1 billion. He holds a B.S. in Applied Economics and Business Management from Cornell University and an M.B.A. from the William E. Simon Graduate School of Business Administration at the University of Rochester. He has also earned his Chartered Financial Analyst designation. He is a member of the Executive Committee of the Trust Division of the New York Banker's Association. He is also a director of the Central New York Community Foundation.

RECENT POSTS

Better Unemployment Number

The "Safety of Bonds" Myth

Just like that!

Ugly August

Bright Side of Double Dip Fears

All eyes on Wyoming

Lack of Business Confidence

Are bonds forecasting a double dip?

Are rates too high?

Slowdown?