The lead-off analogy is one that we’ve used many times to relate a relatively simple market phenomenon, just as the primary subject material is a relatively simple strategy in baseball. If anyone needs a refresher, the lead-off in baseball is when a runner, who is already on base during another batter’s at-bat, begins to move away from the base they are safely on, and edge slightly toward the next base. The goal can be to prepare to steal the next base or simply to be “that much further along” in case the ball is hit.
Today then would be the first notable opportunity for bond markets to take their own lead-off in anticipation of next week’s potentially significant events (ECB and Jobs Report). Until now, and indeed since late last week, we’ve been expecting bond markets to not have anywhere to go, and thus be consigned to what would probably turn out to be a mostly sideways range, but perhaps with a slight bias in one direction or another. Essentially, bond markets have been stuck “on base and waiting for the pitch.”
And now that the sideways theme has held up so nicely, here’s the proverbial pitch. Just like in baseball, where the pitch itself doesn’t guarantee that the ball will be hit, today’s Jackson Hole speech from Bernanke merely provides the opportunity for base hits. Though unlikely, markets might detect a leaning toward a certain outcome in the FOMC Announcement just under 2 weeks from now. If so, they might lead-off in the direction of that leaning, and thus, we could see the sideways theme face it’s first major test.
Even if that happens, we’d emphasize that Ben at Jackson Hole is merely a “contact hitter”–that is to say, he’s not-at-all likely to hit one out of the park and serve as the impetus for a bunch of base-running by bond markets. As we’ve probably said too many times already this week and last, the heavier hitters will be up in the first two weeks of September. But between Bernanke and the other economic events today, we could certainly see a convincing lead-off.
As for that other data, there’s a good amount on tap from the Euro zone overnight, including Unemployment for the entire Euro zone and several ECB speakers. Domestically, we’ll get Chicago PMI, Consumer Sentiment, and Factory Orders all before Bernanke starts speaking (to be clear, Factory Orders and Ben share a 10am time slot, but the prepared speech isn’t quite as interesting as the discussions that follow)