MNI ASIA OPEN: Employ Report Suspended, ISM Services Downtrend

EXECUTIVE SUMMARY

• MNI FED: Williams Defends Fed's Unconventional Policy Tools
• MNI JAPAN: Post-LDP Election, Focus Will Turn To Parliamentary Support
• MNI US-CHINA: China Considering US Investment Package To Ease Curbs
• MNI US DATA: MNI Estimates Uptick In Initial Claims To 223-225k Last Week
• MNI US DATA: ISM Services Activity Resumes Broader Downtrend

US

MNI FED: Williams Defends Fed's Unconventional Policy Tools

Federal Reserve Bank of New York President John Williams on Friday said central banks must have the appropriate tools to carry out their mandates and that includes so-called unconventional policies, beyond just the setting of the short-term interest rate. "It is not enough to be accountable and independent: central banks must have the appropriate tools to carry out their mandates," Williams said in prepared remarks for a speech at the Dutch National Bank in Amsterdam. 

MNI US: Speaker Johnson Rules Out Putting Bipartisan Funding Bill On House Floor

House Speaker Mike Johnson (R-LA) has told Nathaniel Reed at Scripps News that he is "right now" ruling out putting any future bipartisan Senate compromise to reopen the government on the House floor. Johnson's comments throw cold water on the prospect that the House could enter into compromise negotiations with the Senate when it returns to session on Monday. 

NEWS

MNI US-CHINA: China Considering US Investment Package To Ease Curbs - Bloomberg

Bloomberg reporting that, “China is pushing the Trump administration to roll back national-security restrictions on Chinese deals in the US, dangling the prospect of a massive investment package as part of a proposal that would upend a decade of policy.” According to Bloomberg sources, “The demands from President Xi Jinping’s negotiators also include lowering tariffs on imported inputs from the world’s No. 2 economy used by any Chinese factories built in the US as a result.” Bloomberg notes, “The Chinese floated a figure of $1 trillion earlier this year... but the size of the potential investment being discussed now is unclear.”

MNI US DATA: Labor Secretary Wants NFP Report Publication "As Soon As" Gov't Reopens

Following the non-release of September's nonfarm payrolls data, Labor Sec Chavez-Deremer in a Fox Business appearance didn't directly answer the host's initial question about whether the report would be released after the gov't reopens ("certainly what we want to see at BLS is to have those numbers out"). Then the host followed up, directly asking: "just to be clear, when would you expect to release the September jobs numbers"

MNI JAPAN: Post-LDP Election, Focus Will Turn To Parliamentary Support

By the evening of Saturday, 4 October, the governing conservative Liberal Democratic Party (LDP) will have a new president. The winner of the election will also become prime minister-designate. This comes ahead of a vote in the National Diet to confirm the new LDP president as outgoing PM Shigeru Ishiba's successor, expected on 15 October. However, in the intervening 11 days, the new LDP leader will have to gain the backing of at least one opposition party in order to secure a majority in both chambers of parliament. 

US TSYS

MNI US TSYS: Tsys Extend Late Session Lows, Gov Remains Closed, Data Suspended

• Treasuries extend lows after the bell - coinciding with reports that another vote to end the Govt shutdown has failed to pass in the Senate. Tsy Dec'25 10Y contract slips to 112-20.5 low -9 (yld 4.1172% +.0346); Curves mixed: 2s10s +.161 at 54.343, 5s30s -1.557 at 100.094.
• Treasuries retreated from modest session opener levels after it became aware the Sep employment data would NOT be released. Futures extended lows slightly after mixed ISM Services data (index and new orders lower than expected; prices paid & employment higher).
• The headline Services PMI index fell more than anticipated, to 50.0 (51.7 expected, 52.0 prior), with multiple key sub-indices showing signs of weakness. The Business Activity index (the equivalent of "Production" in the Manufacturing survey) making headlines with its 5.1 point fall to 49.9, the first contraction since May 2020 (it touched 50.0 in May).
• The USD Index traded inside the weekly range throughout Friday trade, leaving markets of the view that a prolonged US government shutdown that limits government data releases will do very little to deter the Fed from proceeding with a second rate cut at their October rate decision.
• Look ahead: No data scheduled or Fed speakers for Monday. Tuesday's Trade Balance & Import/Export data suspended due to the Gov shutdown. US Treasury supply kicks off Monday with $84B 13W & $75B 26W bill auctions (1130ET).

OVERNIGHT DATA

MNI US DATA: ISM Services Activity Resumes Broader Downtrend

September's ISM Services report showed slower activity vs August, with unexpectedly stubborn price pressures. As the report notes, the September numbers look similar to May-July, suggesting that the August pickup was fleeting. The overall trend in the survey remains toward softer activity, though the 0.4% annualized real GDP that this implies for the month (per the ISM) looks like an underestimate of underlying growth.

• The headline Services PMI index fell more than anticipated, to 50.0 (51.7 expected, 52.0 prior), with multiple key sub-indices showing signs of weakness.
• The Business Activity index (the equivalent of "Production" in the Manufacturing survey) making headlines with its 5.1 point fall to 49.9, the first contraction since May 2020 (it touched 50.0 in May).
• New Orders remained in expansion at 50.4 but this was a significant drop from prior (54.0 expected, 56.0 prior). New export orders continued to contract while imports returned to contraction.

MNI US DATA: Services PMI Solidity Continues To Contrast With ISM Weakness

The final S&P Global US Services PMI was revised up 0.3 points from the flash estimate, at 54.2. That's a slightly smaller slowdown than previously estimated vs August's 54.4, and showed much stronger services sector activity than the ISM Services indicator (which fell to 50.0 vs 51.7 expected, 52.0 prior).

MNI US DATA: MNI Estimates Uptick In Initial Claims To 223-225k Last Week

Based on state-by-state data released by the Department of Labor, MNI estimates a seasonally-adjusted 223-225k initial jobless claims in the week of September 27. This would represent a 5-7k uptick from the prior week's 218k (unrevised). That would still bring the 4-week moving average down, to 235k (if it's 225k claims for the week)  vs 237k prior, for a 4-week low.

MARKETS SNAPSHOT

Key market levels of markets in late NY trade:
DJIA up 298.51 points (0.64%) at 46819.32
S&P E-Mini Future up 5 points (0.07%) at 6771.75
Nasdaq down 50.4 points (-0.2%) at 22793.97
US 10-Yr yield is up 3.7 bps at 4.1192%
US Dec 10-Yr futures are down 8.5/32 at 112-21
EURUSD up 0.0026 (0.22%) at 1.174
USDJPY up 0.23 (0.16%) at 147.5
WTI Crude Oil (front-month) up $0.37 (0.61%) at $60.85
Gold is up $30.9 (0.8%) at $3887.10

European bourses closing levels:
EuroStoxx 50 up 5.9 points (0.1%) at 5651.71
FTSE 100 up 63.52 points (0.67%) at 9491.25
German DAX down 43.76 points (-0.18%) at 24378.8
French CAC 40 up 24.91 points (0.31%) at 8081.54

US TREASURY FUTURES CLOSE

3M10Y +3.263, 16.053 (L: 12.065 / H: 16.377)
2Y10Y +0.354, 54.536 (L: 53.149 / H: 54.768)
2Y30Y -0.866, 113.859 (L: 112.805 / H: 115.481)
5Y30Y -1.731, 99.92 (L: 99.823 / H: 102.32)
Current futures levels:
Dec 2-Yr futures down 1.75/32 at 104-7.875 (L: 104-07.625 / H: 104-10.125)
Dec 5-Yr futures down 5.75/32 at 109-8.5 (L: 109-08.5 / H: 109-15.25)
Dec 10-Yr futures down 9/32 at 112-20.5 (L: 112-20.5 / H: 112-31.5)
Dec 30-Yr futures down 12/32 at 116-29 (L: 116-27 / H: 117-16)
Dec Ultra futures down 10/32 at 120-14 (L: 120-12 / H: 121-06)

MNI US 10YR FUTURE TECHS: (Z5) Monitoring Support At The 50-Day EMA

• RES 4: 114-10   High Apr 7 (cont.)
• RES 3: 114-00   Round number resistance
• RES 2: 113-12/29 High Sep 18 / High Sep 11 and the bull trigger
• RES 1: 113-00 High Sep 24
• PRICE:‌‌ 112-24.5 @ 1215 ET Oct 3
• SUP 1: 112-11/01 50-day EMA / 50.0% of Jul 15 - Sep 11 bull phase 
• SUP 2: 111-26   Low Aug 26
• SUP 3: 111-13+ Low Aug 18 and a key support
• SUP 4: 111-01+ 76.4% retracement of the Jul 15 - Sep 11 bull phase  

Treasuries bounced Wednesday and the contract is holding on to its latest gains. Support at the 50-day EMA, currently at 112-12, has been pierced but remains intact. A clear break of this average would undermine a bull theme and signal scope for a deeper retracement. This would open 111-13+, the Aug 18 low and the next key support. On the upside, initial firm resistance to watch is unchanged, at 113-00, the Sep 24 high. A break would be bullish.

SOFR FUTURES CLOSE

Current White pack (Dec 25-Sep 26):
Dec 25 -0.015 at 96.335
Mar 26 -0.025 at 96.540
Jun 26 -0.035 at 96.750
Sep 26 -0.030 at 96.890
Red Pack (Dec 26-Sep 27) -0.035 to -0.025
Green Pack (Dec 27-Sep 28) -0.04 to -0.03
Blue Pack (Dec 28-Sep 29) -0.035 to -0.03
Gold Pack (Dec 29-Sep 30) -0.03 to -0.025

REFERENCE RATES (PRIOR SESSION)
​​​​​​​
US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 4.20% (+0.00), volume: $3.022T
• Broad General Collateral Rate (BGCR): 4.17% (+0.01), volume: $1.167T
• Tri-Party General Collateral Rate (TCR): 4.17% (+0.01), volume: $1.137T
• (rate, volume levels reflect prior session)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 4.09% (+0.00), volume: $102B
• Daily Overnight Bank Funding Rate: 4.09% (+0.00), volume: $187B

FED Reverse Repo Operation

RRP usage rebounds to $25.392B with 14 counterparties this afternoon, after falling to the lowest level since early April 2021 yesterday with: $8.436B. Compares to the year's high usage of $460.731B on June 30.

MNI BONDS: EGBs-GILTS CASH CLOSE: Core Curves Bull Flatten For The Week

Gilts outperformed Bunds Friday.

• With the US government shutdown postponing the September nonfarms payrolls report, core FI saw little clear direction and lighter-than-usual volumes.
• The session low in core yields (and wides in OAT/Bund) was made just after noon London time, on news that the French Socialist leader had pushed back on PM Lecornu's fiscal proposals. From there, yields drifted back toward the middle of the morning's range into the week's close.
• In data, Eurozone August PPI was a little weaker than expected, while Italian and Spanish Services PMIs were solid.
• The German curve twist flattened, with the UK curve down in parallel through the 10Y segment and outperforming Bunds throughout. For the week, curves bull flattened in both the UK (2Y yield -4.9bp, 10Y -5.6bp) and Germany (2Y -1.1.bp, 10Y -4.8bp).
• Periphery EGB spreads closed a little tighter.
• Ratings reviews after the close include Moody's on the EU. Next week's data schedule is relatively light, with German factory orders the Eurozone highlight. Multiple central bank speakers include ECB's Lagarde at EU Parliament, and BOE's Pill, Mann, and Bailey.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 0.9bps at 2.019%, 5-Yr is up 0.5bps at 2.302%, 10-Yr is down 0.1bps at 2.698%, and 30-Yr is down 0.7bps at 3.267%.
• UK: The 2-Yr yield is down 1.8bps at 3.966%, 5-Yr is down 1.9bps at 4.118%, 10-Yr is down 2bps at 4.69%, and 30-Yr is down 1.6bps at 5.501%.
• Italian BTP spread down 0.7bps at 81.3bps / French OAT spread down 0.9bps at 81.3bps

MNI FOREX: Shutdown Persists, But Market Taking in Stride

• Headed through the third session of US government shutdown and markets have been considerably more stable relative to the spells of volatility noted earlier in the week. The USD Index traded inside the weekly range throughout Friday trade, leaving markets of the view that a prolonged US government shutdown that limits government data releases will do very little to deter the Fed from proceeding with a second rate cut at their October rate decision.
• Outside of the US, JPY slipped against all others in G10. This keeps USD/JPY clear of the test of major support into the weekly lows of 146.59, a level that helped prop up price action earlier this week and contain any further USD weakness. Moves follow comments from BoJ's Ueda, who overnight steered clear of any renewed commitment to hiking rates in Japan. While this messaging was inline with prior BoJ communications, it contrasted with the better-than-expected Tankan manufacturing sentiment data out earlier in the week.
• Currency trade was generally more muted elsewhere, leaving major macro themes intact for now. GBP traded mixed, leaving the Autumn Budget as the next major macro risk for the UK. The front-end of the GBP vol curve provides a further signal for  market concern over the Autumn Budget. The flatter front-end of the curve and  the building premium for 2m implied vols shows markets building a risk  premium into the event. 2m vols have posted the sharpest gains over the past  week as they begin to capture the event on November 26th.
• US data again will not be released in the coming week, with the government shutdown likely to extend well over the weekend. There remains very little pressure on either side to concede and strike a near-term deal. Outside of the US, focus rests on the Canadian jobs market release, prelim US UMich sentiment data as well as rate decisions from the New Zealand, Poland, Thailand and Philippine central banks. 

MONDAY DATA CALENDAR

Date	GMT/Local	Impact	Country	Event
06/10/2025	0700/0900	**	ES	Industrial Production
06/10/2025	0700/0900	**	CH	Unemployment
06/10/2025	0730/0930	**	EU	S&P Global Final Eurozone Construction PMI
06/10/2025	0730/0930	***	FR	HCOB France Construction PMI
06/10/2025	0730/0930		EU	ECB de Guindos Speech at Diario Expansion
06/10/2025	0800/1000		EU	ECB Lane Keynote at ECB MonPol Conference
06/10/2025	0830/0930	**	GB	S&P Global/CIPS Construction PMI
06/10/2025	0900/1100	**	EU	EZ Retail Sales
06/10/2025	1530/1130	*	US	US Treasury Auction Result for 13 Week Bill
06/10/2025	1530/1130	*	US	US Treasury Auction Result for 26 Week Bill
06/10/2025	1700/1900		EU	ECB Lagarde at ECON Hearing, European Parliament
06/10/2025	1730/1830		GB	BOE Bailey Keynote at Scotland Global Investment Summit
07/10/2025	2330/0830	**	JP	Household spending