Bank bond investors waited nervously on the market's sidelines Monday as a heavy week of economic statistics began unfolding.
Despite a rally in the equity markets, bond traders said they did not anticipate much pickup in activity in their market before Friday.
"A heavy week of economic data clearly means there will be volatility," said bank bond analyst Michale Leit of Prudential Securities Inc. "There is a pretty significant calendar of industrial issuers, and that is where the focus of the market is right now."
Economist Rosanne M. Cahn of Credit Suisse First Boston Inc. said in an advisory report to clients that this week will provide the heaviest load of economic data in recent memory.
"We have never written about data due out in a particular week, leaving that repetitive task to those embroiled in daily gyrations of the fixed- income market," said Ms. Cahn. "But rarely has such a confluence (of statistics) had such potential to roil both fixed-income and equities markets.
"People are waiting to see what the numbers will say and then there will be wild gyrations," said Ms. Cahn. "The bond market will react directly to the indicators, and the stocks will respond to the bonds."
Monday's report of new-home sales-down 2.5% in March but revised upward for February-did little to move the market, but Ms. Cahn said economic data scheduled for subsequent days would do so.
Today's release of the first-quarter employment cost index is anxiously awaited by many on Wall Street. It will be followed by the estimated gross domestic product growth rate for the first quarter, April figures for the National Association of Purchasing Managers index, and, Friday, the April employment numbers.
Ms. Cahn said all eyes would be on the employment cost index. It is viewed as an important sign of how the Federal Reserve will move in coming weeks, since the Fed no longer looks for inflation in price indicators, she said.
"Because of the character of the economy, companies don't have pricing power," said Ms. Cahn. "Meanwhile, the labor market has gotten tight, so if there is going to be a pickup in inflation, it will be seen in the wages."
Market observers began shifting their attention toward wage inflation after the unemployment rate dropped below 6% two years ago, added Ms. Cahn.
Ms. Cahn said she expects the biggest swing in the corporate bond market to occur Wednesday because the market is expecting the purchasing managers index to decline in April. However, she expects April's figure to be much higher.
"Manufacturers will have to restock their inventories, which were drawn down in the first quarter," she said. "Sales were so strong that (products) flew off the shelves, and they will have to restock to get the appropriate amount of inventory back."