STIR: Dovish Shift Held Ahead Of NFPs and Fed Reaction
- Fed Funds implied rates hold the dovish shift in recent days ahead of today’s NFP release (Preview: https://mni.marketnews.com/3Mv6fNA) helped by soft data (both labor and yesterday’s retail sales) and Trump administration officials attempting to manage expectations of softer jobs numbers.
- The near-term rate path sees the most conviction in a June rate cut since spillover from crypto and precious metals pressure last week and before that Jan 9, whilst the terminal yield is at ytd lows.
- FF cumulative cuts from 3.64% effective: 6bp Mar, 12.5bp Apr, 27bp Jun, 36.5bp Jul, 48bp Sep, 54bp Oct and 60.5bp Dec.
- SOFR futures are little changed on the day, with the terminal implied yield of 3.09% (H7) at the bottom of the ytd range of 3.09-3.285% across closes.
- Today’s Fedspeak can see reaction to today’s job numbers from either end of the hawk-dove spectrum. Schmid (hawk) speaks for the first time in nearly a month, although he next has a voting role in 2028.
- 1000ET – Kansas City Fed’s Schmid on mon pol and economic outlook (text + Q&A). He said Jan 15 that his preference is to keep policy modestly restrictive and that rate cuts risk inflation harm without supporting the labor market.
- 1015ET – VC Supervision Bowman (voter, dove) in moderated conversation at a financial services conference. She said on Jan 30 that while she didn't elect to cut rates in January, she could be ready to cut in March. She made clear that she saw 3 cuts this year in the Dec SEP, making her one of the biggest doves on the Committee as widely assumed.
- 1600ET – Cleveland Fed’s Hammack (’26 voter, hawk) on leadership. Topic aside, she said yesterday that rates could be on hold for some time.
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EQUITY OPTIONS: FTSE Put Spread
UKX (20th March) 9500/8000ps 1x3, bought for 21 in 3.5k (3.5k x 10.5k).
US TSY FUTURES: Net Short Cover In US Dominated On Friday
OI data points to a mix of net long cover in the front end and intermediates (TU, FV & TY) on Friday, while net long setting (UXY & WN) and short cover (US) was seen further out the curve.
- The unusually large round of net short cover in US futures essentially accounted for the entirety of the net DV01 shift on the curve.
| 09-Jan-26 | 08-Jan-26 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 4,473,362 | 4,513,106 | -39,744 | -1,522,261 |
FV | 6,682,973 | 6,688,217 | -5,244 | -228,166 |
TY | 5,564,316 | 5,575,384 | -11,068 | -734,583 |
UXY | 2,572,867 | 2,566,204 | +6,663 | +597,604 |
US | 1,811,165 | 1,888,444 | -77,279 | -10,677,639 |
WN | 2,094,322 | 2,085,072 | +9,250 | +1,690,160 |
|
| Total | -117,422 | -10,874,885 |
EU-BOND SYNDICATION: New 3-year Jul-29 / 30-year 4.00% Oct-55 tap: Mandate
"The EU has mandated BNP Paribas, BofA Securities, Credit Agricole CIB, Nomura and Santander as Joint Lead Managers for its upcoming EUR Fixed Rate RegS Bearer dual tranche transaction, comprising a NEW Long 3-year Benchmark due 12th July 2029 and TAP of the outstanding 4% Oct-2055 (EU000A4EG039).
There will be no further group. The transaction will be launched tomorrow, subject to market conditions."
From market source
- A new 3-year EU-bond alongside a 30-yeer tap is the same syndication as in January 2025. Last year saw E6bln for the 3-year and E5bln for the 30-year tap. We expect the same size transaction this year.
