| Claims data due, Powell expected to push back on bond market fears, and OPEC+ meets. Employment situation Yesterday's disappointing ADP private payrolls number kicked off three busy days for the labor market. Weekly jobless claims data at 8:30 a.m. Eastern Time is expected to show an increase to 750,000 as the pandemic continues to hold sway over the economy. The magnitude of the latter was made clear in numbers released yesterday by the Bureau of Labor Statistics which showed 15 states had record-low employment-population ratios in 2020. Meanwhile economists estimate that tomorrow's payroll number will see 200,000 positions added in February. Powell The employment situation may be one of the things that Fed Chair Jerome Powell will use to reaffirm that the central bank is determined to keep monetary policy accommodative, when he appears at a Wall Street Journal Webinar later today. With markets suddenly worried about inflation caused by a much-faster-than-previously expected forecast, Powell will have to convince investors that Fed policy is on the right path. Speaking of the recovery, voting on President Joe Biden's stimulus plan in the Senate is now unlikely before the weekend. Oil meeting OPEC and its allies are meeting today, with preliminary talks giving little hint as to whether the market will get the April supply increase it is expecting. As has become usual, Saudi Arabia remains cautious on increasing output while Russia is keen to open the taps. Oil is holding above $60 a barrel ahead of the meeting, with investors also keeping an eye on developments in the Middle East where Yemen's Houthi rebels claimed an attack on an Aramco facility in Saudi Arabia. Markets dropGlobal equites are under pressure again this morning, with the technology sector one of the biggest losers in the wake of yesterday's Nasdaq selloff. Overnight the MSCI Asia Pacific Index dropped 1.9% while Japan's Topix index closed around 1% lower. In Europe the Stoxx 600 Index was down 0.9% by 5:50 a.m. with miners joining technology shares in selling off. S&P 500 futures pointed to more red at the open, the 10-year Treasury yield was at 1.474% and gold was little changed. Coming up... U.S. durable goods and factory orders for January are at 10:00 a.m. Powell speaks at 12:05 p.m. Votes in the House have been cancelled for today following a warning from law enforcement officials that a militant group may be planning an attack on the Capitol. Broadcom Inc., Costco Wholesale Corp. and Gap Inc. are among the companies reporting results. What we've been readingThis is what's caught our eye over the last 24 hours. And finally, here's what Joe's interested in this morningFederal Reserve Chairman Jerome Powell is speaking later today amid growing chatter that perhaps the recent rise in Treasury yields will pose a threat to the Fed's plans. So there are questions out there about whether the Fed will implement some new policy to suppress interest rates by more bond buying or at least some sort of verbal intervention.
On the latest episode of the Odd Lots podcast, Tracy Alloway and I had the pleasure to speak with Credit Suisse strategist Zoltan Pozsar about what's been going on with Treasuries, both from a macro/Fed perspective and also from a bank plumbing perspective. It's dense and difficult to summarize, particularly the questions about bank balance sheets and their capacity to absorb more government debt issuance.
But from a Fed standpoint, Pozsar is of the view that there isn't much of a problem for Powell & Co. Here's his comment at the 33:30 minute mark, which is slightly edited.
"...maybe I was a bit too fast last week saying well one thing that the Fed could do is talk rates down, do something like an operation twist, sell front end stuff, and buy back end stuff to police the long end. But here's the point. The long end, you don't really need to police. What you have seen is that you had this massive selloff, but then you know the FX-hedged buyers... they are now getting a beautiful amount of slope in the Treasury curve... If you look at these FX-hedged yields we are back to levels where we have last time been in 2015."
In other words, while you can have spasms, tantrums and bouts of crazy action in the Treasury market, there are some natural anchors that limit how far these things can go. Per Pozsar, yields on long-end U.S. Treasuries are extremely attractive to foreign buyers, who can hedge their risk in the FX market. Maybe around 2.25% on a 30-year bond to you doesn't seem very juicy, but for a Japanese investor who is only getting 0.715% on JGBs, after hedging out yen risk, it might not be a bad time to buy. For another perspective, read Bloomberg's Stephen Spratt here.
Anyway, listen to the whole episode here or on iTunes or Spotify.
Joe Weisenthal is an editor at Bloomberg. Like Bloomberg's Five Things? Subscribe for unlimited access to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. | 
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