MNI ASIA OPEN: Unexpected ADP Jobs Loss Spurs NFP Uncertainty

EXECUTIVE SUMMARY

• MNI FED: Lack Of Support For A July Cut, But It's Still Live
• MNI US: House Vote On Rule To Progress OBBB Does Not Look Imminent
• MNI ASIA: Trump Confirms Vietnam Trade Deal
• MNI ISRAEL: Hamas 'Studying New Ceasefire Offers"
• MNI US DATA: A Large Miss For ADP As Slowing Trend Escalates

US

MNI FED: Lack Of Support For A July Cut, But It's Still Live

Heading into Thursday's employment report, implied probability of a 25bp cut in July is around 22% (having briefly pushed through to 25% after the surprise ADP payrolls contraction - see chart). Given what we've heard from FOMC officials since the June meeting, it would probably take a very weak report, including an unemployment rate above 4.3% in June, to force the FOMC off the sidelines on July 30.

MNI FED: FHFA Director Calls For Congress Investigation Into Powell "Malfeasance"

Federal Housing Finance Administration (FHFA) director Pulte has called for a congressional investigation of Fed Chair Powell, seemingly with the objective of getting Powell removed "for cause" (per the Federal Reserve Act, a member of the Fed board can only be removed "for cause", I.e. misconduct). Pulte has previously criticized Powell and called for his resignation for not cutting rates.

NEWS

MNI US: House Vote On Rule To Progress OBBB Does Not Look Imminent

Punchbowl's Jake Sherman suggests that a House vote on the "rule" to advance toward a debate and full vote on the "One Big Beautiful Bill" is not imminent, due to insufficient Republican votes at this stage. There is no discernable market reaction to the apparent delay, in part because passage was always likely to be a drawn-out process. @JakeSherman on X.com: "HOUSE REPUBLICANS are telling members to go back to their offices. It does not look like a vote on the rule is imminent."

MNI ASIA: Trump Confirms Vietnam Trade Deal

US President Donald Trump posts on Truth Social, "I just made a Trade Deal with Vietnam. Details to follow!". When Trump first announced his 'Liberation Day' 'reciprocal' tariffs in April, Vietnam was in line for a levy of 46%, one of the highest rates of any country worldwide. Last week, Vietnamese Prime Minister Pham Minh Chinh said, while speaking at a panel event, that "I hope that you will see that the result [of trade talks] will come earlier than two weeks...Vietnam and the US share a deep understanding on tariffs... I hope that all the positive things will come for us."

MNI SECURITY: UK & Germany To Sign Defence Pact In Coming Weeks: Politico

Politico reports that the UK and Germany will sign a wide-ranging defence pact in the coming weeks that will pledge mutual support in the case of a strategic threat to either. This will provide Germany with mutual assistance clauses with both European nuclear powers, and moves towards Chancellor Friedrich Merz's goal of bolstering deterrents to an attack on the European continent away from the US. 

MNI IRAN: Foreign Min-'Serious & Heavy Damage' At Fordow

Speaking to CBS News, Foreign Minister Abbas Araghchi says that Iran's nuclear enrichment facility at Fordow suffered "serious and heavy damage" in the US airstrikes on the location in late June. Araghchi: "No one exactly knows what has transpired in Fordow. That being said, what we know so far is that the facilities have been seriously and heavily damaged," adding that "The Atomic Energy Organization... is currently undertaking evaluation and assessment,."

MNI ISRAEL: Hamas 'Studying New Ceasefire Offers"

Reuters reports comments from a Hamas statement saying that the group is "studying new ceasefire offers [that] it received from the mediators". Hamas says it "seeks an agreement that will end the war in Gaza and achieves an Israeli army withdrawal from Gaza." I24 reports senior Hamas official Taher al-Nono stating "We are serious and ready to reach an agreement and are ready to agree to any proposal - if the demands for ending the war are clearly met or whatever will lead to its complete end".

US TSYS

MNI US TSYS: Surprise ADP Jobs Loss Ahead Thursday's June NFP Report

• Treasuries look to finish weaker Wednesday, well off early session highs after a brief knee-jerk reaction to an unexpected ADP private jobs loss rather than an expected gain. Focus turned to trade talk and Thursday's jam-packed data session that includes June NFP as markets are closed Friday for the 4th of July Holiday.
• The Sep'25 10Y contract trades -6 at 111-21.5 vs. session and 1W low of 111-16.5. First key support to watch is 111.07.5, the 20-day EMA. Curves remain steeper but off highs: 2s10s +2.691 at 49.404 (52.814H), 5s30s +1,844 at 94.608 (98.661H).
• ADP private sector employment was much weaker than expected in June as it fell -33k (sa, cons 98k) along with last month’s soft print confirmed with a downward revision to 29k vs the initial 37k. The decline was led by professional & business services (-56k after -13k, its sharpest decline since Feb 2023) and education & health services (-52k after -16k, its sharpest decline since Jul 2020).
• Pres Trump announced a trade deal with Vietnam. "The Terms are that Vietnam will pay the United States a 20% Tariff on any and all goods sent into our Territory, and a 40% Tariff on any Transshipping. In return, Vietnam will do something that they have never done before, give the United States of America TOTAL ACCESS to their Markets for Trade. In other words, they will “OPEN THEIR MARKET TO THE UNITED STATES,” meaning that, we will be able to sell our product into Vietnam at ZERO Tariff."
• Political uncertainty in the UK heavily weighed on sterling Wednesday, as markets speculated that Rachel Reeves’ term as Chancellor of the Exchequer might be coming to an end. Prime Minister Sir Keir Starmer refused to publicly back his Chancellor, in a testing session of PMQs in the House of Commons, heightening the market’s fiscal concerns.

OVERNIGHT DATA

MNI US DATA: A Large Miss For ADP As Slowing Trend Escalates

ADP employment surprisingly fell in June as it continued a trend of clear moderation in recent months compared to what has been a steadier trend for private payrolls up to May ahead of tomorrow’s NFP release. Declines were led by two sectors in particular, one of which has had a strangely weak relationship with BLS payrolls, but it’s still a soft report no matter how you look at it. 

• ADP private sector employment was much weaker than expected in June as it fell -33k (sa, cons 98k) along with last month’s soft print confirmed with a downward revision to 29k vs the initial 37k. The decline was led by professional & business services (-56k after -13k, its sharpest decline since Feb 2023) and education & health services (-52k after -16k, its sharpest decline since Jul 2020).

MNI US DATA: Challenger Job Cut Announcements Ease Back To More Typical Levels

The Challenger, Gray & Christmas job cuts report showed a relatively benign June after some strong increases earlier in the year. Challenger job cut announcements amounted to 48k in June after 93.8k in May, for a -2% Y/Y decline after some elevated readings earlier this year that were driven by more than just direct DOGE effects. It follows a 47% Y/Y increase in May, 63% Y/Y in April and an average 90% Y/Y through Q1.

• Ex-government layoffs meanwhile were -8% Y/Y in June after 43% Y/Y in May, 58% in April and an average -1% Y/Y in Q1. From the press release: ““The bulk of companies cited economic conditions last month. We saw some DOGE activity and have tracked over 2,000 jobs directly attributed to tariffs this year, but for the most part it was a quiet June.”

MNI US DATA: A Small Uplift In Mortgage Activity As Rates Ease

• MBA composite mortgage applications increased 2.7% (sa) last week after 1.1%, -2.6% and a strong 12.5% in the previous three weeks.
• Refis led the latest increase, rising 6.5% after 3.0%, as new purchase applications underperformed for a fifth consecutive week with 0.1% after -0.4%.
• The usual reminder of relative levels, however: composite applications stand at 55% of 2019 averages, consisting of 64% for new purchases and 44% for refis.
• The latest increase was helped by a 9bp decline in the 30Y conforming rate to 6.79% for its lowest since the week to Apr 4, marking a 13bp decline over the past month.
• With the average 10Y swap rate over the week dropping 12bp, the 30Y mortgage rate to 10Y spread widened further to 305bps (+3bp) for its highest since the week to May 9. That’s still below the 315bp in late April/early May but above the 285bp averaged in Q1 in a net tightening in conditions, potentially reflecting some more pessimistic looking housing data more broadly.

MARKETS SNAPSHOT

Key market levels of markets in late NY trade:
DJIA down 10.52 points (-0.02%) at 44484.42
S&P E-Mini Future up 25 points (0.4%) at 6274.5
Nasdaq up 190.2 points (0.9%) at 20393.13
US 10-Yr yield is up 3.9 bps at 4.2808%
US Sep 10-Yr futures are down 6/32 at 111-21.5
EURUSD down 0.0008 (-0.07%) at 1.1798
USDJPY up 0.24 (0.17%) at 143.66
WTI Crude Oil (front-month) up $1.76 (2.69%) at $67.21
Gold is up $19.64 (0.59%) at $3358.48

European bourses closing levels:
EuroStoxx 50 up 36.29 points (0.69%) at 5318.72
FTSE 100 down 10.64 points (-0.12%) at 8774.69
German DAX up 116.82 points (0.49%) at 23790.11
French CAC 40 up 75.83 points (0.99%) at 7738.42

US TREASURY FUTURES CLOSE

3M10Y +3.447, -5.691 (L: -10.395 / H: -3.139)
2Y10Y +2.682, 49.395 (L: 46.478 / H: 52.814)
2Y30Y +3.136, 102.129 (L: 98.583 / H: 107.589)
5Y30Y +1.423, 94.187 (L: 92.591 / H: 98.661)
Current futures levels:
Sep 2-Yr futures down 0.5/32 at 103-28.125 (L: 103-27.25 / H: 103-30.75)
Sep 5-Yr futures down 3.25/32 at 108-21.5 (L: 108-19.5 / H: 108-27.5)
Sep 10-Yr futures down 6/32 at 111-21.5 (L: 111-16.5 / H: 111-30.5)
Sep 30-Yr futures down 18/32 at 114-26 (L: 114-13 / H: 115-19)
Sep Ultra futures down 19/32 at 118-17 (L: 117-26 / H: 119-16)

MNI US 10YR FUTURE TECHS: (U5) Bull Cycle Remains In Play

• RES 4: 114-14   High Apr 7 and key resistance
• RES 3: 113-07   76.4% retracement of the Apr 7 - 11 bear leg
• RES 2: 112-23   High May 1 and key resistance
• RES 1: 112-12+/15 High Jul 1 / 61.8% of the Apr 7 - 11 sell-off
• PRICE:‌‌ 111-21+ @ 1610 ET Jul 2
• SUP 1: 111-20+ Intraday low       
• SUP 2: 111-07+ 20-day EMA
• SUP 3: 110-30   50-day EMA
• SUP 4: 110-16   Low Jun 20

A bull cycle in Treasury futures remains intact, however, price reversed hard off highs into Tuesday’s close. Attention is on the next important resistance at 112-15, the 61.8% retracement of the Apr 7 - 11 steep sell-off. Clearance of this hurdle would strengthen a bull theme and expose 112-23, the May 1 high. Note that the uptrend is overbought, a pullback would unwind this position. First key support to watch is 111.07+, the 20-day EMA.

SOFR FUTURES CLOSE

Sep 25 +0.005 at 95.985
Dec 25 +0.005 at 96.30
Mar 26 steady00 at 96.540
Jun 26 -0.010 at 96.740
Red Pack (Sep 26-Jun 27) -0.025 to -0.01
Green Pack (Sep 27-Jun 28) -0.03 to -0.025
Blue Pack (Sep 28-Jun 29) -0.025 to -0.025
Gold Pack (Sep 29-Jun 30) -0.025 to -0.02

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

• Secured Overnight Financing Rate (SOFR): 4.44% (-0.01), volume: $2.920T
• Broad General Collateral Rate (BGCR): 4.39% (+0.00), volume: $1.114T
• Tri-Party General Collateral Rate (TCR): 4.39% (+0.00), volume: $1.084T
• (rate, volume levels reflect prior session)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $133B
• Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $264B

FED Reverse Repo Operation

RRP usage slips to $237.307B this afternoon from $245.530B yesterday, total number of counterparties at 45. Usage had fallen to $54.772B on Wednesday, April 16 -- lowest level since April 2021 - compares to yesterday's (July 1) $460.731B highest usage since December 31.

MNI PIPELINE: Corporate Bond Update: $2.2B SoftBank Group 4Pt Priced

• Date $MM Issuer (Priced *, Launch #)
• 07/02 $2.2B *SoftBank Group $500M 3.75Y 6.5%, $600M 5.5Y 6.875%, $600M 7 Y 7.25%, $500M 10Y 7.5% (in addition to 3 Eur tranches: 4.25Y, 6Y & 8Y) Note, SoftBank Corp issued $1B over 2 tranches on Monday.
• 07/02 $800M *Korea Gas $300M 3Y SOFR+65, $500M 5Y +47
• 07/02 $800M #National Bank of Kuwait PerpNC6 6.375%
• 07/02 $500M *HIKMA Pharmaceuticals 5Y +135a
• 07/02 $500M #Qatar Insurance NC6 6.15%

MNI EGB BONDS: EGBs-GILTS CASH CLOSE: Gilts Sell Off On Fiscal Concerns

Gilt yields soared Wednesday on renewed concerns over the UK's fiscal outlook.

• Gilts weakened sharply in early afternoon trade amid speculation that UK Chancellor Reeves could leave her post after the government was forced to water down its welfare reform bill. EGBs weakened in tandem.
• UK yields later edged off their highs after PM Starmer expressed his "full support" for Reeves but the damage was done, in one of the worst sessions for the long end in the last 2+ years including a 20+bp rise for the 30Y at one point.
• In some constructive developments for bonds, BoE MPC member Taylor elicited a dovish short-end reaction after saying 5 cuts might be needed; while there was a brief Treasury-led rally after US private payrolls unexpectedly contracted. Also, Italian/Eurozone unemployment came in higher than expected.
• Both the German and UK curves bear steepened on the day, with Gilts of course underperforming Bunds. Periphery/semi-core EGB spreads tightened, led by Spain.
• Thursday's calendar includes final Services PMIs and the account of the June ECB policy meeting. Global attention will be on US pre-holiday data, including the nonfarm payrolls report, with some attention also paid to Swiss inflation.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 1.4bps at 1.863%, 5-Yr is up 3.5bps at 2.183%, 10-Yr is up 9bps at 2.664%, and 30-Yr is up 6.4bps at 3.117%.
• UK: The 2-Yr yield is up 5.4bps at 3.881%, 5-Yr is up 10.6bps at 4.042%, 10-Yr is up 15.8bps at 4.612%, and 30-Yr is up 19.1bps at 5.42%.
• Italian BTP spread down 2.5bps at 85bps / Spanish down 2.8bps at 61.2bps

MNI FOREX: GBP Under Significant Pressure as Political Uncertainty Ramps Up

• Political uncertainty in the UK heavily weighed on sterling Wednesday, as markets speculated that Rachel Reeves’ term as Chancellor of the Exchequer might be coming to an end. Prime Minister Sir Keir Starmer refused to publicly back his Chancellor, in a testing session of PMQs in the House of Commons, heightening the market’s fiscal concerns.
• GBPUSD remains roughly 1% lower on the session as we approach the APAC crossover, having traded as low as 1.3563 amid the tumult, during which the 30-yr gilt yield rose as much as 22bps at its extreme. 20-day EMA support was pierced below 1.3586 and a sustained break of this average would signal scope for a more pronounced corrective pullback. The 50-day, which has supported dips well in recent months, intersects at 1.3439.
• For EURGBP, this week’s gains are reinforcing current bullish conditions. 0.8592, 61.8% of the Apr 11 - May 29 downleg, has been broken, as well as 0.8624, the Apr 21 high. Above here, the next significant targets are 0.8694 and 0.8738, the Apr 14 & 11 highs respectively. GBPJPY is also extending towards an important area, located around 195.00.
• Elsewhere, the dollar index trades on a slightly firmer footing, up around 0.25% on the session as markets await the significant US employment report on Thursday. Two key factors have helped stabilise the greenback: the reversal higher for US yields from dovish extremes and an important technical support holding for the DXY, a trendline drawn across the 2011 and 2021 lows.
• Aside from the GBP weakness, NZD moderately underperforms its G10 peers, down 0.40% and consolidating back below 0.6100. Despite the moderate losses for both Aussie and Kiwi today, the medium-term bullish trends for both AUDUSD and NZDUSD have been bolstered this week ahead of RBA and RNBZ central bank decisions next week. For AUD, sights remain on key resistance at 0.6688, the US election related highs.
• US employment report and ISM services headline a packed US calendar on Thursday.

THURSDAY DATA CALENDAR

Date	GMT/Local	Impact	Country	Event
03/07/2025	0630/0830	***	CH	CPI
03/07/2025	0700/0300	*	TR	Turkey CPI
03/07/2025	0715/0915	**	ES	S&P Global Services PMI (f)
03/07/2025	0715/0915	**	ES	S&P Global Composite PMI (final)
03/07/2025	0745/0945	**	IT	S&P Global Services PMI (f)
03/07/2025	0745/0945	**	IT	S&P Global Composite PMI (final)
03/07/2025	0750/0950	**	FR	S&P Global Services PMI (f)
03/07/2025	0750/0950	**	FR	S&P Global Composite PMI (final)
03/07/2025	0755/0955	**	DE	S&P Global Services PMI (f)
03/07/2025	0755/0955	**	DE	S&P Global Composite PMI (final)
03/07/2025	0800/1000	**	EU	S&P Global Services PMI (f)
03/07/2025	0800/1000	**	EU	S&P Global Composite PMI (final)
03/07/2025	0830/0930		GB	Decision Maker Panel data
03/07/2025	0830/0930		GB	BOE Credit Conditions Survey
03/07/2025	0830/0930	**	GB	S&P Global Services PMI (Final)
03/07/2025	0830/0930	***	GB	S&P Global/ CIPS UK Final Composite PMI
03/07/2025	1230/0830	***	US	Jobless Claims
03/07/2025	1230/0830	**	US	WASDE Weekly Import/Export
03/07/2025	1230/0830	**	CA	International Merchandise Trade (Trade Balance)
03/07/2025	1230/0830	***	US	Employment Report
03/07/2025	1230/0830	**	US	Trade Balance
03/07/2025	1230/0830	**	US	Trade Balance
03/07/2025	1345/0945	***	US	S&P Global Services Index (final)
03/07/2025	1345/0945	***	US	S&P Global US Final Composite PMI
03/07/2025	1400/1000	***	US	ISM Non-Manufacturing Index
03/07/2025	1400/1000	**	US	Factory New Orders
03/07/2025	1400/1000	**	US	Factory New Orders
03/07/2025	1400/1000	*	US	US Bill 08 Week Treasury Auction Result
03/07/2025	1400/1000	**	US	US Bill 04 Week Treasury Auction Result
03/07/2025	1430/1030	**	US	Natural Gas Stocks
03/07/2025	1500/1100		US	Atlanta Fed's Raphael Bostic
03/07/2025	1530/1130	*	US	US Treasury Auction Result for Cash Management Bill
03/07/2025	1700/1300	**	US	Baker Hughes Rig Count Overview - Weekly
03/07/2025	1700/1300	**	US	Baker Hughes Rig Count Overview - Weekly
04/07/2025	2330/0830	**	JP	Household spending