STIR: Modest Hawkish Adjustment In Fed Pricing After NFPs, 88bp Cuts Through Dec
May-02 12:57
Modest hawkish reaction to the labour market report, with the upside surprise in the headline reading (albeit a little tarnished by negative revisions) and uptick in hours worked offsetting the low unrounded & softer-than-expected AHE metrics.
- 1bp of easing priced for this month, 11bp through June, 31bp through July. 53bp through September, 70bp through October and 88bp through December.
- That compares to 2bp, 15bp, 35bp, 57bp, 73bp and 90bp ahead of the data.
- Market briefly prices the shallowest ’25 cutting cycle of the week, showing 85bp of cumulative cuts through year-end, before the initial hawkish reaction fades.
- Terminal pricing approximation (currently SFRU6) sells off by 5bp on the release, before stabilising at 3.11%, ~23bp less dovish than levels seen ahead of yesterday’s ISM survey.
- We suggested that the market reaction to a softer-than-expected report would probably outweigh a firmer-than-expected outcome, particularly in light of the hawkish adjustment seen since yesterday’s ISM survey,
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SONIA: Call spread vs put spread
Apr-02 12:50
SFIZ5 96.20/96.30cs vs 95.75/95.65ps, bought the cs for 2 in 2.5k.
FINLAND AUCTION PREVIEW: ORI Operation Tomorrow
Apr-02 12:46
Finland has announced it will be looking to sell up to a combined E400mln of the following at its ORI operation tomorrow, April 3:
- the 0.50% Sep-27 RFGB (ISIN: FI4000278551)
- the 2.625% Jul-42 RFGB (ISIN: FI4000046545)
US DATA: ADP Beats In Solid Report, Usual NFP Correlation Caveats Aside
Apr-02 12:44
- ADP employment growth was stronger than expected in March at 155k (cons 120k) after a marginally upward revised 84k (initial 77k) in February.
- It leaves an average monthly 142k increase in Q1 and with the latest increase above the average 144k in 2024, offering a reasonably solid report along with other hard data vs weaker soft data.
- Correlation with private payrolls growth remains a concern. In latest vintages for both releases, ADP undershot by -56k in Feb, overshot by 105k in Jan and undershot by -111k in Dec. That said, the private payrolls series has admittedly been the more volatile series in recent months.
- Bloomberg consensus for private payrolls currently stands at 135k.
- With that standard caveat aside, there was an impressive bounce in seasonally adjusted hiring from smallest firms, with those with 1-19 employees adding 42k jobs after a rare 4k decline in Feb (revised from the -17k initially, a first monthly decline since Dec 2023).
- There’s no clear trend by firm size when comparing the Q1 average job growth to that of 2024. The smallest (1-19) and largest (500+) employees have both seen a moderation in hiring (average 22k vs 39k and 54k vs 67k respectively) but all other sized firms have seen an acceleration in hiring.
- On the pay front, median annual pay eased to a new recent low for job changers at 6.5% Y/Y (from 6.8% in Feb and through September’s 6.6% for the lowest since early 2021.
- Job stayers meanwhile eased a tenth to a joint recent low of 4.6% Y/Y (otherwise lowest since mid-2021) with the combination seeing a joint low for the pay premium at 1.9pps.
