MNI ASIA OPEN: Soft ADP Data Tees-Up Friday's August Jobs Data
EXECUTIVE SUMMARY
- MNI: Fed Rates Headed To Neutral 'Over Time' - Williams
- MNI US: DOJ Opens Criminal Investigation Into Fed's Lisa Cook - WSJ
- MNI US DATA: A Soft ADP Report Maintains Its Prior Cooler Trend
- MNI US DATA: Productivity Gains Keep Lid On Labor-Based Inflation Pressures
- MNI US DATA: Mixed Claims Data But Continuing Drift Lower
- MNI US DATA: Solid ISM Services Potentially Boosted By Tariff-Related Activity
US
MNI FED: Gov Nominee Miran: President Nominated Me Because He Likes My Policy Views
Fed Gov nominee Miran's independence (or lack thereof) from White House influence is unsurprisingly a central theme in his Senate banking committee nomination hearing. He says "I couldn't be more in agreement that independence of the central bank is of paramount importance for the economy, for financial markets, for the long run stewardship of the country, all of those are completely I'm in complete accord with. Look, the President nominated me because I have policy views that I suppose that he liked.... If I'm confirmed to this role, I will act independently, as the Federal Reserve always does."
MNI: Fed Rates Headed To Neutral 'Over Time' - Williams
It will become appropriate to lower U.S. interest rates to a "more neutral setting over time" as the labor market is gradually cooling to pre-pandemic levels and inflation has remained above the Fed's 2% target, New York Fed President John Williams said Thursday. "Looking ahead, if progress on our dual mandate goals continues as in my baseline forecast, I anticipate it will become appropriate to move interest rates toward a more neutral stance over time. This expectation reflects a delicate balancing of risks to our mandate goals," he said in prepared remarks.
NEWS
MNI US: Govt Shutdown Risk Continues To Tick Up Despite Emerging GOP Funding Plan
The implied probability of a US government shutdown on October 1 ticked up today, reflecting a more robust position from Democratic leadership in Congress. Despite the emergence of a GOP plan to avert a shutdown, there has been little communication between Republican and Democratic leaders, a negative signal as Senate Majority Leader John Thune (R-SD) needs at least seven Democratic votes to clear the filibuster. Politico reported earlier that House Appropriations Chairs Tom Cole (R-OK) and Senator Susan Collins (R-ME), “now want to pass three full-year bills ... plus a short-term continuing resolution for the nine remaining bills.”
MNI US: DOJ Opens Criminal Investigation Into Fed's Lisa Cook - WSJ
The Department of Justice has opened a criminal investigation into Federal Reserve Governor Lisa Cook, "issuing subpoenas as part of an inquiry into whether she submitted fraudulent information on mortgage applications", per US officials cited by the Wall Street Journal. The Journal notes that: "The investigation comes on the heels of two criminal referrals from Bill Pulte, the Trump-appointed director of the Federal Housing Finance Agency, who has publicly alleged that Cook engaged in mortgage fraud. President Trump has cited those allegations in his bid to fire Cook..."
MNI SECURITY: Trump Says EU Must Halt RU Oil Purchases, Defers Penalties For Putin
President Donald Trump has again warned of consequences for Russia if President Vladimir Putin doesn’t agree to a meeting with Ukrainian President Volodymyr Zelenskyy. Trump told Zelenskyyy/Euro leaders that “there could be consequences if they don't meet”, per WH official quoted by Reuters. Trump added: “We'll see what happens over week or two, at that point I’ll step in,” appearing to punt a possible US response to Moscow.
US TSYS
MNI US TSYS: Rates Near Highs Ahead Friday's Key August Employ Report
- Treasuries look to finish moderately higher, near Thursday session highs after this morning's data. Treasury futures gapped higher then quickly reversed/pared gains after lower than expected ADP private jobs gain (+54k vs. +68k est) (prior up-revised slightly). ADP employment has pointed to subdued private sector hiring for some months now, with the three-month average inching up to 46k in August.
- Weekly jobless claims gained slightly (237k vs. 230k est, 229k prior) while continuing claims came out lower than expected (1.940M vs 1.959M est, prior down-revised to 1.944M). Unit Labor Cost slightly lower than expected - but prior is up-revised significantly.
- Meanwhile, August's ISM Services report was stronger than expected in most major categories, with the headline index rising to a 6-month high 52.0 from 50.1 prior (and vs 51.0 Bloomberg consensus). This was a solid report but there was still ample evidence of tariff-related effects on business activity.
- Currently, the Dec'25 10Y trades +8.5 at 112-28 (yld 4.1684 -.0483) - just off session high at 112-28.5 -- Initial technical resistance: 2.000 proj of the Jul 15 - 22 - 28 price swing. Support below at 112-01.5 (20-day EMA). Curves bull flatten: 2s10s -1.664 at 58.146, 5s30s -0.647 at 119.627.
- USD index slowly ground higher (BBDXY +1.54 at 1207.06) undeterred by some slightly softer ADP and claims data, and moderately boosted by an above-expectation ISM services release. Overall, the moves have been relatively contained (DXY up 0.25%) ahead Friday's key employ data.
OVERNIGHT DATA
MNI US DATA: Solid ISM Services Potentially Boosted By Tariff-Related Activity
August's ISM Services report was stronger than expected in most major categories, with the headline index rising to a 6-month high 52.0 from 50.1 prior (and vs 51.0 Bloomberg consensus). This was a solid report but there was still ample evidence of tariff-related effects on business activity: anecdotes suggested front-running may be exaggerating a sharp improvement in new orders and a rise in inventories, and while price pressures moderated slightly, they remain very elevated.
- New orders were a standout in the report at a 10-month high 56.0 (50.3 prior, 51.1 expected), despite a pullback in New Export Orders to a 5-month low 47.3 (47.9 prior). Some anecdotes suggested continued tariff front-running may have been a factor (“Getting merchandise into the U.S. ahead of effective dates of tariff increases"). Indeed, Imports rose 8.7 points to 54.6, highest since January 2024.
MNI US DATA: Mixed Claims Data But Continuing Drift Lower
Higher initial jobless claims and lower continuing claims offered a mixed bag of a report, but initial claims remain within recent ranges whilst continuing claims saw another week of relative stabilization having pushed higher in May/June. Initial jobless claims were higher than expected as they increased to 237k (sa, cons 230k) in the week to Aug 30 from an unrevised 229k. Continuing claims on the other hand were lower than expected at 1940k (sa, cons 1959k) in the week to Aug 23 after yet another downward revision to 1944k (initial 1954k) in the week prior.
MNI US DATA: Productivity Gains Keep Lid On Labor-Based Inflation Pressures
Productivity looked a little better in the second quarter after the initial readings were revised: productivity is now recorded as growing 3.3% Q/Q SAAR, up from 2.4% in the initial. Prior (Q1) was unrevised at -1.8%. And Unit Labor Costs were revised down for Q2 in the second reading (1.0% Q/Q SAAR) from the initial reading (1.6%). Again, prior (Q1) was unrevised (6.9%). That's despite an uptick in hourly compensation growth (4.3% vs 4.0% in initial). Overall hourly compensation and wages hit the fastest rate of growth since Q1 2024 but this was offset by the productivity gains.
MNI US DATA: A Soft ADP Report Maintains Its Prior Cooler Trend
- ADP employment was a little softer than expected in August at 54k (cons 68k) after a marginally upward revised 106k (initial 104k) in July. ADP employment has pointed to subdued private sector hiring for some months now, with the three-month average inching up to 46k in August. This average was 37k in July, compared to average private payrolls growth of 52k after last month’s huge downward revisions which have left payrolls data more in keeping with the slowdown in labor demand seen this year.
MNI CANADA DATA: PMIs Point To Activity Stabilizing At Weak Levels
Canada August PMIs suggested a service sector-led moderation in economic activity vs July, even if the overall report suggests that activity has stabilized after very negative conditions in Feb-Jun amid US trade war concerns. The Composite index ticked down to 48.4, from July's 48.7 which had been a 6-month high. The Services data out Thursday showed a deterioration to 48.6 from what had been an 8-month high 49.3 in July - the previously-released Manufacturing reading showed a 2.2 point improvement to 48.3, a 7-month best.
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA up 327.32 points (0.72%) at 45596.34
S&P E-Mini Future up 43.25 points (0.67%) at 6500.75
Nasdaq up 154.5 points (0.7%) at 21652.8
US 10-Yr yield is down 5.2 bps at 4.1646%
US Dec 10-Yr futures are up 8.5/32 at 112-28
EURUSD down 0.0013 (-0.11%) at 1.1649
USDJPY up 0.4 (0.27%) at 148.5
WTI Crude Oil (front-month) down $0.6 (-0.94%) at $63.37
Gold is down $9.15 (-0.26%) at $3550.35
European bourses closing levels:
EuroStoxx 50 up 21.7 points (0.41%) at 5346.71
FTSE 100 up 38.88 points (0.42%) at 9216.87
German DAX up 175.53 points (0.74%) at 23770.33
French CAC 40 down 20.79 points (-0.27%) at 7698.92
US TREASURY FUTURES CLOSE
3M10Y -2.844, 6.288 (L: 5.056 / H: 9.05)
2Y10Y -2.336, 57.474 (L: 57.373 / H: 60.237)
2Y30Y -0.664, 127.153 (L: 125.304 / H: 129.466)
5Y30Y +1.126, 121.4 (L: 118.792 / H: 122.697)
Current futures levels:
Dec 2-Yr futures up 1.75/32 at 104-10.75 (L: 104-08.375 / H: 104-11.125)
Dec 5-Yr futures up 5/32 at 109-21 (L: 109-14.25 / H: 109-21.75)
Dec 10-Yr futures up 8.5/32 at 112-28 (L: 112-16 / H: 112-29)
Dec 30-Yr futures up 14/32 at 115-0 (L: 114-12 / H: 115-05)
Dec Ultra futures up 19/32 at 117-21 (L: 116-23 / H: 117-30)
MNI US 10YR FUTURE TECHS: (Z5) Fresh Cycle High
- RES 4: 113-11+ 2.382 proj of the Jul 15 - 22 - 28 price swing
- RES 3: 113-06 2.236 proj of the Jul 15 - 22 - 28 price swing
- RES 2: 113-00 Round number resistance
- RES 1: 112-28+ 2.000 proj of the Jul 15 - 22 - 28 price swing
- PRICE: 112-24+ @ 16:54 BST Sep 4
- SUP 1: 112-01+ 20-day EMA
- SUP 2: 111-20+ 50-day EMA
- SUP 3: 111-13+ Low Aug 18 and a key support
- SUP 4: 110-25 Low Aug 1
The trend outlook in Treasury futures is bullish and Thursday’s gains reinforce this condition. The contract has traded to a fresh short-term cycle high, confirming a resumption of the uptrend. This paves the way for an extension towards 112-28+ next, a Fibonacci projection. Note that moving average studies are in a bull-mode position, highlighting a dominant uptrend. Initial support to watch is 112-01+, the 20-day EMA.
SOFR FUTURES CLOSE
Current White pack (Sep 25-Jun 26):
Sep 25 +0.005 at 95.930
Dec 25 +0.020 at 96.265
Mar 26 +0.020 at 96.515
Jun 26 +0.025 at 96.785
Red Pack (Sep 26-Jun 27) +0.025 to +0.040
Green Pack (Sep 27-Jun 28) +0.040 to +0.045
Blue Pack (Sep 28-Jun 29) +0.045 to +0.050
Gold Pack (Sep 29-Jun 30) +0.055 to +0.060
REFERENCE RATES (PRIOR SESSION)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.39% (+0.00), volume: $2.880T
- Broad General Collateral Rate (BGCR): 4.36% (+0.00), volume: $1.146T
- Tri-Party General Collateral Rate (TCR): 4.36% (+0.00), volume: $1.118T
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $119B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $218B
FED Reverse Repo Operation
RRP usage inched up to $20.128B with 17 counterparties this afternoon from $17.923B yesterday - lowest levels since early April 2021. Compares to this year's high usage of $460.731B on June 30.
MNI PIPELINE: Late Corporate Bond Roundup
Still waiting for Sunoco and HPS Corp to launch:
- Date $MM Issuer (Priced *, Launch #)
- 09/04 $6.5B #Citigroup $3B 6NC5 +85, $500M 6NC5 SOFR, $3B 11NC10 +100
- 09/04 $1.7B Sunoco $850M each: 5.5NC2 5.75%a, 8.5NC3 6.0%a
- 09/04 $1.25B #Avalon Holdings 7Y +120
- 09/04 $1.2B #SK Hynix $600M 3Y +73, $600M 5Y +80
- 09/04 $1B *Swedish Export Credit 5Y SOFR+48
- 09/04 $750M #Brookfield Asset Management 30Y +120a
- 09/04 $700M #Kallpa Gerneracion 10Y +140
- 09/04 $Benchmark HPS Corporate Lending Fund 3Y +155, 5Y +183
MNI BONDS: EGBs-GILTS CASH CLOSE: Long-End Relief Rally Extends
European long-end yields declined for a second day Thursday.
- The rally in core FI that started early Wednesday continued unimpeded for much of the morning session, helped in part by softer oil prices and solid digestion of European supply, including Spanish and French auctions.
- The latest BoE DMP survey pointed to a softening employment picture, while a strong 20Y linker auction saw a bull flattening move in Gilts extend. In other data, Eurozone July retail sales were on the soft side.
- The fall in yields was interrupted in mid-afternoon, with equities rallying and US ISM Services headline data proving stronger-than-expected, but yields ultimately closed lower on the day.
- The German and UK curves both bull flattened, with Gilts outperforming Bunds.
- Periphery/semi-core EGB spreads tightened by around 2bp alongside the pickup in equities and aforementioned smooth EGB auction digestion.
- Friday's European calendar includes German factory orders and UK retail sales data (as well as Eurozone Q2 GDP revisions/details and labour market figures), while global focus will be on the US employment report later in the session.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 0.2bps at 1.964%, 5-Yr is down 1bps at 2.27%, 10-Yr is down 2.1bps at 2.719%, and 30-Yr is down 1.9bps at 3.337%.
- UK: The 2-Yr yield is down 1.1bps at 3.949%, 5-Yr is down 2bps at 4.11%, 10-Yr is down 2.8bps at 4.72%, and 30-Yr is down 2.9bps at 5.574%.
- Italian BTP spread down 2.3bps at 85bps / French OAT down 2.3bps at 77.6bps
MNI FOREX: Dollar Firmer as Payrolls Awaited, NZDUSD Eyes Key Support
- Aside from a very brief dip in APAC trade, the USD index has been slowly grinding higher on Thursday, undeterred by some slightly softer ADP and claims data, and moderately boosted by an above-expectation ISM services release. Overall, the moves have been relatively contained (DXY up 0.25%) given the imminent release of the highly significant US employment report on Friday.
- These moves come despite solid demand for the major equity benchmarks and lower US yields, and therefore could be more reflective of positioning ahead of the Friday’s data.
- As usual, USDJPY has been an accurate reflection of the broader greenback price action, with a brief dip to 147.80 well supported in Asia, and the pair then rallying around 10 pips in steady fashion to session highs of 148.78. Solid resistance is seen at 149.12/14, a level that could come under threat should a further weakening of the US labour market not materialise.
- The stronger dollar in the aftermath of the US data continues to weigh most notably on the likes of AUD and NZD, which currently have session losses of 0.5 and 0.65% respectively.
- NZDUSD price action narrows the gap to the aforementioned key double bottom and psychological support at 0.5800. A break of this level would strengthen bearish conditions and signal a move towards 0.5728, the 61.8% retracement of the Apr-Jul rally.
- For AUDUSD, initial resistance between 0.6560/70 held well on Wednesday, despite the firmer-than-expected GDP reading. Support for the pair remains further out, at 0.6415, the Aug 21 / 22 low. A clear break of it would resume a bear leg and highlight a stronger reversal pattern.
- Kiwi weakness slightly outpacing its regional peer sees AUDNZD trade to fresh cycle highs of 1.1157, narrowing the gap to a key medium-term level at 1.1180.
FRIDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 05/09/2025 | 0600/0800 | ** |  DE | Manufacturing Orders |
| 05/09/2025 | 0600/0700 | *** |  GB | Retail Sales |
| 05/09/2025 | 0645/0845 | * |  FR | Foreign Trade |
| 05/09/2025 | 0800/1000 | * |  IT | Retail Sales |
| 05/09/2025 | 0900/1100 | * |  EU | Employment |
| 05/09/2025 | 0900/1100 | *** | EU | EZ GDP 3rd (Regular) |
| 05/09/2025 | 1230/0830 | *** |  US | USDA Crop Estimates - WASDE |
| 05/09/2025 | 1230/0830 | *** | US | Employment Report |
| 05/09/2025 | 1230/0830 | *** | US | Employment Report |
| 05/09/2025 | 1230/0830 | *** | US | Employment Report |
| 05/09/2025 | 1230/0830 | *** | US | Employment Report |
| 05/09/2025 | 1230/0830 | *** | US | Employment Report |
| 05/09/2025 | 1230/0830 | *** | US | Employment Report |
| 05/09/2025 | 1230/0830 | *** |  CA | Labour Force Survey |
| 05/09/2025 | 1400/1000 | * | CA | Ivey PMI |
| 05/09/2025 | 1700/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |
| 05/09/2025 | 1700/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |
