EXECUTIVE SUMMARY

• MNI INTERVIEW: Fed Cheers Cooling Labor Demand As Openings Dip
• MNI INTERVIEW: Fed To Keep Hiking Despite Turmoil-NY Advisor
  
• MNI BRIEF: US Sept Jobs Meet Expectations; Unemployment Dips
• MNI ECB: Bundesbank Pres Joachim Nagel: ECB Rates Must Rise Significantly

US

FED: Rising U.S. interest rates have reduced demand for workers without pushing up layoffs, boding well for the soft landing sought by Federal Reserve officials, San Francisco Fed economist Nicolas Petrosky-Nadeau told MNI Friday.

• The labor market remains tight with employers hiring at a substantially higher pace than before the pandemic and the unemployment rate at a 50-year low. But job openings and quits rates in key sectors have already fallen substantially from their peaks, meaning Fed tightening is doing its job to cool the economy, he told MNI's FedSpeak podcast. The Labor Department reported this week there were 10.1 million job openings in the U.S. at the end of August, a drop of 1.1 million from a month earlier.
  
• The quits rate, a good predictor of real wage growth because it represents people moving to better opportunities with more pay, has also been slowing in the past six months. Quits rates in the professional and business services and leisure and hospitality sectors are back to where they were pre-pandemic, he noted. For more see MNI Policy main wire Friday at 1637ET.

FED: The Federal Reserve is unlikely to “pivot” on interest-rate increases because of recent financial turbulence like the crisis in the UK gilt market, and doing so would threaten its credibility amid high inflation, New York Fed advisor Sebnem Kalemli-Ozcan told MNI.

• “I wouldn’t expect any intervention from the Federal Reserve on these things, unless there’s a total financial market collapse like there was in 2008,” said Kalemli-Ozcan, a professor at the University of Maryland and a member of the New York Fed’s Economic Advisory Panel. “Without that, I think they are not going to do anything – they’re going to stay in their inflation fighting mood, and hiking rates, because that’s their job.”
• Stubborn inflation could force the Fed to hike beyond the 4.6% projection from the September Summary of Economic Projections, she said, with the federal funds rate potentially peaking at 5% or higher. For more see MNI Policy main wire at 1034ET.

EUROPE

ECB: Bundesbank President Joachim Nagel tells Seddeutsche that ECB rates must rise significantly, with the ECB needing to send clear signals at the next meeting. ECB-dated OIS shows a 70bp hike priced for the Oct 27 decision with a cumulative 132bps to 1.98% by year-end.

• Nagel sees inflation threatening growth more than rates hikes, with the German growth outlook looking weak: the German economy probably shrank slightly in Q3, worsened in Q4 and with economic contraction probably also at start of 2023 and could also slightly contract in 2023 as a whole but it probably.

US TSYS: Focus Turns to Next Wk's CPI, Sep FOMC Minutes

Tsy futures remain weaker after the bell, off lows after September employment data came out slightly better than expected w/ jobs gain of +263k vs. +255k est, August up-revision by +11k.

• Yield curves bear steepened (2s10s climbed to -40.616) as focus turned to drop in participation rate and unemployment as traders anticipate more rate hikes into 2023. Stocks not taking the data positively either, SPX eminis falling to late session low of 3643.75.
• Tsys held the lower range as desks turn focus on next week Thursday's CPI (0.2% MoM est, 8.1% YoY est) for next inflation metric. Sep FOMC minutes release on Wednesday at 1400ET.
• Earlier Fed speak underscored the hawkish tempo, NY Fed Williams said need to raise rate to around 4.5% "over time" citing strong jobs market. Williams added he does expect to see inflation "down significantly next year."

OVERNIGHT DATA

• US SEP NONFARM PAYROLLS +263K; PRIVATE +288K, GOVT -25K
• US PRIOR MONTHS PAYROLLS REVISED: AUG +315K; JUL +537K
• NET REVISIONS FOR AUGUST, JULY PAYROLLS +11K

• US AUG CONSUMER CREDIT +$32.2B
• US AUG REVOLVING CREDIT +$17.2B
• US AUG NONREVOLVING CREDIT +$15.1B

• CANADA SEPT JOBS +21.1K VS FORECAST +22.5K, AUG -39.7K
• CANADA SEPT JOBLESS RATE 5.2% VS FORECAST 5.4%, AUG 5.4%
• CANADA HOURLY WAGES +5.2% YOY; PERMANENT WORKERS +5.2%
• CANADA SEPT JOB GAIN LED BY TEACHERS AFTER AUG DECLINE

MARKETS SNAPSHOT

Key late session market levels:

• DJIA down 662.72 points (-2.21%) at 29265.52
• S&P E-Mini Future down 105.25 points (-2.8%) at 3651.25
• Nasdaq down 402.4 points (-3.6%) at 10671.23
• US 10-Yr yield is up 6.6 bps at 3.8895%
• US Dec 10Y are down 16.5/32 at 111-13.5
• EURUSD down 0.0054 (-0.55%) at 0.9737
• USDJPY up 0.21 (0.14%) at 145.35
• WTI Crude Oil (front-month) up $4.65 (5.26%) at $93.06
• Gold is down $17.38 (-1.01%) at $1695.17

US TSY FUTURES CLOSE

• 3M10Y +7.495, 51.198 (L: 39.342 / H: 52.313)
• 2Y10Y +1.597, -42.455 (L: -47.715 / H: -40.616)
• 2Y30Y +0.985, -47.044 (L: -53.43 / H: -43.934)
• 5Y30Y -1.359, -30.039 (L: -35.112 / H: -26.31)
• Current futures levels:
• Dec 2Y down 4/32 at 102-16 (L: 102-14 / H: 102-20)
• Dec 5Y down 12/32 at 107-0.5 (L: 106-27 / H: 107-12)
• Dec 10Y down 16.5/32 at 111-13.5 (L: 111-06 / H: 111-31)
• Dec 30Y down 28/32 at 125-13 (L: 125-02 / H: 126-13)
• Dec Ultra 30Y down 1-14/32 at 134-31 (L: 134-13 / H: 136-25)

US EURODOLLAR FUTURES CLOSE

• Dec 22 -0.10 at 95.185
• Mar 23 -0.115 at 95.110
• Jun 23 -0.110 at 95.135
• Sep 23 -0.110 at 95.220
• Red Pack (Dec 23-Sep 24) -0.11 to -0.095
• Green Pack (Dec 24-Sep 25) -0.09 to -0.075
• Blue Pack (Dec 25-Sep 26) -0.07 to -0.07
• Gold Pack (Dec 26-Sep 27) -0.07 to -0.055

SHORT TERM RATES

US DOLLAR LIBOR: Latest settlements:

• O/N +0.00758 to 3.06629% (+0.00115/wk)
• 1M +0.01328 to 3.31357% (+0.17086/wk)
• 3M +0.08300 to 3.90871% (+0.15400/wk) * / **
• 6M +0.07714 to 4.38471% (+0.15271/wk)
• 12M +0.11158 to 4.99629% (+0.21572/wk)
• * Record Low 0.11413% on 9/12/21; ** New 14Y high: 3.90871% on 10/07/22

• Daily Effective Fed Funds Rate: 3.08% volume: $109B
• Daily Overnight Bank Funding Rate: 3.07% volume: $282B

• Secured Overnight Financing Rate (SOFR): 3.05%, $985B
• Broad General Collateral Rate (BGCR): 3.00%, $399B
• Tri-Party General Collateral Rate (TGCR): 3.00%, $375B
• (rate, volume levels reflect prior session)

FED Reverse Repo Operation

NY Fed reverse repo usage recedes to $2,226.950B w/ 101 counterparties vs. $2,232.801B in the prior session. Recent record high stands at $2,425.910B on Friday, September 30.

FOREX: USD Edges Higher For Third Consecutive Session Following NFP

• Despite the sharp moves seen in equity indices and oil prices, currencies traded in a less volatile manner on Friday after the greenback was given a firm boost following the release of September jobs data for the US.
• The USD Index (+0.28%) looks set to post a positive week after rising for a third successive session amid surging US yields on the back of the employment report.
• With risk sentiment under significant pressure, GBP (-0.62%) and NZD (0.80%) were the weakest performers, however, losses/ranges were more contained compared to prior sessions this week.
• EURUSD has faded further off the bear channel top throughout Friday trade, erasing the entirety of the mid-week rally and briefly trading below the Sep 30 low of 0.9735.
• A significant 4% extension of the rally in crude futures underpinned CAD and NOK outperformance as general bullish sentiment after the OPEC+ cut this week was reinforced.
• Worth noting that Japanese markets will be closed on Monday owing to observance of the Health Sports Day national holiday. Additionally, US Columbus Day and Canada Thanksgiving Holiday may see a relatively quiet start to next week.
• Wednesday will see the release of the FOMC minutes before Thursday’s important release of US CPI for September.

Monday-Tuesday Data Calendar

Date	GMT/Local	Impact	Flag	Country	Event
10/10/2022	0600/0800	*		NO	CPI Norway
10/10/2022	0830/1030	*		EU	Sentix Economic Index
10/10/2022	1200/0800			US	Chicago Fed's Charles Evans
10/10/2022	-			EU	ECB Lagarde at IMF/World Bank Annual Meetings
10/10/2022	1300/1500			EU	ECB Lane Opens ECB Monetary Policy Conference
10/10/2022	1500/1100	**		US	NY Fed survey of consumer expectations
10/10/2022	1735/1335			US	Fed Vice Chair Lael Brainard
11/10/2022	2145/1045	**		NZ	Electronic card transactions m/m
11/10/2022	2301/0001	*		UK	BRC-KPMG Shop Sales Monitor
11/10/2022	2330/1030			AU	Westpac-MI Consumer Sentiment
11/10/2022	0030/1130			AU	NAB Business Survey
11/10/2022	0600/0700	***		UK	Labour Market Survey
11/10/2022	0800/1000	*		IT	Industrial Production
11/10/2022	0900/1000	*		UK	Index Linked Gilt Outright Auction Result
11/10/2022	1000/0600	**		US	NFIB Small Business Optimism Index
11/10/2022	-			EU	ECB Panetta IMF/World Bank Annual Meetings
11/10/2022	1245/1445			EU	ECB Lane Keynote Speech
11/10/2022	1400/1000	**		US	IBD/TIPP Optimism Index
11/10/2022	1530/1130			US	Philadelphia Fed's Patrick Harker
11/10/2022	1530/1130	*		US	US Treasury Auction Result for 13 Week Bill
11/10/2022	1530/1130	*		US	US Treasury Auction Result for 26 Week Bill
11/10/2022	1600/1200			US	Cleveland Fed's Loretta Mester
11/10/2022	1700/1300	***		US	US Note 03 Year Treasury Auction Result
11/10/2022	1800/1900			UK	BOE Cunliffe Panels IIF Annual Meeting
11/10/2022	1800/2000			EU	ECB Lane NY Fed Fireside Chat
11/10/2022	1835/1935			UK	BOE Bailey in Conversation w. Tim Adams at IIF Meeting