STIR: 55bp Of Fed Cuts To Year-End Ahead Of Musalem, JOLTS and Then Beige Book

• Fed Funds implied rates have pared some of late Friday/early overnight dovish extremes but still hold the vast majority of the slide on Friday’s soft payrolls report.
• Cumulative cuts from 4.33% effective: 22bp Sep, 41bp Oct, 61.5bp Dec, 73bp Jan and 85bp Mar.
• The SOFR implied terminal yield of 3.045% (SFRH7) is 2bp higher on the day for still 20bp lower since payrolls.
• The 61bp of cuts to year-end compares with a median 50bp from June’s SEP. Considering the unemployment rate of 4.25% in July vs the 4.5% seen averaging in 4Q25 in those same projections, it shouldn’t be surprisingly that Friday’s first reaction to the payrolls report was measured:
  • Hammack (’26 voter, hawk) said the US labor market still appears healthy, though fresh jobs numbers released Friday constituted a “disappointing report to be sure.”
  • Bostic (non-voter) hasn’t changed his view that there should be just one rate cut this year.
• Fed Governor Kugler (permanent voter) resigned late on Friday, vacating her board of governors seat due to expire in January. “I am proud to have tackled this role with integrity, a strong commitment to serving the public, and with a data-driven approach strongly based on my expertise in labor markets and inflation.” It’s a surprise although she had missed last week’s FOMC meeting.
• Trump has said he’ll appoint a new Fed governor in the coming days, along with a new BLS commissioner after Friday’s extraordinary decision to fire McEntarfer after a weak report. See more on the latter from the MNI Policy Team at MNI INTERVIEW: Ex-Chief Says BLS Can Withstand Trump Pressure (Aug 1). 

• RES 4: 112-23 High May 1 
• RES 3: 112-15   61.8% retracement of the Apr 7 - 11 sell-off 
• RES 2: 112-12+ High Jul 1 and a bull trigger
• RES 1: 112-12   High Aug 4
• PRICE:‌‌ 112-04 @ 11:26 BST Aug 4
• SUP 1: 110-19+/08+ Low Jul 24 / Low Jul 14 & 16        
• SUP 2: 110-03   76.4% retracement of the May 22 - Jul 1 bull leg
• SUP 3: 109-28   Low Jun 6 and 11
• SUP 4: 109.25   Low May 27

Treasury futures rallied sharply on the back of the soft NFP print and remain firm headed into the Monday open. Friday’s rally resulted in a break of key short-term resistance at 111-14+, the high on Jul 22 and 30 low, as well as 111-28. The clear break here highlights a stronger reversal to open the bull trigger at 112-12+, the Jul 1 high and the next key resistance. On the downside, key support is 110-08+, the Jul 14 and 16 low. First support lies at 110-19+, the Jul 24 low.

Couple of Notable ESTR Basis trade, suggest buyers:

• TKYM5 12k at 98.07.
• TKYU5 20k at 98.1275.