In the day just past, the bond market finally made its first move outside of the recent consolidation range–a series of lower highs and higher lows that had been intact since Fed day on June 19th. There were some cases to be made for underlying events to drive the trading momentum, but none of the events lined up too well with the timing. Either way, it looks like the lighter liquidity associated with holiday-week trading made the move bigger than it otherwise might have been.
In the day ahead, bonds will digest the week’s busiest day of economic data with both ADP Employment and ISM Non-manufacturing on tap in addition to a handful of other 2nd tier reports. The first direction of consolidation breakout isn’t always the market’s “final answer,” and in the current case, we shouldn’t be surprised to see the answer change if the economic data suggests it.
Both ADP and ISM are roughly equally equipped when it comes to market moving power. That said, some extra momentum would be reserved for ISM simply because it comes later in the morning. The maximum impact would be seen in the event that ISM and ADP both argue the same bond market reaction. Under that scenario, we’d see ADP have 50-75% of its own reaction with the rest being reserved for and added onto the ISM reaction.