Market commentary

Initial jobless claims came in slightly better-than-expected at 445k this morning but remain in the 450k range that has come to define this recovery. Continuing claims rose slightly as unemployed persons find it difficult to obtain new work.
The growing consensus in the bond market is that more quantitative easing is imminent from the Fed, an idea clearly indicated in the rally we have seen in the 10 year note. Last Friday the 10 year closed at a yield of 2.51% and this morning is trading at 2.40%. A large part of this rally came after yesterday’s ADP report which pointed towards a weaker-than-expected payrolls report. Tomorrow’s payroll report is expected to reflect a slight loss of jobs in the overall economy, with a gain of 75,000 in private payrolls. The persistent weakness in the labor markets is very compelling to Fed policy makers, and this will be the last employment report before the Fed’s November meeting.
A couple of items to note: 1) We are coming up on a 3 day weekend, so volatility could be exaggerated after the early Friday morning release of the jobs data, and 2) next week the U.S. Treasury is auctioning an estimated $32 billion of 3 year notes, $21 billion of 10 year notes, and $13 billion of 30 year bonds.