AUSSIE BONDS: Futures Challenging Recent Lows, Q3 GDP Out Wednesday
The early bias in Aussie bond futures is weaker, with 3yr (YM, last 96.08) and 10yr (XM, 95.45) futures off around 1.5-2.5bps in the first part of dealings. ACGB yields are around 1.5-2bps firmer across the curve, a continuation of recent yield gains. This follows a softer lead from US Tsy futures on Friday, in what was an impacted session by CME data issues and shortened due to the Thanksgiving break. There were no obvious headline drivers for US Tsys. The AU-US 10yr sits at +52bps, close to recent cycle highs, the differential having established a new higher range amid a dovish Fed backdrop, and uncertainty around whether the next RBA move could be a hike.
- For Aussie futures, the 10yr is back at lows from last week at 95.45, with downside focus on 95.415, then 95.30, levels last seen in the first half of the year. For the 3yr, downside focus will be on test under 96.00.
- In cash ACGB yields, the 3yr is near 3.88%, with upside focus likely to rest in the 3.95-4.00% region. The 10yr is just above 4.53%, with earlier 2025 highs above 4.60%. The AU 3/10s curve is close to recent lows, last +65bps.
- Little easing risk for the RBA is priced in the next few months, while by the Nov meeting next year around 10bps of tightening is priced in.
- Earlier we had the final S&P Global manufacturing print for Nov. It was unchanged at 51.6 versus the initial flash estimate.
- The highlight of the week will be Wednesday’s Q3 GDP which Bloomberg consensus expects to show a pickup in growth to 0.7% q/q and 2.2% y/y after Q2’s 0.6% & 1.8%. Other inputs into GDP are released this week with inventories as part of Monday’s Q3 business indicators. It is expected to be flat while company profits should rise 1.6% q/q after Q2’s 2.4% q/q decline.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
FED: Gov Waller: Still Advocating For A December Rate Cut
Gov Waller, one of the FOMC's more prominent doves, makes clear in an appearance on Fox Business that he supports a follow-up rate cut in December. He makes reference to Chair Powell's press conference comment that the Fed could skip a cut at the December meeting due in part to a lack of official government data during the federal shutdown (Powell: “what do you do if you are driving in the fog? You slow down").
- Waller says today: "Right now, we know that the labor market has been weak... We know inflation is going to come back down. Inflation expectations are anchored, and in that world, the standard of central bank wisdom is to look through it and proceed with worrying about the labor market. So in my view, we should just look at what the data is telling us and proceed on policy that way.... So this is why I'm still advocating that we cut policy rates in December, because that's what all the data is telling me to do. The fog might tell you to slow down. It doesn't tell you to pull over to the side of the road. You still have to go. You may want to be careful, but it doesn't mean to stop, and ... the right thing to do with policy is to continue cutting."
- This is of particular interest since he appeared to suggest he would have a more cautious outlook on further easing after cutting in October.
USDCAD TECHS: Doji Candle Reversal Signal
- RES 4: 1.4200 Round number resistance
- RES 3: 1.4167 50.0% retracement of the Feb 3 - Jun 16 bear leg
- RES 2: 1.4111 High Apr 10
- RES 1: 1.4039/80 High Oct 24 / 16 and the bull trigger
- PRICE: 1.4018 @ 16:25 GMT Oct 31
- SUP 1: 1.3888 Low Oct 29 and key short-term support
- SUP 2: 1.3848 Bull channel base drawn from the Jul 23 low
- SUP 3: 1.3769 Low Sep 19
- SUP 4: 1.3727 Low Aug 29 and a bear trigger
A strong rally in USDCAD Thursday highlights a reversal of the corrective bear leg between Oct 14 - 29. Note that the climb suggests that Wednesday’s candle - a doji - is a valid pattern and therefore a potential reversal signal. The pair is holding on to its latest gains - a bullish signal. A continuation higher would open 1.4080, the Oct 16 high and a bull trigger. Key short-term support is at 1.3888, the Oct 29 low.
LOOK AHEAD: US Macro Week Ahead: Alternate Labor Data and ISM Surveys
- Next week sees another week of US government shutdown restricted data releases. That means no BLS nonfarm payrolls report for October (a second month now without one) but labor data will nevertheless see plenty of attention from alternative sources.
- That includes ADP private payrolls and Revelio Labs’ labor statistics along with the final version of the Chicago Fed's unemployment rate nowcast after its advance release penciled in 4.35% for little change from its 4.34% estimate for September after 4.32% in the actual BLS data for August.
- We will also continue to receive another set of state-level weekly jobless claims which can be used to reasonably accurately gauge a nationwide estimate. Latest claims data pointed to a five-week low for initial claims, coming a day after Fed Chair Powell drew “some comfort” from claims and vacancies data suggesting “maybe continued gradual cooling, but nothing more than that”.
- Elsewhere, October business surveys will be in focus, especially the ISM manufacturing and services releases. Flash PMIs from S&P Global suggested that US business activity growth accelerated in October to the second-fastest so far this year, accompanied by the largest rise in new business seen in 2025 to date. The PMIs have however been notably more optimistic than the ISM surveys for a few months now.
See MNI's updated guide to the next 7 days of US data releases here.
