GILTS: Futures Hold Narrow Range, Recover From Early Lows

The May nonfarm payrolls report follows two surprisingly strong reports for March and April in developments that have seen a growing number of FOMC members increasingly concerned with the inflation outlook whilst the labor market looks stable. 

• Bloomberg consensus currently estimates nonfarm payrolls growth of 93k in May after 115k in April or a three-month average of 48k, whilst private payrolls could tell a slightly stronger story with 100k in May after 123k in April or a three-month average of 55k.
• These estimates are likely supported by more timely indicators of jobs growth such as the weekly ADP pulse suggesting this improved momentum continued into early May.
• The recovery in payrolls growth since the -9k averaged in the three months to Aug 2025 has been impressive considering estimates of the breakeven payrolls growth rate had started to drift towards zero for 2026. That said, the broad stabilization in the unemployment rate since last summer suggests ex post that these dwindling breakeven estimates might have been overly pessimistic.
• Consensus currently sees the unemployment rate at 4.3% after it almost surprised higher with 4.34% in April. The rate has recently swung between 4.54% in Nov 2025 (shutdown distortion worth circa +0.1pp) and 4.26% in Mar 2026 but it’s currently at a similar level to the 4.34% averaged in 3Q25 prior to the shutdown. As then Fed Chair Powell noted at the April FOMC press conference, a 4.3% unemployment rate is low and “pretty close to mainstream estimates of the natural rate.”
• Broader measures of slack should also be watched, after the underemployment rate rose two tenths to a four-month high of 8.2% in April although remained below the recent high of 8.7% high in November. 

• RES 4: 1.3967 High Mar 31 and a key M/T resistance 
• RES 3: 1.3949 High Apr 3 
• RES 2: 1.3919 1.0% 10-dma envelope
• RES 1: 1.3870 High May 28
• PRICE: 1.3796 @ 17:28 BST May 29
• SUP 1: 1.3774 Low May 28  
• SUP 2: 1.3735/3643 50-day EMA / Low May 8
• SUP 3: 1.3550 Low May 1
• SUP 4: 1.3526 Low Mar 9 

Despite a sharp pullback on Thursday, a bull cycle in USDCAD remains intact and this week’s gains have strengthened the bullish condition. 1.3869, 76.4% of the Mar 31  - May 1 bear leg, has been pierced. A clear break of this hurdle would strengthen a short-term bullish theme and signal scope for a climb towards 1.3967, the Mar 31 high and a key medium-term resistance. Initial firm support to watch lies at 1.3735, the 50-day EMA.   

Treasuries had a mixed session to close out the week, with the curve twist steepening Friday as optimism over a US-Iran ceasefire extension ebbed and flowed.

• Yields fell to session lows (10Y down to 4.426%) at around 11am ET after President Trump announced on social media that he was meeting in the Situation Room "now" to "make a final determination" on Iran, seemingly suggesting a deal between the two sides may be close. That piece of news saw the best volumes of the day (~120k TY traded).
• However, in mid-afternoon the NYT reported (citing senior administration officials) that Trump left the meeting without making a decision, which wiped out the session's gains.
• Nonetheless, yields looked to enjoy their lowest weekly close since May 8, with the 10Y down about 7bp for the week.
• Latest Levels: The 2-Yr yield is down 1bps at 4.0102%, 5-Yr is down 0.7bps at 4.1459%, 10-Yr is up 0.2bps at 4.4492%, and 30-Yr is up 1.8bps at 4.9907%. Sep 10-Yr futures (TY) up 1/32  at 109-26.5 (L: 109-23 / H: 110-00.5)
• Data was limited: MNI Chicago PMI hit its highest since January 2022, while the advance goods trade deficit was smaller than expected in April.
• In Fedspeak, Bowman said she saw the energy inflation shock as temporary but appears wary of growing risks. SF Fed’s Daly says the FOMC should keep trying to bring inflation back to target while ensuring employment and economic growth are not unduly damaged. On the more hawkish end overnight, KC's Schmid had warned on looking through the energy shock with policy not very restrictive, and while Minneapolis’s Kashkari maintained hawkish rhetoric, he said it was too early to commit to hikes.
• Looking ahead, next week’s focus is squarely on May payrolls, with Bloomberg consensus at 93k and the unemployment rate seen at 4.3%, alongside ISM Manufacturing and Services, JOLTS, jobless claims, and a busy Fed speaker slate including Waller, Powell, Hammack, Kashkari, Barr, Logan, Barkin and Daly. MNI's US macro weekly has more details Here.