Holding A Little Cheaper Ahead Of NFPs

Core global FI markets hold cheaper on the day as NY settles in.

• Continued impetus from the long end of the JGB curve, given BoJ speculation, facilitated the early weakness. Meanwhile, the previously covered RTRS source report, which provided some modest pushback on the idea of an imminent hike from the BoJ, failed to have a meaningful impact.
• The proximity to the impending NFP release (see our full preview for more on that event) is keeping trading relatively contained, although the degree and speed of the recent run of richening in bonds/dovish repricing in core global STIRs may have resulted in some pre-event book squaring.
• Tsy yields are 2-4bp higher on the day, with a light flattening impulse observed. Bears have been unwilling to push meaningfully through yesterday’s low in TY futures, at least pre-NFP. Fed Funds futures are showing ~122.5bp of cuts for ’24 on the whole, shy of the recent dovish extremes of ~135bp.
• Inflation expectations in the UoM survey will also be eyed post-NFPs.
• Note that meaningful U.S. risk events remain evident through the early part of next week. Monday brings a double Tsy auction schedule (3s & 10s), Tuesday sees CPI & further Tsy supply (30s) and Wednesday will see the latest FOMC decision.
• German yields are 3.5-5.5bp higher on the day, with the belly leading the move there.
• Gilts yields are 3-7bp higher on the day, with global impulses and some worry surrounding sticky longer run inflation expectations outweighing dovish reads from a labour market survey and shorter term inflation expectations.