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Traders hedge against soft US jobs data in auction
NEW YORK, Aug 5 (Reuters) - Hedgers and speculators are girding for U.S. payrolls to put in another disappointingly meek rise in July, suggesting that any surprise on the high side of forecasts could dent bonds and boost stocks.
The first of two economic derivatives auctions on Thursday showed an implied market forecast for a 242,000 gain in payrolls, above the Reuters median forecast for 228,000.
But because the auction started at 250,000 and the final implied forecast ended up lower, a trader said the number shows traders and investors are "expecting a number far lower than that." The trader said there was "definitely more interest on the downside than upside."
A spate of recent indicators suggesting employment did not improve much in July, after payrolls posted a meager 112,000 gain in June, has prompted speculation that another weak number could be on the way.
Reflecting the cautious tone to the auction, the biggest implied probability among different strike buckets was for a rise between 175,00 and 200,000, at 12.94 percent. The next biggest implied probability was for a gain of less than 100,000. In the auction, strike buckets are broken into 25,000 increases.
At the same time, some auction participants are guarding against a bigger jump in jobs. Altogether, a 31 percent implied probability was given for a gain of 300,000 or more.
The next derivatives auction will be held between 7 a.m. and 8 a.m. EDT (1100 and 1200 GMT) on Friday, before the data is released at 8:30 a.m. (1230 GMT).
Economic derivatives, offered by Deutsche Bank, Goldman Sachs and global broker ICAP, have a good history of showing how markets have positioned ahead important economic figures, compared with the forecasts of economists.