Highlights:
- Payrolls the highlight, and a soft print could cement a December Fed cut
- Ample Fedspeak to follow data, will be watched for reaction
- Canadian unemployment rate seen climbing back to recent high
US TSYS: Twist Flatter Ahead Of Payrolls On Particularly Low Volumes
- Treasuries sit twist flatter on the day ahead of payrolls, a release that dominates today’s session. See the MNI Payrolls Preview here.
- Cash yields are 2bp higher (2s) to 0.3bp lower (30s).
- 2s10s at 2bps (-1.5bp) has extended yesterday’s flattening, reverting closer to the brief inversion seen after Bessent’s pick as Treasury Secretary via Wednesday's recent high of almost 10bp.
- TYH5 trades at 111-04+ (-02) on exceptionally low cumulative volumes of 195k. It’s pulled a little further back from Tuesday’s high of 111-11 and further resistance at 111-12 (50-day EMA).
- Support meanwhile is seen at 110-18 (Dec 4 low) in the event of a hawkish payrolls report that helps see the end of what are currently seen as corrective gains.
- Data: Payrolls Nov (0830ET), U.Mich consumer survey Dec P (1000ET), Consumer credit Oct (1500ET)
- Fedspeak: Bowman (0915ET), Goolsbee (1030ET), Hammack (1200ET), Daly (1300ET) – see STIR bullet
STIR: ISM Services Hit Reversed Ahead Of Payrolls, Fedspeak To Follow
- Fed Funds implied rates are near changed overnight for the next two meetings but after that have lifted as much as 3bps for the Jun’25 to reverse Wednesday’s drop on a weaker ISM services report.
- Cumulative cuts from 4.58% effective: 17.5bp Dec, 24bp Jan, 39bp Mar and 59bp Jun.
- Today’s Fedspeak is the last scheduled before the FOMC media blackout begins 0000ET Saturday, with all appearances coming post-payrolls.
- Hammack is probably the pick today as we haven’t much from her since she formally assumed her current voting role in September. However, in the event of an ambiguous payrolls report, Bowman can carry asymmetrical risks if the usually hawkish FOMC member offers support for another 25bp cut this month.
- As for hawkish implications, we expect Fedspeak will only really come into its own in the event of a much stronger than expected payrolls report. However, CPI would still need to be solid to help firm up support for a Fed pause, which comes in the blackout period and would require less official channels of Fed communication.
- 0915ET Bowman (permanent voter, hawk) at the Missouri Bankers Association (just Q&A)
- 1030ET Goolsbee (’25, dove) in fireside chat at economic symposium (just Q&A)
- 1200ET Hammack (’24) gives speech on economic outlook (text + Q&A)
- 1300ET Daly (’24) in moderated conversation (just Q&A)
US TSY FUTURES: Long Setting In TY Futures Dominated On Thursday
Although OI suggests that net cover was apparent in more contracts on Thursday (net long cover in TU, FV & TY & net short cover in US) the largest net positioning impulse (in DV01 equivalent terms) came from net long setting in TY & WN futures, as the addition of ~$4mn DV01 equivalent of fresh TY exposure helped tipped the scale.
| 05-Dec-24 | 04-Dec-24 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 4,319,207 | 4,333,413 | -14,206 | -560,447 |
FV | 5,970,811 | 6,020,690 | -49,879 | -2,157,298 |
TY | 4,463,353 | 4,487,469 | -24,116 | -1,591,942 |
UXY | 2,189,530 | 2,145,215 | +44,315 | +4,054,010 |
US | 1,848,468 | 1,850,195 | -1,727 | -231,348 |
WN | 1,761,898 | 1,757,779 | +4,119 | +862,933 |
|
| Total | -41,494 | +375,909 |
STIR: OI Points To Mix Of Short Setting & Long Cover In SOFR Futures On Thursday
OI data points to net short setting through 4 of the front 5 SOFR futures on Thursday, before long cover became more prominent further out the strip.
- Updated on Fed pricing run and STIR fundamentals to come shortly.
| 05-Dec-24 | 04-Dec-24 | Daily OI Change |
| Daily OI Change In Packs |
SFRU4 | 1,260,057 | 1,261,305 | -1,248 | Whites | +20,231 |
SFRZ4 | 1,296,257 | 1,291,934 | +4,323 | Reds | -11,489 |
SFRH5 | 1,068,155 | 1,064,629 | +3,526 | Greens | -9,781 |
SFRM5 | 986,661 | 973,031 | +13,630 | Blues | -1,323 |
SFRU5 | 805,361 | 803,336 | +2,025 |
|
|
SFRZ5 | 922,725 | 939,683 | -16,958 |
|
|
SFRH6 | 555,083 | 554,130 | +953 |
|
|
SFRM6 | 599,019 | 596,528 | +2,491 |
|
|
SFRU6 | 632,506 | 637,867 | -5,361 |
|
|
SFRZ6 | 693,141 | 693,799 | -658 |
|
|
SFRH7 | 416,715 | 418,787 | -2,072 |
|
|
SFRM7 | 352,487 | 354,177 | -1,690 |
|
|
SFRU7 | 286,526 | 288,627 | -2,101 |
|
|
SFRZ7 | 288,911 | 287,292 | +1,619 |
|
|
SFRH8 | 198,380 | 199,006 | -626 |
|
|
SFRM8 | 153,757 | 153,972 | -215 |
|
|
CANADA DATA: Participation Assumptions Key Behind U/E Rate Estimate Differences
- Bloomberg consensus sees Canadian jobs growth of 25k in November after 14.5k in October, whilst the below Canadian bank analysts see a mild skew softer with a median 20k.
- There’s broad agreement with the unemployment rate ticking up to 6.6% although Scotia stand out with their 6.4% call. It highlights just how much participation rate changes can have an impact on perceptions on broader labour market balance.
- The below table shows comments from analysts at the higher, middle and lower end of the spectrum in estimates for jobs growth:
CANADA DATA: Unemployment Rate Seen Nudging Back To Recent High
- The Canadian labour force survey for November is expected to show employment growth of 25k (range 5-46k) after a modestly softer than expected 15k in October.
- Focus should be on the unemployment rate again for a gauge of broader labour market slack. The unemployment rate surprisingly held at 6.49% for a second consecutive month back in October vs then-consensus of 6.6%, but the prime-age rate increased to new recent highs.
- Analysts stick with their prior call for a one-tenth increase to 6.6% for which there is reasonable consensus (7 of 13 look for 6.6, 3 see 6.7, 2 see 6.5 and 1 sees 6.4). Its recent high of 6.63% in August was the highest since Sep 2021.
- We agree with the risk of a drift higher as there’s an overhang from recent strength in working age population growth that hasn’t yet fed into the labour force. We did however see that same bias last month which failed to materialize.
- Wage growth in this survey has taken a backseat recently, with the BoC looking at broader metrics. The limited survey responses look for a moderation from 4.9% to 4.7% Y/Y for the hourly wage rate of permanent employees although it remains robust. It has only been below 4.5% Y/Y once since Aug 2022. That's in an economy with productivity growth of -0.1% Y/Y as of Q3 (which was in turn its least negative since 3Q22).
- This is the last major release ahead of the BoC decision on Dec 11. The decision is seen close to a 50/50 call between a second 50bp cut or shifting back to a 25bp clip, with 38-39bp of cuts broadly priced after soft latest momentum in GDP data, having been 33bp pre-GDP and less than 30bps after Trudeau’s fiscal stimulus package.
EGB FUNDING UPDATE: Belgium 2025 Funding Plan
- Gross borrowing requirement E44.65bln (down from E50.88bln in 2024 – updated today; original estimate was E52.92bln, then updated to E50.71bln in June).
- Net financing requirement is E19.43bln (down from E21.36 in 2024 – updated today; original 2024 estimate was E21.48bln):
- “Assuming the Kingdom’s compliance with the new European fiscal framework”. Note that Belgium has not yet submitted its fiscal plans to the EC, with only a provisional budget for Q1 2025 in place. As such, this figure is “likely to be adapted in the course of 2025”.
- E42bln of OLOs to be issued (E43.19bln issued in 2024 from an initial target of E41bln).
- TC stock expected to stabilise at E36.74bln.
FOREX: USD/JPY Edges Closer to Key Resistance
- USD/JPY trades higher early Friday, benefiting from both the uptick in the US 10y yield as well as strength in European (and particularly French) equity markets. France's CAC-40 has now rallied over 4% off the November low, and is helping underpin sentiment across the continent. This brings spot within range of yesterday's 150.78 high, above which 151.25/94 marks the key upside levels - today's 50- and 20-day EMA values. Overnight JPY vols added a 7 point premium ahead of today's NFP print, with yesterday's 20.7 print in overnight implied the highest since US election day.
- AUD, NZD underperform, with NZD clearly leading the losses - there was an element of concern that the appointment of David Perdue by Trump as the Ambassador to China is a strong signal of hawkish intent toward China under the Trump admin next year - which is certainly negative for both AUD and NZD, but flow-driven moves and idiosyncratic price action is also at play.
- Perhaps notably, EUR/AUD and EUR/NZD are rallying sharply - both of which have rallied well across the French political fallout and may be triggering broader participation in AUD, NZD sales.
- The USD is firmer, rising against most others in G10, albeit within broader ranges.
- Jobs data set for Friday provides the near-term volatility risk, with markets expecting job gains of 220k over the month of November, and a step lower in average hourly earnings. The whisper number has improved across the week and now matches consensus, after being closer to 150k at the beginning of the month. Prelim UMich sentiment data is set to follow.
OPTIONS: Expiries for Dec06 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0500(E2.1bln), $1.0550(E701mln), $1.0600-05(E814mln), $1.0650(E889mln)
- USD/JPY: Y151.00($551mln)
- USD/CAD: C$1.4000($637mln), C$1.4200($912mln)
COMMODITIES: WTI Futures Return to Week's Lows, Bearish Theme Reinforced
- A bearish threat in WTI futures remains present and the Nov 25 move lower reinforces this theme. A resumption of bearish price action would open $65.74, the Oct 1 low, and $63.90, the Sep 10 low and key support. For bulls, a stronger reversal to the upside would instead refocus attention on the key short-term resistance at $77.04, the Oct 8 high. Initial firm resistance to watch is unchanged at $72.41, the Nov 7 high.
- Gold continues to trade inside a range, for now. The long-term trend condition remains bullish and the Oct 31 - Nov 14 bear leg appears to have been a correction. Moving average studies are in a bull-mode position, highlighting a dominant uptrend. Resistance to watch is $2721.4, the Nov 25 high. Clearance of this level would highlight a bullish short-term development. Key support to monitor is $2536.9, the Nov 14 low.
EQUITIES: Eurostoxx 50 Futures Extends This Week's Rally, Above November Highs
- Eurostoxx 50 futures have traded higher this week and the contract is holding on to its latest gains. The move higher undermines a recent bearish theme. Price has traded through the 50-day EMA, at 4868.67. The clear breach of this average strengthens a bullish theme and note that 4961.00, the Nov 6 high, has been pierced. This opens 5015.00, the Oct 29 high. Key support is 4699.00, the Nov 19 low. Initial support lies at 4844.40, the 20-day EMA.
- The S&P E-Minis contract maintains a bullish tone and price traded higher yesterday. This confirms a resumption of the uptrend and signals scope for a continuation near-term. Note that moving average studies are in a bull-mode set-up, highlighting a dominant uptrend and positive market sentiment. Sights are on the 6145.26, a Fibonacci projection. Initial support to watch lies at 5990.65, the 20-day EMA.
| Date | GMT/Local | Impact | Country | Event |
| 06/12/2024 | 0700/0800 | ** |  DE | Industrial Production |
| 06/12/2024 | 0700/0700 | * |  GB | Halifax House Price Index |
| 06/12/2024 | 0745/0845 | * |  FR | Foreign Trade |
| 06/12/2024 | 1000/1100 | * |  EU | Employment |
| 06/12/2024 | 1000/1100 | * |  IT | Retail Sales |
| 06/12/2024 | 1000/1100 | *** | EU | GDP (final) |
| 06/12/2024 | 1330/0830 | *** |  US | Employment Report |
| 06/12/2024 | 1330/0830 | *** |  CA | Labour Force Survey |
| 06/12/2024 | 1415/0915 | US | Fed Governor Michelle Bowman | |
| 06/12/2024 | 1500/1000 | ** | US | U. Mich. Survey of Consumers |
| 06/12/2024 | 1500/1000 | * | CA | Ivey PMI |
| 06/12/2024 | 1530/1030 | US | Chicago Fed's Austan Goolsbee | |
| 06/12/2024 | 1700/1200 | US | BOE's Greene at Financial Times Live | |
| 06/12/2024 | 1700/1200 | US | Cleveland Fed's Beth Hammack | |
| 06/12/2024 | 1800/1300 | US | San Francisco Fed's Mary Daly | |
| 06/12/2024 | 2000/1500 | * | US | Consumer Credit |
1689 words