US DATA: Empire And Philly Manufacturing Start Year Strong, Except Jobs (1/2)

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EXECUTIVE SUMMARY: 

• The Riksbank is expected to hold the policy rate at 1.75% on Thursday, in a quarterly decision which includes an updated MPR and rate path projection. We expect the policy statement to re-iterate that the policy rate will be kept at 1.75% for “some time”.
• The main focus should be on the first three quarters of the updated rate path. This is the part of the curve that is “owned” by the Executive Board, and therefore constitutes a policy signal (beyond that is a staff forecast). ee basis points, owing to strengthening activity momentum, supportive monetary policy and the anticipated expansion of fiscal policy from next year.
• Such a revision to the Q3 point would be an acknowledgement from the Board that the risk of a hike to 2% is marginally greater than the risk of another cut in H2 2026. However, we don’t expect this to provide a meaningful hawkish impulse to markets, which have moved to almost fully price in a hike by the end of 2026 over the past few weeks.
• Instead, the risk to market pricing is probably skewed in a dovish direction, in a scenario where the Board holds the first three quarters of the path at 1.75%. We note that this scenario is the current consensus amongst analysts, even if not endorsed by SEK rates markets. 

• RES 4: 113-09   76.4% retracement of the Nov 25 - Dec 10 bear leg
• RES 3: 113-00+ 61.8% retracement of the Nov 25 - Dec 10 bear leg
• RES 2: 112-27+ High Dec 5 
• RES 1: 112-23   High Dec 11 
• PRICE:‌‌ 112-11+ @ 13:50 GMT Dec 16
• SUP 1: 111-29   Low Dec 10 and the bear trigger
• SUP 2: 111-19   1.236 proj of the Oct 17 - Nov 5 - 25 price swing
• SUP 3: 111-11   1.382 proj of the Oct 17 - Nov 5 - 25 price swing 
• SUP 4: 111-00   Round number support 

A bear theme in Treasuries remains intact. Today’s volatile activity resulted in a brief test above the 20-day EMA, at 112-20. The outlook remains bearish. A continuation lower would refocus attention on key support at 111-29, the Dec 10 low. Clearance of this level would confirm a resumption of the bear leg and open 111-19, a Fibonacci projection. On the upside, a clear breach of 112-23, the Dec 12 high would strengthen a S/T bull cycle.

Derivatives trade turns mixed with underlying rejecting post-data knee-jerk bid, TYH6 back in overnight range at 112-11 (+2) vs. 112-22.5 high - briefly through 20-day EMA at 112-20. Projected rate cut pricing gaining cool slightly vs. early morning levels (*): Jan'26 steady at -6.1bp, Mar'26 at -13.5bp (-14.3bp), Apr'26 at -20.6bp (-20.8bp), Jun'26 at -34.5bp (-34.2bp).

• 5,000 TYF6 113/113.5 1x2 call spds ref 112-11
• 6,000 TYG6 111/112/113 2x3x1 put flys ref 112-12.5
• +12,000 Weds Wkly 10Y 112 puts, 6-7
• -8,000 TYG6/TYH6 112.5 straddle spd, 33 vs. 112-09.5