US: Air Traffic To Be Cut 10% - Rtrs, Shutdown Ending Odds Rise Towards End Nov
Headlines have crossed from Reuters that the US will cut air traffic by 10% at 40 major airports by this Friday, unless the government shutdown is ended. It notes: "U.S. Transportation Secretary Sean Duffy confirmed on Wednesday that he would order a 10% reduction in scheduled air traffic at 40 major airports starting Friday unless a deal to end the federal government shutdown is reached." Odds of the shutdown ending in the second half of Nov have risen, but our US team noted overnight the Democrats negotiating stance has likely been hardened in the aftermath of the recent election results.
- This comes as the shutdown enters the longest on record (now into its 36th day), with air traffic disruptions only to add to the economic downside risks.
- Our US team noted overnight that the Democrats stance around negotiations has likely hardened after yesterday's election results. Focus remains on the funding bill, with health insurance subsidies still seen as sticking point. They note: "Sarah Ferris at CNN reports on X, “Senate Dems involved in talks to end shutdown are using election to try to spur GOP to back a framework to temporarily extend ACA with some reforms to reopen govt, per 2 sources. “With that it ends fast; without we stare at each other another week.” The report appears to confirm that the ‘blue wave’ overperformance at yesterday’s elections has bolstered Democrats' position that a hardline stance on reopening the government is endorsed by voters."
- Per Polymarket, odds of the shutdown ending by Nov 12-15 sit at 22, up modestly from the start of the week. Odds of the shutdown ending by Nov 16 or later sit at 40.3, per Polymarket, also up from earlier in the week. The market is expecting the shutdown to be over by end Nov, with odds at 93, per Polymarket.
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JPY: USD/JPY - Consolidates Gains Above 150.00
The overnight range was 149.75 - 150.48, Asia is currently trading around 150.30. The pair looks to be consolidating its gains above 150.00 after the surge higher in reaction to Sanae Takaichi’s victory. The market's attention has quickly returned to a potential looser fiscal and monetary policy on this outcome and looks to be pushing back the likelihood of an imminent rate hike. With risk roaring higher this all feeds further into the carry trade, the focus will now turn toward the pivotal 151/152 area a break of which will potentially start another leg higher. Expect dips to now find support unless there is push back on the market's views of Takaichi’s policies.
- MNI BRIEF: BOJ: Mixed Wages, Prices May Cloud Rate Hike. The Bank of Japan reported mixed views on wage hikes for fiscal 2026 and on corporate price-setting behaviour, key areas of focus for policymakers. The findings are likely to overshadow prospects for a rate hike this month, although market expectations for an October move have weakened following the outcome of the ruling Liberal Democratic Party’s presidential election.
- “Deutsche Bank turns Neutral On Yen From Bullish On Takaichi Win: “Sanae Takaichi’s victory in the LDP leadership race is a big surprise for markets. Our base case is for knee-jerk losses in the JPY towards 150, but we do not see the JPY trending much weaker.” - BBG
- Options : Close significant option expiries for NY cut, based on DTCC data: 149.75($895m), 150.00($796m), 151.00($776m). Upcoming Close Strikes : 147.00($1.47b Oct 8) - BBG.
- Data/Event : Household Spending, Leading Index CI
Fig 1 : USD/JPY Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
US TSYS: Yields End Higher Led By The Long-End
TYZ5 reopens at 112-13+, up 0-01 from closing levels in today’s Asia-Pac session.
- Overnight the US 10-year yield had a range of 4.1307% - 4.1656%, closing around 4.152%.
- Treasury yields ended higher overnight; the move was led by the long-end which saw the yield curve steepen(2s10s +2.24 at 56.362, 5s30s +1.71 at 101.186).
- 10-Year yields bounced on the back of global politics but remains subdued below 4.20% as the market works through the US shutdown. I suspect buyers continue to be around 4.20% initially and look to fade the move higher. The jobs data if released will be key this week and if not then the ADP starts to take on a lot more relevance.
- MNI: Schmid Says Fed Must Maintain Credibility On Inflation. Kansas City Fed President Jeff Schmid said Monday that monetary policy must remain restrictive in the face of an inflation path that remains unacceptably elevated. "With inflation still too high, monetary policy should lean against demand growth to allow the space for supply to grow and relieve price pressures in the economy," Schmid said according to prepared remarks. "The current environment is one where aggressively boosting demand could raise the risk of an outsized increase in prices, as firms gain pricing power and increase the passthrough of tariffs to consumers
- (Bloomberg) -- Expected volatility in the Treasuries market has sunk to the lowest in almost four years as the US government shutdown delays key economic data releases and deprives traders of catalysts for large price swings.
Fig 1: 10-Year US Yield 2H Chart
Source: MNI - Market News/Bloomberg Finance L.P
AUSSIE 10-YEAR TECHS: (Z5) Reversal Lower Extends
- RES 3: 95.960 - High Apr 7 (cont.)
- RES 2: 95.875 - High Jul 2 (cont.)
- RES 1: 95.780 - High Sep 12, 18 and 19
- PRICE: 95.590 @ 16:24 BST Oct 06
- SUP 1: 95.510 - Low Sep 3
- SUP 2: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 3: 95.275 - Low Nov 14 (cont) and a key support
Aussie 10-yr futures are trading closer to their recent lows. It is still possible that the recent move down is a correction. Near-term resistance to watch is 95.780, the Sep 12 high. A clear break of this level would signal scope for a continuation higher and open 95.875, the Jul 2 high on the continuation chart. On the downside, key short-term support to watch has been defined at 95.510, the Sep 3 low. Clearance of this level would instead be bearish.
