MNI ASIA OPEN: Fed Gov Barr Urges Caution On Rate Adjust
EXECUTIVE SUMMARY
- MNI POLICY: Fed Set To Keep Cutting Rates Despite Missing Data
- MNI FED: Gov Barr: Uncertainty Means FOMC Should Move Cautiously
- MNI FED: Gov Barr: Have To Weigh Inflation Vs Jobs Risks At October Meeting
- MNI US: INDIA: Modi Touts Progress In Trade Talks w/Trump But Deal Remains Elusive
- MNI JAPAN: LDP, Komeito Ldrs To Meet 10 Oct, Final Decision On Coalition Afterwards
- MNI US DATA: Upcoming Data Guide: National Claims Data Off, But State-Level On
US
MNI POLICY: Fed Set To Keep Cutting Rates Despite Missing Data
The U.S. government data blackout will not prevent the Federal Reserve from continuing to lower interest rates as soon as this month and possibly again in December in response to signs of weakening in the labor market and inflation that is less acute than officials had feared. Growing risks to the employment outlook following sharp downward revisions to payrolls data have been a central justification for the resumption of interest rate cuts after a year-long hiatus.
MNI FED: Gov Barr: Uncertainty Means FOMC Should Move Cautiously
Gov Barr's speech on "The Economic Outlook and Monetary Policy" Thursday appears to confirm MNI's assumption that he was the most hawkish of the 8 permanent voters on the FOMC as of the September meeting. More specifically, he's probably one of the 7 on the 19-member FOMC who don't see further cuts this year, and the only permanent voter in that category. He calls for a "cautious" approach on adjusting rates and unlike many of his colleagues, doesn't suggest that some further easing toward a more neutral stance is warranted.
MNI FED: Gov Barr: Have To Weigh Inflation Vs Jobs Risks At October Meeting
Gov Barr's key comments in a post-speech Q&A Thursday: Asked whether he worries if cutting rates will exacerbate inflation pressures, Fed Gov Barr says "Do I worry that cutting rates might exacerbate the problem with inflation? Yes, that's one of the things that I'm worried about. I think we need to be it's one of the reasons I think we need to move cautiously...if we didn't have any concerns at all about the labor market, we wouldn't need to cut interest rates in that environment."
NEWS
MNI US: Trump Pledges To Permanently Cut Democrat Programs But Short Of Mass Firings
US President Donald Trump says at a Cabinet meeting that the Trump administration will make permanent cuts to government programmes during the ongoing US government shutdown. Trump, “We’re only going to cut Democratic programmes, I hate to tell you… We’ll be cutting some very popular Democrat programmes that aren’t popular with Republicans.”
MNI US: INDIA: Modi Touts Progress In Trade Talks w/Trump But Deal Remains Elusive
Indian PM Narendra Modi posts on X, “Spoke to my friend, President Trump and congratulated him on the success of the historic Gaza peace plan. Also reviewed the good progress achieved in trade negotiations. Agreed to stay in close touch over the coming weeks.” Modi’s statement comes amid a thaw in tensions that has yet to translate into progress on a bilateral trade agreement.
MNI US: Senator Murphy Warns Of War w/Venezuela As Trump Admin Sidelines Diplomacy
Senator Chris Murphy (D-CT) has warned in a statement on X that President Donald Trump’s military action against boats off the coast of Venezuela could drag the US into a “real war fast.” Murphy, “We have no idea who [Trump's] killing. He has no legal authority to do this and it's more evidence of his disdain for the Constitution and the law. And it could get us into a real war fast.”
MNI JAPAN: LDP, Komeito Ldrs To Meet 10 Oct, Final Decision On Coalition Afterwards
Liberal Democratic Party (LDP) President Sanae Takaichi will hold a meeting with Komeito party Chair Tetsuo Saito on 10 October, after which the Komeito head will make a decision on whether to continue as part of the governing coalition. Komeito held a central executive meeting earlier today on the topic of the governing coalition, with no decision made either way.
US TSYS
MNI US TSYS: Treasuries Decline, Fed Gov Barr Urges Caution on Rate Adjust
- Treasuries look to finish modestly lower after reversing early session gains, mirroring German Bunds in the first half. Currently, the Dec'25 10Y contract trades -2.5 at 112-17 (112-14 low) - initial technical support at 112-13/01 (50-day EMA / 50.0% of Jul 15 - Sep 11 upleg).
- Thursday's weekly Jobless Claims and Wholesale Trade Sales/Inventories suspended due to the Gov shutdown.
- Nevertheless - individual state-by-state estimates should trickle in, which should allow for some rough estimates of the nation-wide figure to emerge from various analysts starting later Thursday and overnight. MNI will provide an estimate for initial (week of Oct 4) and continuing (week of Sep 27) claims by Friday morning.
- Fed Gov Barr calls for a "cautious" approach on adjusting rates and unlike many of his colleagues, doesn't suggest that some further easing toward a more neutral stance is warranted. "If we didn't have any concerns at all about the labor market, we wouldn't need to cut interest rates in that environment" Barr added.
- Tsys held weaker levels after the $22B 30Y auction re-open tailed (912810UM8): 4.734% high yield vs. 4.729% WI; bid-to-cover steady at 2.38x.
- USD strength continues to play out across G10 FX, with EUR/USD and GBP/USD both trading with heavy losses - and taking out key support in the process. This exposed fresh levels in the two pairs at: 1.3282, the Aug 6 low for GBPUSD, and 1.1516, a Fibonacci retracement in EURUSD.
- Looking ahead: Friday's UMichigan preliminary October consumer sentiment survey could prove to be the week's most important single data release.
OVERNIGHT DATA
MNI US DATA: Upcoming Data Guide: National Claims Data Off, But State-Level On
The weekly jobless claims report is postponed for a 2nd consecutive week due to the federal government shutdown, while wholesale trade data will also be postponed. However we will get some data. Indeed for jobless claims, individual state-by-state estimates should trickle in, which should allow for some rough estimates of the nation-wide figure to emerge from various analysts starting later Thursday and overnight. MNI will provide an estimate for initial (week of Oct 4) and continuing (week of Sep 27) claims by Friday morning. For last week's release, MNI estimated 223-225k initial claims (week of Sep 27) and 1,916k continuing (Sep 20 week).
- We will get the Dallas Fed's weekly economic index at around 1130ET (which helpfully compiles multiple weekly private sector indicators, and uses their own imputed estimate of jobless claims data so subject to revision later).
- Also today, we are tentatively expecting to get the NY Fed's latest Survey of Market Expectations, whose publication schedule lines up with the FOMC minutes (usually comes out a day later). This is most closely watched for forming consensus Fed balance sheet/QT expectations (it combines the former Survey of Primary Dealers and Survey of Market Participants) but also has several questions devoted to macro expectations.
- Arguably Friday's UMichigan preliminary October consumer sentiment survey could prove to be the week's most important single data release.
- A note on Friday's monthly Treasury budget report: this release date is always uncertain. Treasury releases this report on the 8th business day of the month, but this edition is the fiscal year-end report which they usually take a little more time to compile. In any event there is little suspense as the CBO estimate came out Wednesday: full-year FY2025 (Oct-Sep) deficit $1.809T - $8B smaller than the 2024 deficit of $1.817T.
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA down 282.74 points (-0.61%) at 46316.43
S&P E-Mini Future down 25.75 points (-0.38%) at 6775.25
Nasdaq down 46.3 points (-0.2%) at 22996.99
US 10-Yr yield is up 2.1 bps at 4.1384%
US Dec 10-Yr futures are down 2/32 at 112-17.5
EURUSD down 0.007 (-0.6%) at 1.1558
USDJPY up 0.45 (0.29%) at 153.14
WTI Crude Oil (front-month) down $1.21 (-1.93%) at $61.34
Gold is down $63.6 (-1.57%) at $3978.56
European bourses closing levels:
EuroStoxx 50 down 24.17 points (-0.43%) at 5625.56
FTSE 100 down 39.47 points (-0.41%) at 9509.4
German DAX up 14.12 points (0.06%) at 24611.25
French CAC 40 down 18.77 points (-0.23%) at 8041.36
US TREASURY FUTURES CLOSE
3M10Y +0.618, 18.148 (L: 15.789 / H: 20.345)
2Y10Y +1.083, 54.571 (L: 52.29 / H: 55.32)
2Y30Y +0.423, 113.045 (L: 111.032 / H: 113.795)
5Y30Y -0.278, 98.895 (L: 98.049 / H: 100.048)
Current futures levels:
Dec 2-Yr futures down 0.625/32 at 104-6.5 (L: 104-05.75 / H: 104-07.5)
Dec 5-Yr futures down 1.75/32 at 109-5.75 (L: 109-04 / H: 109-10)
Dec 10-Yr futures down 2/32 at 112-17.5 (L: 112-14 / H: 112-24.5)
Dec 30-Yr futures down 3/32 at 116-23 (L: 116-16 / H: 117-06)
Dec Ultra futures steady at 120-9 (L: 119-30 / H: 120-25)
MNI US 10YR FUTURE TECHS: (Z5) Remains Above 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: 112-20 @ 11:11 BST Oct 9
- SUP 1: 112-13/01 50-day EMA / 50.0% of Jul 15 - Sep 11 upleg
- 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 remain above support at the 50-day EMA, currently at 112-13. The trend structure remains bullish and recent weakness is considered corrective. A clear break of the 50-day EMA is required to undermine the trend and this would expose 111-13+, the Aug 18 low and a key support. For bulls, initial firm resistance to watch is 113-00, the Sep 24 high. A break would be bullish.
SOFR FUTURES CLOSE
Current White pack (Dec 25-Sep 26):
Dec 25 steady at 96.320
Mar 26 steady at 96.510
Jun 26 steady at 96.720
Sep 26 -0.005 at 96.860
Red Pack (Dec 26-Sep 27) -0.01 to -0.005
Green Pack (Dec 27-Sep 28) -0.015 to -0.01
Blue Pack (Dec 28-Sep 29) -0.01 to -0.01
Gold Pack (Dec 29-Sep 30) -0.015 to -0.01
REFERENCE RATES (PRIOR SESSION)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.12% (-0.02), volume: $2.924T
- Broad General Collateral Rate (BGCR): 4.09% (-0.03), volume: $1.167T
- Tri-Party General Collateral Rate (TCR): 4.09% (-0.03), volume: $1.135T
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.10% (+0.01), volume: $76B
- Daily Overnight Bank Funding Rate: 4.10% (+0.01), volume: $156B
FED Reverse Repo Operation
RRP usage slips to new low of $4.496B (lowest level since early April 2021) with 10 counterparties this afternoon vs. $5.231B yesterday. Compares to this year's high usage of $460.731B on June 30.
MNI PIPELINE: Corporate Bond Update: Indonesia 2Pt Priced, $1B Rabobank Launched
- Date $MM Issuer (Priced *, Launch #)
- 10/09 $1.85B *Rep of Indonesia $600M 5.5Y 4.35%, $1.25B 10.5Y 4.95%
- 10/09 $1B #Rabobank $500M 3Y +35, $500M 3Y SOFR+59
- 10/09 $500M Burgan Bank 5Y +150a
- 10/09 $Benchmark Oman +7Y Sukuk +95a
MNI BONDS: EGBs-GILTS CASH CLOSE: OATs Weaker, But Outperform Peers
European curves bear steepened Thursday.
- Periphery/semi-core EGB spreads widened modestly on a session that was only light on data and macro developments, largely in a late risk-off move late as equities weakened.
- OATs outperformed peers however after the Government announced post-cash close Wednesday that President Macron will announce a new prime minister Friday, potentially averting the need to hold snap elections.
- BoE's Mann pointed to another vote in favour of maintaining rather than cutting Bank Rate.
- The ECB's September meeting accounts broadly echoed President Lagarde's view that policy is in a good place, citing no immediate pressure to change rates.
- As noted, it was a limited session for data (amid the US gov't shutdown). The German trade surplus outperformed expectations in August.
- Both the UK and German curves bear steepened, with Gilts underperforming.
- Apart from the French PM announcement which is the most anticipated event of the day, Friday's calendar includes Italian industrial production data and an appearance by ECB's Escriva. S&P is due to rate Italy after Friday's cash close.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 0.8bps at 1.997%, 5-Yr is up 2.4bps at 2.295%, 10-Yr is up 2.4bps at 2.703%, and 30-Yr is up 1.5bps at 3.279%.
- UK: The 2-Yr yield is up 0.9bps at 4.004%, 5-Yr is up 2.7bps at 4.176%, 10-Yr is up 3.6bps at 4.745%, and 30-Yr is up 3.6bps at 5.546%.
- Italian BTP spread up 0.8bps at 80.5bps / Spanish bond spread up 0.2bps at 54.1bps
MNI FOREX: USD Recovery Picks Up, Despite JPY Bounce
- USD strength continues to play out across G10 FX, with EUR/USD and GBP/USD both trading with heavy losses - and taking out key support in the process. This exposed fresh levels in the two pairs at: 1.3282, the Aug 6 low for GBPUSD, and 1.1516, a Fibonacci retracement in EURUSD.
- The dollar strength persists across the US government shutdown - but is not a reflection of increased expectations of economic resilience, but may be more a factor of market uncertainty as well as increasing risk abroad - particularly political risk in France and Japan.
- The USD has fast reversed the weakness posted off the early August high - taking out 99.304, the 76.4% retracement for the Aug - Sep downleg in the process. Markets still firmly expect a further Fed rate cut at the next meeting, even without the security of the latest NFP print and as next week's inflation print is likely delayed. Instead, markets remain on watch for private sector labour market and inflation measures.
- JPY underwent a spell of volatility as Takaichi spelt out that her government will not pursue JPY weakness excessively - a comment that helped trigger a sharp - albeit brief - spell of JPY strength. Volumes similarly spiked, with JPY futures trading a cash equivalent of $2bln in just two minutes - easily the best volumes of the week.
- Scandi currencies underperformed. SEK and NOK were the poorest performers on the day, with the looming Verisure IPO a potential trigger - sell-side estimates have gauged as much as €2bln in EURSEK demand set to cross as the IPO settles on Friday.
FRIDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 10/10/2025 | 0600/0800 | *** |  NO | CPI Norway |
| 10/10/2025 | 0600/0800 | ** |  SE | Private Sector Production m/m |
| 10/10/2025 | 0900/1100 | * |  IT | Industrial Production |
| 10/10/2025 | - |  EU | ECB de Guindos at ECOFIN Meeting | |
| 10/10/2025 | 1230/0830 | *** |  CA | Labour Force Survey |
| 10/10/2025 | 1230/0830 | *** | CA | Labour Force Survey |
| 10/10/2025 | 1400/1000 | *** |  US | U. Mich. Survey of Consumers |
| 10/10/2025 | 1400/1000 | ** | US | University of Michigan Surveys of Consumers Inflation Expectation |
| 10/10/2025 | 1700/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |
| 10/10/2025 | 1700/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |
| 10/10/2025 | 1700/1300 | US | St Louis Fed's Alberto Musalem | |
| 10/10/2025 | 1800/1400 | ** | US | Treasury Budget |
