MNI US MARKETS ANALYSIS - Whisper Number, Primary Dealers More Bullish vs. Consensus

US TSYS: Headline September Employ Focus, Fed Gov Waller, UAW Conf

• Cash Tsys running weaker, off late overnight lows on relatively narrow overnight range as markets await the September employment report at 0830ET. Consensus looks for payrolls growth of 170k, unemployment rate expected to re-correct lower, after August’s 3.80% was largely down to technical factors
• Well off Wednesday's 16Y high of 4.8799%, Tsy 10Y yield currently +.0237 at 4.7422%. Curves steeper: 3M10Y +3.483 at -75.692, 2Y10Y +.495 at -30.111.
• A technical bear trend in Treasuries futures remains intact, Tsy Dec'23 10Y futures at 107-04 (-6) above initial resistance of 106-03+/00 (Low Sep 4 / Round number support). This week’s fresh cycle lows confirm a resumption of the downtrend and maintain the price sequence of lower lows and lower highs.
• Markets continue to discuss the higher for longer narrative and assess odds of an economic soft landing. Rate hike projections into early 2024 steady to a touch firmer: November at 22.2% w/ implied rate change of +5.6bp to 5.384%, December cumulative of 9.7bp at 5.426%, January 2024 8.4bp at 5.413%. Fed terminal at 5.430% in Jan'24.
• Fed Gov Waller will attend a moderated discussion at the Brookings Inst at 1200ET, no text. UAW head Shawn Fain expected to hold a video conf regarding the worker strike at 1000ET.

OI Points To Fresh Long Setting In SOFR On Thursday

The combination of preliminary open interest data and yesterday’s bull flattening of the SOFR strip through the blues points to net long setting dominating from a positioning perspective on Thursday, with the move most pronounced in the whites (on a pack basis).

• Modest pockets of apparent net short cover were seen, with such flows in the greens and the blues mostly offsetting any net long setting on a pack basis.

OI Points To Mix Of Long & Short Setting On Thursday

The combination of preliminary open interest data and twist steepening of the Tsy curve point to a mix fresh longs and fresh shorts being set in net positioning terms on Thursday.

• Contracts through UXY seemingly saw fresh longs set on net, while US & WN futures seemingly saw fresh shorts set on net.
• The apparent long setting through UXY marginally outweighed the short setting seen further out the curve in DV01 equivalent terms.

MNI NFP PREVIEW: Whisper, Primary Dealers More Bullish vs. Consensus

• Focus turns to today's payrolls release, and particularly average hourly earnings, seen re-accelerating to 0.3% from 0.24% prior. BBG consensus looks for +170k, however the whisper number and primary deal survey are more bullish, looking for +190k and +180k respectively.
• The true trend of payrolls growth could be again by muddied this month. But the co-incidence of the end of the actors strike and the beginning of the UAW strike is expected to have had minimal impact on the headline due to this month’s survey period: the UAW strike began on September 15th – the very end of the survey week for this month’s data.
• Full MNI NFP preview here, with primary dealer expectations below: https://roar-assets-auto.rbl.ms/files/56086/USNFPO...

FOREX: Greenback Stabilises Ahead of Payrolls

• The greenback has stabilised close to yesterday's lows, with the USD Index within range of intraday support at 106.3214 - a break below which opens Monday's 106.0444 for direction. Macro data and headline flow has been few and far between early Friday, leaving markets to continue to absorb the run higher and steepening of the US curve across the week.
• JPY is the poorest performer in G10, reversing the bulk of the Thursday move lower in USD/JPY. This keeps prices at around the midpoint of the Wednesday pullback, but a rally would again test the Y150.00 level at which markets remain cautious about potential intervention from the Japanese authorities.
• GBP/USD is firmer for a third session, printing a third session of higher highs to recover above the $1.2200 handle. The bounce is considered corrective for now, with the broader trend condition remaining negative for now. Technical focus remains on the likely formation of a death cross in DMA space, with the 50-dma on course to break below the 200-dma in the coming week or so, which would mark the first formation of the pattern since late 2021.
• Focus Friday rests on the September NFP release, with markets expecting the US to have added around 170k jobs across the month, however the market whisper number and the primary dealer survey are more optimistic, looking for 190k and 180k respectively. Beyond the headline, markets are looking to gauge any rebalancing in the labour market - particularly via wages, which are expected to re-accelerate to 0.3% this month.

FX OPTIONS: Expiries for Oct06 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0450(E2.7bln), $1.0500-10(E2.2bln), $1.0550-60(E1.9bln), $1.0575(E614mln), $1.0600(E767mln), $1.0640-50(E1.1bln), $1.0685-00(E4.4bln)
• USD/JPY: Y149.00($825mln), Y149.35-50($2.1bln), Y150.00($1.8bln)
• GBP/USD: $1.2175(Gbp633mln), $1.2200(Gbp632mln), 1.2220-25(Gbp654mln), $1.2500-05(Gbp1.0bln)
• AUD/USD: $0.6300(A$1.5bln), $0.6380-00(A$4.6bln), $0.6500(A$1.3bln)
• USD/CAD: C$1.3625($1.5bln), C$1.3660-65($881mln)
• USD/CNY: Cny7.26($680mln), Cny7.27($697mln), Cny7.30($1.6bln), Cny7.35($2.9bln)

EGBS: Off Cheap, BTP/Bund Spread Eyes Widest Close Since Jan

Bunds have ticked away from session cheaps in recent trade, last -5, sticking comfortably within yesterday’s range thus far.

• German cash benchmarks are 0.5bp richer to 2bp cheaper, with light twist steepening seen.
• EGB spreads to Bunds are generally little changed to incrementally wider, with the BTP widening taking the spread to Bunds to the ~202bp area, on track for the widest close since early January.
• Pre-NFP European news flow has generally been centred on firmer than expected German factory orders data (which was boosted by a volatile component) and a RTRS source report suggesting that “Germany's government expects the economy to shrink by 0.4% this year in its draft autumn projections.” Such a move in the GDP projection would be in line with European Commission forecasts.
• ECB speak from Schnabel once again failed to firmly close the door on the potential for a further move higher in rates given upside risks to inflation. Meanwhile, Herodotou echoed his recent remarks.
• A quick reminder that the books of the latest BTP Valore issuance close at lunchtime. Order books have topped EUR16.5bn, The June issue saw E18.2bn total issuance (E17.2bn across the first four days and E1.12bn on day 5).

GILTS: A Little Softer on the Day, Global Moves Eyed

Gilts have been happy to look to the weakness in core global FI peers given the lack of meaningful domestic markets drivers.

• That leaves futures -15 or so, comfortably within the confines of yesterday’s range.
• Cash gilts are 1.5-3.5bp cheaper across the curve.
• A resounding victory in a Scottish by-election has tilted betting market odds re: the next general election even more in favour of a Labour victory but hasn’t been a meaningful market mover.
• Elsewhere, the Halifax house price index flagged continued pressure for the domestic housing market. Still, the details of the release focused on areas of well-documented risk/worry.
• SONIA futures are flat to -4.5, while BoE-dated OIS is little changed to 3bp firmer.
• A reminder that the local docket is now essentially empty ahead of the weekend, with more focus set to fall on offshore matters, namely the spill over surrounding the U.S. NFP report.

EQUITIES: Short-Term Gains in Eurostoxx 50 Futures Considered Technically Corrective

• Eurostoxx 50 futures trend conditions remain bearish and short-term gains appear to be corrective. The contract has traded below 4128.00, the Sep 27 low. This confirms a resumption of the downtrend that started late July and signals scope for a move towards 4055.40, a Fibonacci retracement point. Initial firm resistance is at 4207.30, the 20-day EMA. A break of this average would signal a possible short-term base.
• A bear cycle in S&P E-minis remains in play. The contract traded lower Wednesday, confirming a resumption of the bear leg once again. This maintains the price sequence of lower lows and lower highs and signals scope for weakness towards 4194.75, the May 24 low. Pivot resistance is 4441.61, the 50-day EMA. Ahead of the 50-day average is resistance at 4381.68, the 20-day EMA.

COMMODITIES: Recent WTI Price Action Signals Scope for Retracement to $80 Handle

• WTI futures traded lower again yesterday. This week’s bearish price action has resulted in a break of support at $88.19, the Sep 26 low. The contract has also cleared support at the 50-day EMA, at $84.46. This signals scope for a deeper retracement towards the $80.00 handle and $79.57, a Fibonacci retracement point. Initial firm resistance is at $87.71, the 20-day EMA. A break would signal a possible reversal.
• A bearish theme in Gold remains intact and the metal is trading just above this week’s low. The recent sell-off resulted in a break of support at $1901.1 and this was followed by a breach of $1884.9, the Aug 21 low. This confirmed a resumption of the downtrend that started early May. The focus is on $1804.9, the Feb 28 low and a key support. On the upside, firm resistance is at $1878.2, the 20-day EMA.