News Headline Summary

Following the weaker than exp. ADP data, risk assets continue to see selling pressure with crude futures trading down over USD 2.50 & spot gold looking to test USD 1450/oz to the downside; US equity futures trade at lows heading into Wall St. open

Analysis details (14:55)

- Initially the USD weakened on the data but has since bounced and therefore FX pairs pulled off recent highs.
- This poor data out of the US comes ahead of the FOMC monetary policy decisions due at 1900BST (1300CDT) and the US jobs report on Friday.
- It has been noted that the tone of data late in Q1 softened, quite likely due to the delayed effect of fiscal restraint enacted at the beginning of the year.
- The Treasury Borrowing Advisory Committee also noted that market forwards imply an even more benign path of tightening relative to private sector and Fed forecasts. Should the Fed embark on policy tightening, yields could overshoot to the high side due to concerns of Fed portfolio unwind and fixed income investor redemptions. Should this occur, the higher cost of financing is material as annual interest expense could more than quadruple when yields "normalize." Therefore, continuing to extend the weighted average maturity of Treasury debt in a stable manner so as to minimize term premium is sensible policy to adhere to.

01 May 2013 - 14:19 - Fixed Income Data - Source: RANsquawk

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