US: FOMC and ADP employment in focus - BBH

Analysts at BBH suggest that before getting to the FOMC meeting, investors will learn the ADP estimate for private sector jobs (~175k after 263k in March).  

Key Quotes

“It so badly missed the March BLS non-farm payrolls estimate (89k) that today's report may not have much impact.  Shortly after the ADP report, the US Treasury will make two announcements.  First, it will announce the size of the Q2 refunding.  Second, it will release the minutes of the recent advisory committee meeting that likely discussed the issuance of an ultra-long Treasury bond.”

“This is a decision that the Treasury Department makes without Congress.  Many participants are skeptical that a sufficient supply of, say, 50-year bonds can be issued that will significantly impact the average duration of the $14 trillion (marketable securities) market.  There is also concern that in order to draw investors into that duration, a concession (higher yields) will be demanded.”

“The US also reports services PMI and non-manufacturing ISM.  The flash PMI slipped to 52.5 from 52.8.  It was the third consecutive decline.  The Bloomberg survey has the April ISM rising to 55.8 from 55.2.  The peak since October 2015 was set in February at 57.6. “

“There is no press conference following the FOMC meeting.  Besides some minor adjustments to its economic assessment, we do not expect the statement to change very much.  It is too much to expect strong clues into the June meeting.  The Bloomberg calculation puts the odds of a June hike at almost 61%, while the CME's estimate puts it at 63%.  Yet the US two-year yield is lower than it was when the Fed hiked rates last December and in March.”