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Market Would Likely Be More Sensitive To Weak U.S. Labor Market Report

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News feeds remain muted ahead of the U.S. NFP release, with the previously covered block flow in FV Tsy futures supporting wider core global FI markets in recent trade as Tsys move to fresh session highs.

  • Post-FOMC long setting in Tsys and short cover in SOFR futures has been identified over the last 24 hours. However, our best guess is that positioning in both remains net short.
  • As such, the risk to market positioning seems to lie within a weaker U.S. labor market report, with the first 25bp Fed cut only fully discounted through the end of the Nov FOMC.
  • Sensitivity to a soft NFP release could be further heightened by Fed Chair Powell’s choice to stress that an unexpected weakening in the labor market would widen the path to cutting rates.
  • Still, the move away from recent highs in Tsy yields and market implied Fed rates, as well as the post-FOMC positioning swings, does give some space for a hawkish market adjustment if today’s major data release warrants it.
  • Click for our full preview of the data.
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News feeds remain muted ahead of the U.S. NFP release, with the previously covered block flow in FV Tsy futures supporting wider core global FI markets in recent trade as Tsys move to fresh session highs.

  • Post-FOMC long setting in Tsys and short cover in SOFR futures has been identified over the last 24 hours. However, our best guess is that positioning in both remains net short.
  • As such, the risk to market positioning seems to lie within a weaker U.S. labor market report, with the first 25bp Fed cut only fully discounted through the end of the Nov FOMC.
  • Sensitivity to a soft NFP release could be further heightened by Fed Chair Powell’s choice to stress that an unexpected weakening in the labor market would widen the path to cutting rates.
  • Still, the move away from recent highs in Tsy yields and market implied Fed rates, as well as the post-FOMC positioning swings, does give some space for a hawkish market adjustment if today’s major data release warrants it.
  • Click for our full preview of the data.