MNI ASIA OPEN: Fed's Barkin Optimistic on Labor, Inflation

EXECUTIVE SUMMARY

• MNI BRIEF: Fed's Barkin Is Sanguine On Both Jobs, Inflation
• MNI FED: Gov Waller: Reserves At Ample, Have To Eye Balance Sheet Composition Next
• MNI CANADA: PM-Deep Negotiations Ongoing w/US & Restarting Broad Engagement w/China
• MNI US DATA: Poor NY Fed Services Report A Warning Signal For Activity

US

MNI FED: Gov Waller: Reserves At Ample, Have To Eye Balance Sheet Composition Next

In a post-speech Q&A, Gov Waller appears to agree with the conclusion of QT soon, as suggested by Chair Powell on Tuesday. Eyeing the distinction between "ample" and previously "abundant" reserves, Waller says: "I think we're at the point where ... we run an ample reserves to ensure that there's sufficient liquidity in the banking system... we had an excessively large balance sheet due to quantitative easing. We ended that. We've been on a quantitative tightening policy since May of 2022, and we're basically back to where we think we should be just for ample."

MNI FED: Waller Continues To Advocate Measured Easing Approach

Fed Governor Waller (permanent voter, dove) continues to advocate for measured approach to easing monetary policy in an appearance on Bloomberg TV. When asked about whether his view has changed from his speech entitled "Let's Get On with It" from Aug 28:  "In the last six weeks, I don’t think a lot has changed. All the private sector data, including the Beige Book yesterday, is telling us the same story. The labor market is weak but growth is on the stronger side, which is a puzzle now because you cannot have a strong growing economy and zero jobs growth. Either numbers start coming back down or the labor market rebounds."

MNI BRIEF: Fed's Barkin Is Sanguine On Both Jobs, Inflation

Federal Reserve Bank of Richmond President Tom Barkin on Thursday cited reasons to be sanguine about both the labor market and inflation, noting limits to the downside risk for both sides of the Fed's dual mandate goals. A "noticeable shift" in the labor market in recent weeks has been marked by anecdotal reports of more labor availability, but immigration curbs and retirements are shrinking supply apace with available jobs, Barkin told the Aiken Chamber of Commerce in South Carolina, also noting that consumer demand remains solid. 

NEWS

MNI US: Speaker Johnson Claims Schumer Rejected Offer Of Obamacare Vote

House Speaker Mike Johnson (R-LA) told reporters in a press conference on Capitol Hill that Senate Majority Leader John Thune (R-SD) yesterday offered Senate Minority Leader Chuck Schumer (D-NY) a vote on enhanced premium tax credits (Obamacare). According to Johnson, Schumer turned down the offer because Democrats "wanted a guaranteed outcome." Johnson's comment suggests for the first time that there may be some leader-to-leader discussions to end the government shutdown taking place. However, the sides don't appear any closer to an offramp out of the shutdown. Senior Democrats have noted that President Donald Trump will ultimately have to join negotiations if the impasse is to be broken.

MNI EU: Commission Outlines Multi-Trillion Euro Defence Readiness Roadmap

At a presser following a meeting of the College of Commissioners, European High Representative for Foreign Affairs and Security Policy Kaja Kallas speaks on the EU's 'Defence Readiness Roadmap'. Says that "Over the next few years, there must be a major build-up of European defence capabilities," warning that "Russia has no capacity to launch an attack on the EU today, but it could prepare itself in the years to come." Kallas: "The danger will not disappear even when the war in Ukraine ends. It is clear that we need to toughen our defences against Russia." Says the goal is to have a drone defence system for the EU ready by 2028. 

MNI CANADA: PM-Deep Negotiations Ongoing w/US & Restarting Broad Engagement w/China

Prime Minister Mark Carney has just finished speaking at a presser, ostensibly focused on measures to combat crime, but is also addressing questions on other topics. On relations w/the US, Carney says that "We are engaged in deep negotiations with the US on several sectors", and that "There are times to hit back against the US, and there are times to talk, and right now is the time to talk."

MNI BOJ: Dovish Headlines From BoJ Assistant Governor Shimizu

Reuters report various dovish headlines from BoJ Assistant Governor Shimizu. The comments landed along with seemingly growing acknowledgement of US regional banks pressures, clouding the reaction in USDJPY with broad-based risk-off prompting JPY strength. 

• “EVERY COUNTRY IS FACING A NUMBER OF UNCERTAINTIES, PARTICULARLY FROM TRADE POLICY, WHICH COULD HAVE ADVERSE IMPACT ON CORPORATE, HOUSEHOLD SENTIMENT"
• “INFLATION EXPECTATIONS IN JAPAN ARE STILL BELOW 2%, SO WE HAVE TO LIFT UP EXPECTATIONS AND CONTINUE TO SUPPORT ECONOMIC ACTIVITY”
• “IT IS NOT KNOWN EXACTLY HOW JAPAN'S ECONOMY WILL REACT TO NEW ENVIRONMENT ON INTEREST RATES, WHICH IS WHY BOJ HAS TO BE VERY CAREFUL IN PROCEEDING WITH POLICY NORMALIZATION”
• “IF BOJ IS SUFFICIENTLY CONFIDENT ABOUT FUTURE PATH OF ECONOMY, IT CAN PROCEED WITH POLICY NORMALIZATION" – all Reuters

MNI JAPAN: TV Tokyo-Takaichi Offered Ishin 2+ Cabinet Positions In Coalition Talks

TV Tokyo reports that, according to Japan Innovation Party (Ishin) co-leader Fumitake Fujita, governing Liberal Democratic Party (LDP) President Sanae Takaichi expressed her intention to have "two or more" cabinet members from the libertarian-federalist party if they agree to back her to be the next PM and form a governing coalition. 

 US TSYS

MNI US TSYS: Risk-Off Round Two: Insurers Weigh on Financials

• Treasuries poised to extend session highs, TYZ5 113-25.5 - highest since September 17/pst FOMC knee jerk high - as equities extend lows again after rebounding off midday lows.
• Again, no specific headline or Block related trade to cite for the move, though some desks pointing to overreaction of story on two regional banks getting hit (Zions and Western Alliance Bancorp) that was mentioned earlier.
• Currently, the DJIA is down 409.64 points (-0.89%) at 45,843.87, S&P E-Minis down 72.25 points (-1.08%) at 6,644, Nasdaq down 222.9 points (-1%) at 22,448.95.
• The Financials sector is leading the decline at the moment, but primarily due to insurers: Marsh & McLennan -8.07%, Arthur J Gallagher & Co -6.47%, Brown & Brown Inc -6.36%.
• Tsy Dec'25 10Y futures trade 113-25.5 (+17.5), 10Y yield 3.9726% (-.0556). Rally narrows the gap with the 113-29 bull trigger in the process. This strengthens the underlying bullish theme, signaling scope for a stronger rally. Clearance of 113-29 would confirm a resumption of the M/T uptrend.
• Look ahead: Friday's Housing Starts/Permits, Import/Export Prices suspended due to the Gov shutdown. Meanwhile, the Federal Reserve has temporarily suspended the release of its Industrial Production data due to the shutdown as well.

OVERNIGHT DATA

MNI US DATA: Poor NY Fed Services Report A Warning Signal For Activity

The New York Fed's Business Leaders Survey showed a sharp pullback in activity in October, with the headline business activity index dropping to -23.6 from -19.4. That marks the lowest reading since January 2021, and the the 3rd consecutive month of deterioration. The survey was weak across the board, with the business climate moving more negative, and various sub-categories also poor: "Employment edged lower, and wage growth remained modest. Supply availability continued to worsen....On the whole, firms were slightly pessimistic about the outlook."

MNI US DATA: Philly Manufacturing Sees Historic Reversal, But Details Less Negative

The Philadelphia Fed's Manufacturing Business Outlook Survey's general business conditions index showed one of the sharpest month-to-month deteriorations in series history in October, falling 36 points to  a 6-month low -12.8 (expectation had been for a reading of positive 10.0).

MARKETS SNAPSHOT

Key market levels of markets in late NY trade:
DJIA down 427.3 points (-0.92%) at 45823.6
S&P E-Mini Future down 67.75 points (-1.01%) at 6645.75
Nasdaq down 203.1 points (-0.9%) at 22464.85
US 10-Yr yield is down 6.1 bps at 3.9669%
US Dec 10-Yr futures are up 18/32 at 113-25.5
EURUSD up 0.0045 (0.39%) at 1.1692
USDJPY down 0.81 (-0.54%) at 150.22
WTI Crude Oil (front-month) down $0.77 (-1.32%) at $57.50
Gold is up $85.8 (2.04%) at $4293.89

European bourses closing levels:
EuroStoxx 50 up 46.98 points (0.84%) at 5652.01
FTSE 100 up 11.34 points (0.12%) at 9436.09
German DAX up 90.82 points (0.38%) at 24272.19
French CAC 40 up 111.59 points (1.38%) at 8188.59

US TREASURY FUTURES CLOSE

3M10Y -4.797, 1.513 (L: 1.119 / H: 8.919) 
2Y10Y +1.79, 54.675 (L: 51.641 / H: 57.402)
2Y30Y +3.069, 115.669 (L: 110.788 / H: 118.475)
5Y30Y +2.601, 103.359 (L: 99.292 / H: 104.832)
Current futures levels:
Dec 2-Yr futures up 5.125/32 at 104-16.875 (L: 104-11 / H: 104-17.5)
Dec 5-Yr futures up 12.25/32 at 110-0.5 (L: 109-19.25 / H: 110-01)
Dec 10-Yr futures up 18/32 at 113-25.5 (L: 113-05.5 / H: 113-25.5)
Dec 30-Yr futures up 29/32 at 118-28 (L: 117-27 / H: 118-30)
Dec Ultra futures up 1-05/32 at 123-5 (L: 121-27 / H: 123-08)

MNI US 10YR FUTURE TECHS: (Z5) Late Rally Narrows Gap with Bull Trigger

• RES 4: 114-10   High Apr 7 (cont.)
• RES 3: 114-00   Round number resistance
• RES 2: 113-29   High Sep 11 and the bull trigger
• RES 1: 113-25+ High Oct 16 
• PRICE:‌‌ 113-21 @ 18:49 BST Oct 16
• SUP 1: 112-27+ 20-day EMA 
• SUP 2: 112-17/01 50-day EMA / 50.0% of Jul 15 - Sep 11 upleg
• SUP 3: 111-26   Low Aug 26
• SUP 4: 111-13+ Low Aug 18 and a key support 

Treasuries are building on the week’s gains into the Thursday close, narrowing the gap with the 113-29 bull trigger in the process. This strengthens the underlying bullish theme, signalling scope for a stronger rally. Clearance of 113-29 would confirm a resumption of the M/T uptrend. Support at the 50-day EMA at 112-17 remains intact for now. A clear break of this average would undermine the uptrend.

SOFR FUTURES CLOSE

Current White pack (Dec 25-Sep 26):
Dec 25 +0.060 at 96.420
Mar 26 +0.095 at 96.690
Jun 26 +0.10 at 96.925
Sep 26 +0.10 at 97.065
Red Pack (Dec 26-Sep 27) +0.085 to +0.095
Green Pack (Dec 27-Sep 28) +0.090 to +0.090
Blue Pack (Dec 28-Sep 29) +0.090 to +0.090
Gold Pack (Dec 29-Sep 30) +0.085 to +0.085

REFERENCE RATES
​​​​​​​
US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 4.29% (+0.10), volume: $3.059T
• Broad General Collateral Rate (BGCR): 4.25% (+0.09), volume: $1.183T
• Tri-Party General Collateral Rate (TCR): 4.25% (+0.09), volume: $1.141T
• (rate, volume levels reflect prior session)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 4.10% (+0.00), volume: $81B
• Daily Overnight Bank Funding Rate: 4.10% (+0.00), volume: $165B

FED Reverse Repo Operation

RRP usage inches up to $6.960B with 11 counterparties from $5,484B Wednesday. Compares to $3,516B on Tuesday, Oct 13 (lowest level since early April 2021) & this year's high usage of $460.731B on June 30.

MNI PIPELINE: Corporate Bond Roundup: Issuers Sidelined Into Earnings

• Date $MM Issuer (Priced *, Launch #)
• 10/16 $700M *Momentive 3Y +75
• 10/16 $500M #GEB 10Y +180

MNI BONDS: EGBs-GILTS CASH CLOSE: Gilts Outperform Amid Broader Rally

European yields dropped across the board Thursday, with Gilts outperforming.

• While Spanish/French supply helped contain intraday rallies in Bund, ultimately core FI gained through the session as the US Trade Representative made comments seen as ratcheting up Sino-American tensions.
• UK Chancellor Reeves' comments on investigations surrounding regulated prices (which would lessen inflation) appeared to provide some support for Gilts, which outperformed on t he day.
• French PM Lecornu survived no-confidence motions as expected, but fiscal/political risks remain with budget negotiations beginning next week.
• After the cash close, bond futures rose sharply alongside a drop in equities, implying that the cash rally would have continued.
• In data, monthly UK GDP data broadly met expectations, although the details were a little more mixed.
• The German curve twist steepened, with the UK's bull steepening. Periphery/semi-core EGB spreads tightened, led by BTPs.
• Friday's agenda includes final Eurozone September inflation data, and multiple central bank speakers: BOE's Pill, Greene and Breeden, as well as ECB's Rehn and Nagel.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is down 1.3bps at 1.909%, 5-Yr is down 0.7bps at 2.159%, 10-Yr is down 0.1bps at 2.57%, and 30-Yr is up 1.3bps at 3.159%.
• UK: The 2-Yr yield is down 5bps at 3.852%, 5-Yr is down 4.7bps at 3.954%, 10-Yr is down 4.2bps at 4.501%, and 30-Yr is down 4.2bps at 5.301%.
• Italian BTP spread down 2bps at 78.9bps / French OAT down 1.3bps at 76.2bps

MNI FOREX: USD Resolves Lower as Data Deteriorates

• Other than a brief phase of strength into the European open, Thursday trade has generally proved negative for the USD, which resolved lower across both the European and US sessions. The USD Index made light work of any support into yesterday's lows, however more material levels should come into play through 97.891 (50% retracement of bounce off cycle lows) and 97.462.
• With no official US data (PPI, retail sales and weekly jobless claims were due today) due to the US government shutdown, market focus remains on alternative measures of economic activity and today's releases were poor. The Philly Fed Business Outlook came in sharply below expectations, with NY Fed Services Business Activity also deteriorating.
• This, twinned with Treasury estimates that the shutdown is costing $15bln per day, is keeping US yields under pressure, although 4.00% support in 10y yields has held for now.
• Quietly, GBP strength continues to build. Only SEK & NOK have outperformed GBP in spot returns this week and while GBPUSD is close to erasing the early October move lower, it's EURGBP that seems to be more at risk of moving lower. The cross off daily lows, but is still trading either side of the 50-dma (a level that has helped anchor prices over the past fortnight). Price has found very little support from the survival of France's cabinet across two confidence votes today, despite the tightening of the French-German yield spread this week.
• That said, we see the market having more room to reprice a dovish BoE outlook than a dovish ECB outlook, which points to the risk of further downside in the SFIZ6/ERZ6 spread. EURGBP's correlation to 12m forward rates rather than near-term CB expectations is clear - and with more scope for BoE repricing across the course of 2026 relative to the ECB, this could contain protracted downside in spot.
• Friday focus shifts to the final Eurozone CPI print. Housing starts/building permits data and the import/export price indices for September were due, but will likely be rescheduled due to the US government shutdown. Central bank speakers include BoJ's Uchida, BoE's Pill, Breeden & Greene and Fed's Musalem looks to be the final FOMC member speaking before the pre-meeting media blackout.

FRIDAY DATA CALENDAR

Date	GMT/Local	Impact	Country	Event
17/10/2025	0600/0800	**	SE	Unemployment
17/10/2025	0900/1100	***	EU	EZ HICP Final
17/10/2025	0935/1035		GB	BOE Pill Speech at Institute of Chartered Accountants Conference
17/10/2025	1100/1200		GB	BOE Greene Roundtable at Atlantic Council
17/10/2025	1230/0830	*	CA	International Canadian Transaction in Securities
17/10/2025	1230/0830	**	US	WASDE Weekly Import/Export
17/10/2025	1230/0830	***	US	Housing Starts
17/10/2025	1230/0830	**	US	Import/Export Price Index
17/10/2025	1230/0830	***	US	Housing Starts
17/10/2025	1315/0915	***	US	Industrial Production
17/10/2025	1615/1215		US	St. Louis Fed's Alberto Musalem
17/10/2025	1630/1730		GB	BOE Breeden in Panel at IMF/World Bank Meetings
17/10/2025	1700/1300	**	US	Baker Hughes Rig Count Overview - Weekly
17/10/2025	1700/1300	**	US	Baker Hughes Rig Count Overview - Weekly
17/10/2025	2000/1600	**	US	TICS