MNI ASIA OPEN: Focus on November Jobs Ahead Fed Blackout

EXECUTIVE SUMMARY

• MNI US OUTLOOK/OPINION: Scope For Large Revisions After Tumbling Response Rate
• MNI BRIEF: BOC Cutting To 3% Next Year, Ex Governor Dodge Says
• MNI FRANCE: MoDem's Bayrou Lunches w/Macron After Barnier Gov't Ousted
• MNI US TSYS: Markets Hold Narrow Ranges Ahead Friday's Key Jobs Report, Fed Blackout
• MNI US DATA: Continuing Jobless Claims Revision Leaves Smaller Climb For Ref Period

US

MNI US OUTLOOK/OPINION: Scope For Large Revisions After Tumbling Response Rate
The below is taken from the MNI Payrolls Preview [see the full report here]. The initial response rate of 47% for the October esatblishment survey was disappointing even by recent deteriorating standards, at its lowest since 1991.

• The BLS at the time noted that it was depressed in areas both affected and unaffected by the hurricanes so it can't be easily written off. “A larger influence on the October collection rate for establishment data was the timing and length of the collection period. This period, which can range from 10 to 16 days, lasted 10 days in October and was completed several days before the end of the month.”
• Second response rates have been tracking much higher at above 90%, which would see a huge amount more information than with the first read for October. That leaves scope for large two-month revisions, with attention on whether October's surprisingly soft month was revised away or whether September's initially strong report was further trimmed.
• We believe there’s a net expectation of upward revisions in this week’s report. BNP Paribas for instance run through the sequence of revisions to Sep 2017 payrolls growth after Hurricanes Harvey and Irma: the initial estimate saw national payrolls growth decline -33k, before +18k after the first revision (the report we’ll be getting this week for the Oct 2024 estimate) and +38k in the second release. Note that it was eventually upgraded to a +92k increase shown in the current vintage of data but that’s after benchmark revisions which can take longer to show up. 

NEWS

MNI SOUTH KOREA: Impeachment Vote On 7 Dec, Police To Investigate Yoon 'Sedition'
Prosecutor-General Shim Woo-jung has instructed police to investigate President Yoon Suk-yeol for potential sedition in relation to his declaration of martial law on 3 December. Alongside the investigation into Yoon authorities have barred former Minister of National Defense Kim Yong-hyun, who resigned on 4 Dec, from leaving the country as he also faces an investigation into potential sedition. Woo Jong-soo, head of the National Investigation Headquarters of the National Police Agency, confirmed to the National Assembly's Public Administration and Security Committee that the case against Yoon had been assigned and will continue according to procedure. 

MNI BRIEF: BOC Cutting To 3% Next Year, Ex Governor Dodge Says
The Bank of Canada will lower the current 3.75% policy interest rate to as low as 3% late next year though the path could be slowed by governments handing out short-term tax breaks and relief checks, former Governor David Dodge said Thursday. Investors are split on whether current officials lower rates by 25bps or 50bps at next Wednesday's decision as inflation moderates, and Dodge said at a Senate hearing the exact sequence of reductions is less important than the end goal. 

MNI UK: PM Delivers Major Policy Speech On 'Plan For Change'
Prime Minister Sir Keir Starmer is delivering a major policy speech in the coming minutes titled 'Plan for Chance'. Livestream here. In the speech, Starmer is set to outline specific targets intended to improving life in the UK focused on areas including policing, housing, education, and energy. Some headlines for the policy document: 'We will measure living standards through real household disposable income per person and GDP per capita by the end of parliament'

MNI FRANCE: MoDem's Bayrou Lunches w/Macron After Barnier Gov't Ousted
Francois Bayrou, leader of the centrist MoDem party, is set to have lunch with President Emmanuel Macron at the Elysee Palace amid speculation about who could succeed Michel Barnier as prime minister. Bayrou has been a close ally of Macron since his first run for the presidency in 2017, and MoDem has sat in alliance with Macron's En Marche and Renaissance parties during both of his terms in office. 

MNI INTERNATIONAL TRADE: VdL In LatAm As EU-Mercosur FTA Approaches Finish Line
European Commission President Ursula von der Leyen is in Montevideo, Uruguay for the annual two-day Mercosur summit, with the EU and Mercosur nations (Argentina, Bolivia, Brazil, Paraguay and Uruguay) looking to conclude a free trade agreement that has been over two decades in the making. 

MNI SECURITY: Hezbollah Secretary General Signals Intent To Comply With Ceasefire
Naim Qassem, the Secretary General of Hezbollah, has indicated that the militant group will continue to adhere to the Israel-Hezbollah ceasefire agreement, despite accusing Israel of violating the ceasefire "more than 60 times." Qassem said, per Roi Kais at Kan: "We agreed to the cease-aggression agreement. Hezbollah men with their heads held high. We agreed to the cessation of aggression agreement and an implementation mechanism for resolution 1701... This agreement calls for Israel's withdrawal from all Lebanese land and an end to its aggression, and at the same time it prevents the presence of armed men and the resistance's weapons south of Litani and talks about the fact that the Lebanese army is the only party that will be armed south of Litani."

MNI US TSYS: Markets Hold Narrow Ranges Ahead Friday's Key Jobs Report, Fed Blackout

• Treasury futures look to finish mixed Thursday, well off early session lows as markets consolidate ahead Friday morning's key employment data for November (Bbg survey est +218k vs. +12k prior). Stocks also reversed early gains as accounts took profits in SPX Eminis climbed to a new record high of 6107.25 earlier.
• Reminder, the Federal Reserve enters their self-imposed blackout period at midnight Friday through December 19, the day after the final FOMC policy annc for 2024.
• Tsy curves twisted flatter (2s10s -1.829 at 3.009) as short end rates underperformed, meanwhile projected rate cuts into early 2025 have cool slightly, current levels vs. this morning (*) as follows: Dec'24 cumulative -17.5bp (-18.5bp), Jan'25 -24.5bp (-24.4bp), Mar'25 -39.6bp (-39.2bp), May'25 -49.6bp (-50.2bp). 

OVERNIGHT DATA

MNI US DATA: Continuing Jobless Claims Revision Leaves Smaller Climb For Ref Period
The jobless claims data showed a surprise lift for initial claims, although didn’t alter a low four-week average, whilst continuing claims were lower than expected and a downward revision left a less pronounced uplift for the reference period for tomorrow’s November report. In trend terms, firms still broadly prefer damping down on re-hiring rather than layoffs for reducing labor costs. 

• Initial jobless claims were higher than expected at 224k (sa, cons 215k) in the week to Nov 30 after an upward revised 215k (initial 213k).
• It left the four-week moving average at a still very healthy 218k, a third week back exactly in line with the 2019 average having pulled back from 239k in mid-October in peak disruption from Hurricanes Helene and Milton.
• The (already published) seasonal factor looks unusual but is likely down to where Thanksgiving lands this year. NSA claims fell by -35k for a relatively low 210k for the time of year - see top right chart below.
• Largest individual declines were seen in California (-9.8k) and Texas (-6.4k).
• Continuing claims on the other hand fell more than expected to 1871k (sa, cons 1904k) in the week to Nov 23 after a downward revised 1896k (initial 1907k).
• It sees a modest pullback from what had been a fresh high since Nov 2021, and leaves a less pronounced latest climb in the reference period for tomorrow’s payrolls report for November. That 1896k for the week to Nov 16 compares with 1888k for Oct, 1827k for Sep and 1860k for Aug reference periods. 

MARKETS SNAPSHOT

Key market levels of markets in late NY trade:
DJIA down 231.34 points (-0.51%) at 44782.1
S&P E-Mini Future down 9 points (-0.15%) at 6090
Nasdaq down 24.1 points (-0.1%) at 19710.96
US 10-Yr yield is down 0.6 bps at 4.1742%
US Mar 10-Yr futures are down 0.5/32 at 111-7.5
EURUSD up 0.0075 (0.71%) at 1.0586
USDJPY down 0.62 (-0.41%) at 149.98
WTI Crude Oil (front-month) up $0.01 (0.01%) at $68.55
Gold is down $21.22 (-0.8%) at $2628.67

European bourses closing levels:
EuroStoxx 50 up 32.56 points (0.66%) at 4951.58
FTSE 100 up 13.57 points (0.16%) at 8349.38
German DAX up 126.66 points (0.63%) at 20358.8
French CAC 40 up 27.26 points (0.37%) at 7330.54

US TREASURY FUTURES CLOSE

3M10Y +0.961, -27.434 (L: -30.606 / H: -23.83)
2Y10Y -1.815, 3.023 (L: 2.098 / H: 6.087)
2Y30Y -3.082, 18.367 (L: 17.653 / H: 22.237)
5Y30Y -1.825, 25.698 (L: 24.697 / H: 27.592)
Current futures levels:
Mar 2-Yr futures down 1.5/32 at 103-3.625 (L: 103-01.375 / H: 103-04.625)
Mar 5-Yr futures down 1.5/32 at 107-20 (L: 107-13.25 / H: 107-20.25)
Mar 10-Yr futures down 0.5/32 at 111-7.5 (L: 110-28.5 / H: 111-08) 
Mar 30-Yr futures up 6/32 at 119-31 (L: 119-08 / H: 119-31) 
Mar Ultra futures up 12/32 at 128-7 (L: 127-06 / H: 128-07)

MNI US 10YR FUTURE TECHS: (H5) Holding On To Its Recent Highs

• RES 4: 112-31   High Oct 16 and a key short-term resistance
• RES 3: 111-26   High Oct 22
• RES 2: 111-12+ 50-day EMA
• RES 1: 111-11   High Dec 03
• PRICE:‌‌ 111-04 @ 1345 ET Dec 5
• SUP 1: 110-01/109-20 Low Nov 25 / Low Nov 20/21    
• SUP 2: 109-02+ Low Nov 15 and the bear trigger 
• SUP 3: 108-28   1.236 proj of the Oct 1 - 14 - 16 price swing    
• SUP 4: 108-12+ 1.382 proj of the Oct 1 - 14 - 16 price swing

A bull cycle in Treasuries remains in play and the contract is holding on to its recent highs. Price has recently cleared resistance at the 20-day EMA, and sights are on the 50-day EMA, at 111-12+. This average marks the next important resistance, a clear break of it would signal scope for a stronger recovery near-term. For bears, a reversal lower would highlight the end of a corrective cycle and open the bear trigger at 109-02+, the Nov 15 low.

SOFR FUTURES CLOSE

Dec 24 steady00 at 95.60
Mar 25 -0.010 at 95.850
Jun 25 -0.020 at 96.045
Sep 25 -0.030 at 96.160
Red Pack (Dec 25-Sep 26) -0.03 to -0.02
Green Pack (Dec 26-Sep 27) -0.015 to +0.005
Blue Pack (Dec 27-Sep 28) +0.005 to +0.010
Gold Pack (Dec 28-Sep 29) +0.015 to +0.020

SOFR FIXES AND PRIOR SESSION REFERENCE RATES
​​​​​​​
SOFR Benchmark Settlements:

• 1M -0.02488 to 4.48252 (-0.04983/wk)
• 3M -0.01573 to 4.42844 (-0.04481/wk)
• 6M -0.02247 to 4.33044 (-0.05315/wk)
• 12M -0.02828 to 4.17784 (-0.07605/wk)

US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 4.59% (-0.05), volume: $2.265T
• Broad General Collateral Rate (BGCR): 4.58% (-0.02), volume: $836B
• Tri-Party General Collateral Rate (TGCR): 4.58% (-0.02), volume: $808B
• (rate, volume levels reflect prior session)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 4.58% (+0.00), volume: $99B
• Daily Overnight Bank Funding Rate: 4.58% (+0.00), volume: $261B

FED Reverse Repo Operation

RRP usage falls to new multi-year low of $131.964B (early May 2021 lows) this afternoon from $162.886B on Wednesday. The number of counterparties falls to 53 from 65 prior.

MNI PIPELINE: $1B Atlas Warehouse 2Pt Debt Launched

• Date $MM Issuer (Priced *, Launch #)
• 12/05 $1B #Atlas Warehouse $500M 3Y +195, $500M 5Y +220
• 12/05 $500M Hertz 12.625% 2029 tap
• 12/05 $500M UWM Holdings 5NC2 6.5%

MNI BONDS: EGBs-GILTS CASH CLOSE: BTP And OAT Spreads Continue To Tighten

Bunds and Gilts weakened Thursday, with BTPs and OATs outperforming.

• EGBs largely shrugged off the collapse of the French government which occurred after the cash close Wednesday, with the outcome looking to have been priced in.
• Periphery EGBs and OATs were the outperformers, the former seeing the tightest close to 10Y Bunds since October 2021.
• Weakness in US Treasuries led Bunds lower throughout the day, with Gilts slightly outperforming their German counterparts. The German and UK curves bear flattened.
• ECB cut pricing was pared about 10bp through late 2025, though a December 25bp rate cut remains very much fully priced.
• Eurozone data was mixed: industrial production in France was the weak side but Spain beat expectations, while German factory orders were solid and Euro retail sales were soft.
• After the cash close, French President Macron is due deliver a televised address (2000CET). Friday sees German industrial production data, and the final reading of Q3 Euro GDP.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 6.7bps at 2.018%, 5-Yr is up 6.9bps at 1.986%, 10-Yr is up 5bps at 2.111%, and 30-Yr is up 2.4bps at 2.311%.
• UK: The 2-Yr yield is up 3.8bps at 4.274%, 5-Yr is up 3.3bps at 4.145%, 10-Yr is up 3.2bps at 4.281%, and 30-Yr is up 3.6bps at 4.811%.
• Italian BTP spread down 6.8bps at 108.7bps / French OAT down 5.6bps at 77.4bps  

MNI FOREX: US Dollar Loses Ground as Jobless Claims Rise, Equities Gain

• Major equity benchmarks have consolidated solid gains this week, keeping the greenback on the backfoot Thursday. The USD index is down 0.42% on the session, with the weakness extending after the release of higher-than-expected weekly jobless claims in the US. The poorer data adds a moderately negative tilt leading into tomorrow’s key US employment report.
• The Euro and Swiss Franc lead gains in G10, slightly outpacing the DXY adjustment. EURUSD has remained unfazed by political developments in France, and following the US figures, the pair rose to a high of 1.0590 before reversing 30 pips lower ahead of the APAC crossover.
• EURJPY price action was most notable over the course of Thursday trade, with the higher front-end yields in the US also weighing on the Yen. EURJPY rose to a session high of 159.39, almost 200 pips off the lows. Expectations for the December BOJ meeting continue to stoke JPY volatility, with the market split between whether the bank will hike on December 19.
• Elsewhere, GBPUSD has established itself back above 1.2700 and trades closer to 1.2750 in late trade. Recent gains are considered corrective, and the move higher is allowing an oversold trend condition to unwind. Initial firm resistance at 1.2716, the 20-day EMA, has been pierced. A clear break of the average would signal scope for a stronger recovery and expose the 50-day EMA, at 1.2843.
• Friday’s release of the US employment report will be the data highlight of the week, a key input for the Fed ahead of its final decision of 2024. Non-farm payrolls is expected to bounce sharply to 215k in November in a reversal of October’s strike and weather-related weakness.

FRIDAY DATA CALENDAR

Date	GMT/Local	Impact	Country	Event
06/12/2024	0700/0800	**	DE	Industrial Production
06/12/2024	0700/0700	*	GB	Halifax House Price Index
06/12/2024	0745/0845	*	FR	Foreign Trade
06/12/2024	1000/1100	*	EU	Employment
06/12/2024	1000/1100	*	IT	Retail Sales
06/12/2024	1000/1100	***	EU	GDP (final)
06/12/2024	1330/0830	***	US	Employment Report
06/12/2024	1330/0830	***	CA	Labour Force Survey
06/12/2024	1415/0915		US	Fed Governor Michelle Bowman
06/12/2024	1500/1000	**	US	U. Mich. Survey of Consumers
06/12/2024	1530/1030		US	Chicago Fed's Austan Goolsbee
06/12/2024	1700/1200		US	BOE's Greene at Financial Times Live
06/12/2024	1700/1200		US	Cleveland Fed's Beth Hammack
06/12/2024	1800/1300		US	San Francisco Fed's Mary Daly
06/12/2024	2000/1500	*	US	Consumer Credit