NEW YORK, Nov 4 (Reuters) – Hedgers and speculators are bracing for a stronger-than-expected October payrolls report, according to an economic derivatives auction on Thursday.
The large number of players braced for a higher- than-expected report means that if the number is worse than expected, bonds may rise and stocks may fall.
The auction showed an implied market forecast for a 186,000 increase in October, up from 96,000 in September and above the 169,000 median forecast by economists in a Reuters poll.
The U.S. Department of Labor will release payrolls numbers on Friday morning at 8:30 a.m. EST (1330 GMT).
Some players seem to either be positioning for or hedging against the payrolls figure coming in well above expectations.
The distribution of positions in the auction indicates that about 20 percent of auction participants are bracing for a figure between 225,000 and 275,000, and 7.5 percent of participants are ready for a figure above 350,000.
In contrast, just 16.6 percent of participants are bracing for a figure between 125,000 and 175,000.
Economic derivatives, offered by Deutsche Bank, Goldman Sachs and interdealer broker ICAP, have a good history of showing how markets have positioned ahead of important economic figures, compared with the forecasts of economists.