US NFP survey: Fade any postNFP move - RBS

Research Team at RBS, notes that this month’s RBS NonFarm Payroll survey showed respondents were more likely to fade any postNFP move, in either direction, than go with it.

Key Quotes

“This was particularly true in the event the market moves lower on the release, with 45% of respondents saying they would buy the dip, vs. only 8% saying they would go with it. This is the biggest differential between those two numbers since October of last year. Meanwhile, the percent of respondents who said they would do nothing increased for both a rate selloff and rally. This might indicate that respondents are viewing next week’s election as the bigger risk, preferring to stand pat regardless of tomorrow’s outcome.

Regarding the election, there seems to be a fair amount of disagreement with regards to how markets might react to a Trump victory. The percentage of respondents who thought a Trump win would be bullish and bearish were nearly identical, at 41% and 43% respectively. While disagreement between respondents was high, uncertainty actually seemed to be pretty low as only 11% said they didn’t know what the reaction will be.

In contrast, there seemed to be more consensus around what a Clinton victory would look like, with 63% of respondents saying the market would be neutral, and 29% saying it would be bearish. Even more striking, the Clinton numbers were virtually unchanged from last months’ survey, while expectations for what a Trump win would look seemed to be considerably more fluid. Perhaps reflecting some expectations for continued electionrelated steepening, the percentage of respondents who saw the next 25bps move in 10s being a move higher increased from 38% to 47% since last month. This compares to 39% of respondents expecting the next 25bps move to be lower, which decreased from 46% last month.

With regards to Fed expectations, respondents might also be assigning less weight to today’s NFP than usual. Only 24% of respondents thought the Fed would need to see a print above 175k (the current Bloomberg consensus) to lock in a December hike. Moreover, 89% of respondents thought it would take a print of 100K or below to take a hike completely off the table. This would seem to suggest that Fed expectations will be fairly resilient to even a modestsize miss tomorrow. Conversely, a beat might have limited scope to increase expectations for a December hike. This would be consistent with the results of the question regarding when the Fed will next raise rates, as the percentage of respondents expecting a hike this year increased from 83% to 95%.”