According to a survey of clients conducted by David Ader, head of government bond strategy at CRT Capital, traders are even more bearish than usual headed into the release of Friday’s jobs report.
Ader asked clients two questions, paraphrased below:
- If Treasuries trade higher after the nonfarm payrolls release, will you be: (a) buying, (b) selling, or (c) doing nothing?
- If Treasuries trade lower after the release, will you be: (a) buying, (b) selling, or (c) doing nothing?
“The results were definitively more bearish when compared to the norms,” says Ader of this month’s answers.
20% of respondents said they would buy if Treasuries went higher, “a tad more than the 17% six-month norm.”
However, 47% of respondents said they would sell in that event, well above the 39% average. Meanwhile, 33% said they would do nothing versus 44% on average.
On the other hand, if Treasuries trade lower following the release, 24% of respondents said they would sell, above the 16% norm, while only 30% said they would buy, below the 41% average. And 46% said they would do nothing in that event — slightly above the 42% average.
Compare these results with an interesting observation from Andrew Wilkinson, chief market analyst at Interactive Brokers: “According to current option market pricing, traders are also assigning greater risks that the current rebound [in the stock market] will be sustained into the weekend rather than expecting further selling. Using SPY options series expiring following the release of the employment report, the IB Probability Lab displays stronger likelihood that the underlying SPDR S&P 500 ETF Trust will close higher than it is currently priced.”
In other words, according to these two anecdotes, market participants expect Friday’s jobs release to be supportive for stocks and less so for bonds.