US TSYS: Gains Reversed, Labor Updates Watched For Final Pre-NFP Clues
Treasuries have more than reversed gains seen in Asia hours with some downward impetus from EGBs under modest pressure from heavy corporate and sovereign supply. Today’s calendar focus is on various labor updates but with tomorrow’s NFP report looming large (MNI NFP preview link)
- Cash yields are now 0-1.5bp higher on the day, with 20s leading the increase.
- TYH6 is one tick above recent session lows of 112-12 (-06+) on reasonable cumulative volumes of 335k.
- Yesterday’s high of 112-22, aided by a small miss for ADP, cleared resistance at 112-19+ (50-day EMA) but stopped short of 112-25+ (Dec 30/31 high). Support meanwhile is still seen at 112-01+ (Dec 23 low) before the bear trigger at 111-29 (Dec 10 low).
- Data: ULCs/Productivity Q3 prelim (0830ET), Weekly jobless claims (0830ET), Revelio labor stats Dec (0830ET), Chicago Fed u/e rate nowcast Dec final (0830ET), International trade Oct (0830ET), Wholesale inventories/sales Oct F/Oct (1000ET), NY Fed Inflation expectations Dec (1100ET), Consumer credit Nov (1500ET)
- Fedspeak: Miran on Bloomberg TV (0800ET), Miran in Athens (1500ET) – see STIR bullet
- Bill issuance: US Tsy $80B each 4W & 8W bill auctions (1130ET)
- Politics: Trump in intelligence briefing (1100ET) and policy meeting (1730ET) – both closed to press
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OPTIONS: Expiries for Dec09 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.1585-90(E1.7bln), $1.1600(E755mln), $1.1675(E784mln), $1.1760(E1.3bln)
- EUR/GBP: Gbp0.8785-92(E530mln)
- AUD/USD: $0.6330-35(A$1.2bln)
STIR: Terminal Fed Yield Highest Since July Day Out From FOMC Decision
- Fed Funds implied rates are unchanged on the day, broadly set up for a hawkish Fed cut tomorrow with 23.5bp of cuts priced but then a next fully priced cut not seen until June.
- Today labor data in focus, with the return of weekly ADP tracking after the full monthly report last week before two months of JOLTS data later.
- Cumulative cuts from 3.89% effective: 23.5bp Dec, 30bp Jan, 38bp Mar, 43.5bp Apr and 55.5bp Jun.
- SOFR futures have pared earlier losses and are mostly 0.5-1 tick firmer today looking out to end-2027. It consolidates a sizeable hawkish shift further out the curve in the past three working days, with the implied terminal yield at 3.175% (H7) after yesterday’s 3.18% was the highest close since July.
- MNI Fed Preview: https://media.marketnews.com/Fed_Prev_Dec2025_With_Analysts_4d5a318a2b.pdf
GERMANY: Renewed Pension Reform Proposal Mapping Entry Age To Contribution Years
We note with interest the proposals made by German labour minister Bas (SPD) earlier this week, who proposed a key change to the pension system being to map the pension age to the number of contribution years. The idea favours blue collar jobs, who often start working earlier in life, and would thus also be able to reach pension age earlier.
The potential impacts of the policy would be re-distribution toward lower-paid manufacturing and blue collar workers, and could provide net savings depending on the threshold for contribution years (local press have suggested this could be contained to 45 years).
- CDU approval would be necessary and remains outstanding. "When asked, CDU social policy experts initially declined to comment specifically on the proposal" - SZ
- The proposal comes after a first pension reform package, keeping the "average pension level" at 48% of average income through 2031 (which will cost E122bln through 2040), passed in Bundestag on Friday. This first package had been on the edge of failure after protest from the "CDU young group" on affordability concerns.
