I regularly quote from the work of David Ader at CRT Capital. Each month hesurveys clients regarding their post labor report intentions. It is always an interesting read:
Via David Ader of CRT Capital:
We had an average showing for this month’s survey, which we’ll suggest was mainly a function of the exciting price action in other markets (i.e. risk-assets) and attention focused elsewhere. With that in mind, let’s start with the normal array of questions. When asked what they would do if the market rallied post-NFP we got 53% neutral responses, but with the key takeaway that interest in buying was weaker than normal at 5% vs. a 14% average – i.e. people don’t intend to chase a rally.
However, we asked what they would do if the market sold off, we got a very interesting spin. Here we found an average amount of sellers at 20%, and more buyers than normal at 48% vs. 39% norms. That’s the largest amount of buying interest since Oct ’13. To the question of the next move in 5-year rates, we had more standard fare with 55% saying higher (near the norm), 23% saying lower, and the balance saying no clue.
We’ll draw your attention to the final section below where we put our special question. We asked “What is ‘driving’ Treasury Rates?”. The leading response was a dovish Fed at 22%, followed by Foreign Exchange reserve considerations at 21%. The second-tier was muddling growth 16% and Europe’s geopolitical risks at 11%. Trailing were the Middle East tensions at 9% and risk reduction at 9% as well. The “other” section was particularly interesting and represented 13% of the ‘blame’ for recent moves. “Other” referenced (in order of frequency) 1) relative value of TSY vs. other developed bond markets, 2) bank buying/LCR related, and 3) fear of inflation/higher-rates.
CRT, PRE-NON FARM PAYROLL SURVEY, AUG 2014 (for JULY NFP data)
* Post-Payrolls, And Market Trades HIGHER in price: 5% BUY, less than the 14% norm. 43% SELL, less than 46% average. 53% DO NOTHING, more than the 41% standard fare.
* Post-Payrolls, And Market Trades LOWER in price: 48% BUY, over the 39% average. 20% SELL, right at the 20% norm. 33% DO NOTHING, less than the 39% average.
* Next 15bps In 5-year Rates from 1.77%: 55% say HIGHER vs an average of 50%. 23% say LOWER, lower than the 27% norm. And 23% DON’T KNOW, which is at the 23% average.
What is ‘driving’ Treasury Rates? Please put in a % so that it adds to 100% AND, we’d love to get a sense if you think that influence is right (+), wrong (-) or neutral (=) meaning that it will be sustained for next 3 months.
1) Europe geopolitics — 11 %
2) Middle east geopolitics — 9%
3) FX reserves — 21%
4) Dovish Fed — 22%
5) muddling US growth — 16%
6) risk asset reduction — 9%
7) other, please specificy — 13%