US TSYS: Late SOFR/Treasury Option Roundup: Pre-Data/Event Risk Positioning

From our Fed preview's summary of analyst expectations:

• SEP/Dot Plot: The vast majority of analysts expect unchanged Fed funds rate dot medians in the updated SEP vs the prior edition in September, implying 1 cut in 2026 and another in 2027. Some see the longer-run dot rising to 3.1% from 3.0%.
• Statement: Almost all analysts expect a shift in the forward rate guidance, to reflect less propensity to cut in 2026.
• Opinions vary on the vote split, ranging from 10 in favor of a 25bp cut with 2 dissenters, to 7 in favor of a 25bp cut with 5 dissenters. None expects a unanimous vote.
• Future action: Analysts’ views of total cuts in 2026 range from 25bp to 125bp, with a median of 50bp. Notably, several analysts expect rate cuts to resume only in the 2nd half after Chair Powell’s successor is in place.

All but one of the 33 analysts’ previews of the December meeting anticipates a 25bp rate cut (Unicredit is the exception), with the vast majority seeing a “hawkish cut” in terms of the communications. We go through analysts' key comments in our Fed preview - see table below  for consensus on the Dot Plot and the vote split, as well as the rate outlook.

• Since the delayed September payrolls report, ADP employment has sent mixed signals – it surprisingly firmed in October after declining in September, returned to declining with a -32k drop in the main November report for a third monthly decline in the space of four months before some stabilization in latest weekly data.
• However, some unemployment rate trackers such as the Chicago Fed’s nowcast point to no further deterioration in the labor market ahead, with this nowcast tracking at the same 4.44% in November after 4.46% in October.
• Granted, the surprise increase in the BLS unemployment rate in September has clearly appeared sufficient to sway Williams and seemingly other core FOMC members to the need for another cut in what might be viewed as a further insurance cut.
• Certainly, hawks will point to weekly jobless claims data not showing any additional deterioration in the labor market, with initial claims at very low levels even when looking through the latest slide to its lowest in three years in what looks like a Thanksgiving adjustment distortion. Granted, re-hiring conditions are softer as evidenced by continuing claims but they roughly remain at levels seen in payrolls reference periods from earlier in the year.
• In an addition to what we wrote in the Fed preview, the double JOLTS report for September and October on day one of the two-day FOMC meeting saw much higher than expected job openings but with quit and hire rates casting a more dovish light. Higher frequency Indeed job openings data had suggested stabilization before a recent increase into November.