Bonds are seeing a mini rally this morning as bonds react to both a drop in the ADP Employment report, and as stocks respond to weakness in stocks. As prices improve, rates drop.

The Dow Jones Industrial Average is -35.19 or -0.26% at 13486.15. The more important, but less popular S&P 500 is 1514.81 which is -3.30 or -0.22%. The fixed-income market – bonds – are benefiting from uneasiness about stocks in the wake of a big wave of selling overnight in the Shanghai market.

Bonds are also gaining assistance from this morning's ADP Employment Report. There are little to no published predictions on this item. Bond traders and analysts look at its comparison to the previous month, and the predictions for Friday’s Payroll numbers.

In month-to-month comparison the ADP was better. Last month was 64,000. This month the ADP reported 97,000 private sector jobs growth.

Usually there are 15,000 to 20,000 government jobs added. That would bring Payroll Growth at 117,000. That is lower than the current predictions of 120k to 140k for Friday. Bad news for job growth = good news for rates.

That has moved the 10-year Treasury to 4.861% which is -.021% lower than yesterday’s close.

There was no major news in the real estate market this morning. The weekly MBA Purchase Application Index was 427.0 in week-to-week analysis. The 4-week moving average moved little at 433.93. That was down only moderately from last week’s 434.00.

Sales numbers are continuing to show some slowing. UBS Store Sales was 0.0% in week-to-week and 2.9 in year-to-year. Redbook Survey was holding steady at 2.4%.

THIS AFTERNOON

Bonds most likely are being influenced by this afternoon’s release of the FOMC Minutes at 13:00cdt {18:00gmt}. The minutes will be closely watched for clues as to the direction the FED is taking.  We will post later today as to how the market has reacted.

Steve Boxmeyer [612] 799 – 6858
steve@LendWithIntegrity.com