NFP Friday. ISM Mfg today. China 10’s below 2%
Dec 2, 2024
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–Quiet day on Friday with yields slightly lower. Tens ended at 4.192% down 5.4 bps, and TYH5 settled 111-06, adding to a recent bounce. Big news of the week is the Unemployment report, with NFP expected 195 to 200k. The press is running with a lead story of Biden pardoning Hunter as if there is some sort of surprise value there. Perhaps the re-opening of hostilities in Aleppo is more important?
–On Friday BOJ’s Ueda said the time for a rate hike is approaching, with high odds now being placed on the Dec 19 meeting, the day after the FOMC. $/yen hit a low under 149.50 on the release of his comments. Treasury yields have moved lock-step with $/yen.
–In the race for a sub-2% ten year yield, China edged out Germany, with the former just below 2% today, and the latter at 2.04. To be fair, bunds ended 2023 at 1.90 (high of the year 2.69). China on the other hand, ended 2023 at 2.57; that yield has slid all year. Germany/France 10y spread is is 85 bps, the highest since 2012 when Draghi stopped the bleeding with his “whatever it takes” phrase.
–Today’s news includes ISM Mfg, expected 47.6 from 46.5. Prices Paid expected 56 from 54.8.
–Friday featured new lows in some of the near SOFR one-year calendars, with H5/H6 -49 (9579.5, +2.0/ 9628.5 +4.0). In mid-July H5/H6 was -74.5. It rallied to around -50 going into the Fed ease in Sept (H5 rallied harder), and then pulled back to -68. From there it powered to a high of -30.5 as red sofr contracts sold off hard in the wake of a perceived ‘mistake’ by the Fed in having eased too aggressively in Sept. Now -47. If growth measures of the new admin keep the Fed on the sidelines, sofr calendars will rally as reds converge toward front contract prices.
