News being released tomorrow and Bond/Rate predictions

Mortgage and Lending with Model Citizens "NO POINT LOANS"

REUTERS  US TREASURY OUTLOOK-Bonds may ease again on bailout hopes [JCBLTRV]


    By Chris Reese

    NEW YORK, Sept 30 (Reuters) - U.S. Treasury debt prices

could ease again on Wednesday with investors continuing to

unwind recent safe-haven trades amid expectations Congress will

pass a $700 billion financial bailout later this week.

    Bonds plunged and stocks surged on Tuesday on hopes

Congress will still approve the rescue package, a day after the

House of Representatives narrowly defeated it.

    Government debt prices could fall again on Wednesday if

government officials continue to assure that the deal will get

done. Congress is unlikely to vote again on the plan until


    "Unless overnight that there is some new bug that is going

to bring more votes against passage (of the bailout plan), I

think stocks will hold their ground and Treasuries will unwind

a little bit further," said Kim Rupert, managing director of

global fixed-income analysis at Action Economics LLC in San


    However, any continued selling of bonds may be limited by

worries over whether the bailout package will work to free up

lending, and concerns about the overall economic slowdown.

    "It will continue to be choppy," said Michael Kastner, head

of fixed income at Sterling Stamos Capital Management in New

York, adding "there is still a lot of flight-to-quality bids

for Treasuries especially in the front-end."

    The focus on the plan, which would take bad mortgages off

of the books of financial companies, means some economic data

that might normally be quite important for the bond market will

likely take a bit of a back seat.

    "Data is still fairly secondary at this point," Rupert


    Investors will however monitor the release of private

employment data from ADP Employer Services for September,

primarily for any clues as to what it might mean for the

government's September non-farm payrolls numbers to be released

on Friday.

    Analysts on average are looking for ADP to say the private

employment sector contracted by 60,000 jobs after a contraction

of 33,000 in August.

    The median of forecasts from analysts polled by Reuters is

for non-farm payrolls to show a contraction of 100,000 when the

data is released on Friday, from contraction of 84,000 in


    A key reading on manufacturing for September is also set

for the Wednesday release in the Institute for Supply

Management's index of national factory activity.

    Analysts estimate factory activity contracted slightly,

with expectations of a reading of 49.5 from a reading of 49.9

in August. A reading of 50 separates contraction from


    "The ISM manufacturing measure has been idling very closely

to the 50 breakeven mark since May, and we expect that to

continue with a reading of 49.6 for September," Lehman Brothers

said in a note to clients.

    Investors will also follow the release of data on August

construction spending, which is forecast to have fallen by 0.5

percent from a 0.6 decline in July.

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