Highlights:
- Treasury curve modestly steeper ahead of busy session
- AUD dips as GDP misses expectations
- French Assembly set for censure motion at ~1500GMT/1000ET
US TSYS: Modestly Bear Steeper Ahead Of ISM Services And Powell-Led Fed Comms
- Treasuries are bull steeper ahead of a busy session that includes ADP employment, ISM services for data, Fedspeak from Powell and multiple ’24 and ’25 voters plus the Fed’s Beige Book with its increased importance as FOMC members lean more heavily on anecdotal evidence amidst data noise.
- Cash yields are 0.5-2.5bp higher today, with the front end lagging increases. 10Y yields have lifted to ~4.25% (high 4.2536) although that’s only clawed back declines seen since Thanksgiving - they touched a low of 4.1646% yesterday on South Korea martial law proceedings.
- 2s10s has steepened to 6.6bps (+1.9bp), highs in the post-Bessent pick period but still relatively low by the previous month’s standards.
- TYH5 has seen session lows at 110-24 (-07) on a second overnight session with low cumulative volumes (nearing 270k).
- Most desks will be looking at the 4.30% 10Y yield which would equate to 110-14+ whilst firmer support is seen at 110-01 (Nov 25 low). To the upside, resistance is seen at 111-11 (Dec 3 high).
- Data: MBA mortgage apps Nov 29 (0700ET), ADP employment Nov (0815ET), S&P Global US Serv/Comp PMI final (0945ET), ISM services Nov (1000ET), Factory orders Oct (1000ET)
- Fedspeak: Musalem speaks on economy/mon pol (0845ET, text + Q&A), Barkin in CNBC interview (0900ET), Powell in moderated discussion (1340ET, just Q&A), Fed Beige Book (1400ET), Daly interview to PBS News Hour (1800ET)
- Bill issuance: US Tsy $64B 17W Bill auction (1130ET)
STIR: Fed Funds See 18bp Of Dec Cuts, Heavy Docket Ahead
- Fed Funds implied rates broadly consolidate yesterday’s decline which came ahead of JOLTS, primarily on geopolitical risk, but was subsequently supported by relatively dovish appearances from Daly & Kugler and a typically dovish Goolsbee.
- It’s ahead of an important docket with ISM Services, Fedspeak including Powell and hawk Musalem as well as the Fed’s Beige Book with its increased importance with FOMC members leaning more heavily on anecdotal evidence amidst data noise.
- Cumulative cuts from 4.58% effective: 18.3bp Dec, 25bp Jan, 39bp Mar and 59bp Jun.
- Fed Chair Powell headlines today’s Fedspeak, in a moderated discussion at the NYT DealBook Summit at 1340ET (no text). We also hear from Barkin (’24), Musalem (’25) and Daly (’24) along with the Fed’s Beige Book. We watch Musalem at 0845ET for his keynote address, being one of the most hawkish FOMC members who in Nov 13 comments viewed “gradual” cuts as appropriate if inflation keeps falling (can “judiciously and patiently” evaluate incoming data), but that he would have preferred if three-month core CPI had continued to fall and that the risk of labor market deterioration is possibly lower.
- Powell context: He last spoke Nov 14 when his prepared remarks cemented the apparent hawkish shift since the FOMC 6-7 meeting. While his main comments were largely verbatim from the FOMC press conference Q&A, the impact was more pronounced by the fact that he included these in his prepared remarks rather than making them off-the-cuff - and the likelihood that he was expressing his own personal views moreso than at the press conference (which tends to reflect the FOMC consensus).
- However, there has been a greater shift this week to pointing towards a 25bp cut in December rather than the pause that markets had increasingly weighed up, led by Governor Waller on Monday.
- If asked on tariff impacts, expect Powell to reserve judgement. “For sure at our December meeting, the staff will present on what we know. But policies in several areas will change; when it comes to fiscal policy it takes a long time to get a bill through Congress. It'll be 2026 or 2027 to take effect. That's not to say we won't be doing a lot of analysis. But we'll be careful about changing policy until we get a lot more certainty.
NATO: Rutte-Increased Support For Ukraine Needed To 'Change Trajectory' Of War
Secretary-General Mark Rutte speaking in a presser at the conclusion of a two-day meeting of NATO foreign ministers in Brussels. Calls for all NATO allies to provide enough support for Ukraine to 'change the trajectory' of the conflict. Talking of a 'change in trajectory' would appear to mark the first time the NATO leader has indicated that Ukraine's defence is coming under massive strain amid Russian missile/drone attacks, and advances in the Donbas.
- Rutte: "It is absolutely clear, if we want to keep deterrence at the present level, a 2% military spending target is not enough."
- Teri Schultz at DW: "NATO foreign ministers have agreed on measures to try to deter acts of sabotage, cyber-attacks and what [Rutte] calls "energy blackmail." They'll hold more exercises, share more intel, crack down on Russia's shadow fleet. "We must hold perpetrators to account," he says."
- Schultz: "Rutte sharpens his language significantly on the dangers of Russia-NKorean collaboration. "We should not be naive," he warns, about the possibility that "nuclear technology and missile technology is flowing into North Korea. And therefore, it is a risk now that NKorea will use it not only to be a threat to us here, but also to the US mainland and of course to the region," [...] Mentioning the US specifically is a key message aimed at Trump."
- On non-NATO ally South Korea, Rutte says that the announcement of the end of martial law 'shows a commitment to the rule of law.' Says relations with South Korea are 'iron-clad'.
FRANCE: National Assembly To Take Up Censure Motions Against PM ~1600CET
The National Assembly is set to begin debate on two censure motions against PM Michel Barnier's gov't at 1600CET (1000ET, 1500GMT). One motion has been put forward by the leftist New Popular Front (NFP) alliance, and another by the far-right Rassemblement National (RN). The NFP has said that it will not back the RN motion, but the RN confirms that it will support any effort to remove the gov't. The motions will be heard concurrently, with the NFP presenting its motion first then the RN.
- Following this, PM Barnier will address deputies (without a time limit). Each of the nine political group leaders in the National Assembly will then have their opportunity to speak, after which the vote will take place, first on the NFP motion and then on the RN motion. If the first motion passes the second will not be voted on. Le Monde writes the first vote could take place ~2000CET (1400ET, 1900GMT).
- A majority of all 575 deputies is required for the motion to pass, meaning 288 in favour. Should the NFP and RN vote en masse for censure, the motion will pass comfortably.
- President Emmanuel Macron has called out the centre-left Socialist Party in the NFP, saying they have “lost their bearings” and he does not expect them all to vote for the gov'ts removal. Of the 66 Socialist group deputies, Barnier can afford a maximum of 20 to vote against him if he is to avoid ouster.
- Political betting market Polymarket shows bettors giving a 75% implied probability that Barnier is removed as PM (see chart below).
Chart 1. Betting Market Implied Probability of PM Being Removed from Office in 2024, %
Source: Polymarket
US TSY FUTURES: Mix Of Positioning Swings Seen During Tuesday's Twist Steepening
OI data points to a mix of long setting (TU), long cover (FV & UXY) and short setting (TY, US & WN) as the curve twist steepened on Tuesday.
- The most notable DV01 equivalent net positioning swings came in TU & FV futures, with more limited swings seen further out the curve.
| 03-Dec-24 | 02-Dec-24 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 4,283,723 | 4,217,266 | +66,457 | +2,634,522 |
FV | 6,032,409 | 6,076,570 | -44,161 | -1,911,221 |
TY | 4,497,385 | 4,482,644 | +14,741 | +980,809 |
UXY | 2,158,738 | 2,161,289 | -2,551 | -232,091 |
US | 1,844,833 | 1,841,984 | +2,849 | +376,893 |
WN | 1,741,231 | 1,739,163 | +2,068 | +423,932 |
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| Total | +39,403 | +2,272,845 |
STIR: Mix Of Positioning Swings During Tuesday's SOFR Twist Steepening
Mix of positioning swings seen during yesterday’s twist steepening of the SOFR futures strip, dominant themes outlined below:
- Whites: Short cover
- Reds: Long setting
- Greens & Blues: Short setting
- Drivers of yesterday’s move and latest Fed pricing run to come in subsequent bullet.
| 03-Dec-24 | 02-Dec-24 | Daily OI Change |
| Daily OI Change In Packs |
SFRU4 | 1,262,763 | 1,264,034 | -1,271 | Whites | -13,733 |
SFRZ4 | 1,302,038 | 1,321,825 | -19,787 | Reds | +12,415 |
SFRH5 | 1,074,042 | 1,064,488 | +9,554 | Greens | +32,098 |
SFRM5 | 980,656 | 982,885 | -2,229 | Blues | +19,014 |
SFRU5 | 814,721 | 801,344 | +13,377 |
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SFRZ5 | 946,786 | 949,779 | -2,993 |
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SFRH6 | 567,627 | 578,060 | -10,433 |
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SFRM6 | 596,804 | 584,340 | +12,464 |
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SFRU6 | 634,048 | 631,241 | +2,807 |
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SFRZ6 | 690,296 | 677,720 | +12,576 |
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SFRH7 | 422,735 | 410,553 | +12,182 |
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SFRM7 | 353,026 | 348,493 | +4,533 |
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SFRU7 | 286,420 | 272,577 | +13,843 |
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SFRZ7 | 291,791 | 288,950 | +2,841 |
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SFRH8 | 205,417 | 205,285 | +132 |
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SFRM8 | 155,339 | 153,141 | +2,198 |
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FOREX: GBP Off Bailey Lows, No New Messaging
- A feature interview with the FT from BoE's Bailey managed to send GBP lower, as wires quoted Bailey as saying that he sees "four UK interest rate cuts next year" - a more aggressive easing path than market pricing - however the GBP losses were swiftly reversed as the details of the interview showed he said little new, and was indeed referring to market pricing, rather than the BoE view.
- As such, GBP/USD's print down at 1.2630 was brief, with the pair rallying well off lows to trade flat-to-higher headed into the NY crossover.
- Antipodean currencies trade poorly, with AUD softer against all others on the back of the Q3 GDP print overnight. Q/Q growth rose by +0.3% vs. Exp. +0.5%, with the Y/Y print also slower than forecast at +0.8% vs. Exp. +1.1%. AUD/USD slipped to 0.6408 pullback lows, with that level again under pressure headed into the US session. Support is seen layered below current levels at 0.6389/63/50.
- The ADP Employment Change print is the calendar highlight Wednesday, with markets expecting 150k jobs added for November - a print swiftly followed by the ISM Services Index, which is expected to broadly match October's 56.0 release.
- The central bank speaker slate is particularly busy. Speeches from ECB's Lagarde, Makhlouf and Nagel are due, as well as Fed's Powell, Daly, Musalem and Barkin.
FOREX: AUD Key G10 Laggard as GDP Data Prompts Dovish RBA Repricing
- The Australian dollar is the notable underperformer in G10 FX on Wednesday, following the softer-than-expected GDP data overnight. The economy grew at 0.3% SA over Q3, 20bp lower than expected, and 0.8% y/y, 30bp below expectations, according to National Accounts data.
- For reference, the RBA has forecasted year-end GDP to print at 1.5% in Q4 within its November Statement and cash ACGBs are 4-8bps richer in sympathy. RBA-dated OIS pricing is 5-13bps softer across 2025 meetings, with analysts highlighting that a 25bps rate cut is close to being fully priced in April from May previously. As a reminder, the big four domestic banks remain split on when the central bank would begin its easing cycle, with both NAB and Westpac recently pushing out their forecasts to May as the most likely option.
- The trend condition in AUDUSD (-1.16%) remains bearish and today’s fresh cycle low reinforces current conditions. Note that moving average studies are in a bear-mode position too, highlighting a dominant downtrend. Scope is seen for a move towards 0.6350 (Aug 5 low) and 0.6339 (Nov 10 2023 low), a key area of support.
- Stability for the Euro has also seen EURAUD (+1.09%) extend higher, after firmly rejecting the brief slide below 1.6000 two weeks ago. We noted that this level has been a strong medium-term pivot for the cross and the inability to close below this psychological mark on a daily basis will have likely bolstered the reversal, currently trading at a 4-week high just shy of 1.64.
- AUDNZD has also slipped back below the 1.10 handle extending its recent pullback to 200 pips. A break below 1.0965 would place the cross at a two-month low and would target trendline support just below 1.09.
EQUITIES: E-Mini S&P Trades to Fresh Cycle High, Maintains Bullish Tone
- Eurostoxx 50 futures have traded higher this week and the contract is holding on to its recent gains. The latest move higher undermines a recent bearish theme. Price has traded through the 50-day EMA, at 4862.20. The clear breach of this average strengthens a bullish theme and signals scope for a stronger recovery, opening 4961.00, the Nov 6 high. Key support lies at 4699.00, the Nov 19 low. A break of it would resume the recent bear cycle.
- The S&P E-Minis contract maintains a bullish tone and has again traded to a fresh cycle high, today. 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 6100.00 handle next. Initial support to watch lies at 5979.30, the 20-day EMA.
COMMODITIES: Spot Gold Trading Inside Tight Range, Long-Term Trend Still Bullish
- Despite Tuesday’s gains, 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 is unchanged and is trading inside a tight 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.
| Date | GMT/Local | Impact | Country | Event |
| 04/12/2024 | 1200/0700 | ** |  US | MBA Weekly Applications Index |
| 04/12/2024 | 1315/0815 | *** | US | ADP Employment Report |
| 04/12/2024 | 1330/1430 |  EU | ECB's Lagarde statement at ECON hearing | |
| 04/12/2024 | 1345/0845 | US | St. Louis Fed's Alberto Musalem | |
| 04/12/2024 | 1400/0900 | US | Richmond Fed's Tom Barkin | |
| 04/12/2024 | 1445/0945 | *** | US | S&P Global Services Index (final) |
| 04/12/2024 | 1445/0945 | *** | US | S&P Global US Final Composite PMI |
| 04/12/2024 | 1500/1000 | *** | US | ISM Non-Manufacturing Index |
| 04/12/2024 | 1500/1000 | ** | US | Factory New Orders |
| 04/12/2024 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 04/12/2024 | 1845/1345 | US | Fed Chair Jerome Powell | |
| 04/12/2024 | 1900/1400 | US | Fed Beige Book | |
| 05/12/2024 | 0030/1130 | ** |  AU | Trade Balance |
| 05/12/2024 | 0645/0745 | ** |  CH | Unemployment |
| 05/12/2024 | 0700/0800 | ** |  DE | Manufacturing Orders |
| 05/12/2024 | 0700/0800 |  SE | Flash CPI | |
| 05/12/2024 | 0745/0845 | * |  FR | Industrial Production |
| 05/12/2024 | 0800/0900 | ** |  ES | Industrial Production |
| 05/12/2024 | 0830/0930 | ** | EU | S&P Global Final Eurozone Construction PMI |
| 05/12/2024 | 0930/0930 | ** |  GB | S&P Global/CIPS Construction PMI |
| 05/12/2024 | 0930/0930 | GB | DMP Data | |
| 05/12/2024 | 1000/1100 | ** | EU | Retail Sales |
| 05/12/2024 | 1330/0830 | *** | US | Jobless Claims |
| 05/12/2024 | 1330/0830 | ** | US | Trade Balance |
| 05/12/2024 | 1330/0830 | ** |  CA | International Merchandise Trade (Trade Balance) |
| 05/12/2024 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 05/12/2024 | 1500/1000 | * | CA | Ivey PMI |
| 05/12/2024 | 1530/1030 | ** | US | Natural Gas Stocks |
| 05/12/2024 | 1630/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 05/12/2024 | 1630/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 05/12/2024 | 1700/1700 | GB | BOE's Greene panellist at the FT Boardroom "global economics: what is the path to sustained growth?" | |
| 05/12/2024 | 1715/1215 | US | Richmond Fed's Tom Barkin | |
| 06/12/2024 | 2330/0830 | ** |  JP | average wages (p) |
| 06/12/2024 | 2330/0830 | ** | JP | Household spending |
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