EU COMMUNICATIONS: Telia: Q225 Results

Fed Funds little changed on net over the 08:30 NY data, with much softer-than-expected housing market data and a roughly inline round of jobless claims readings having no lasting impact.

• Geopolitical risk and related spot inflation pressure remains front of mind for markets, negating any impact from the soft housing readings.
• Note that continuing claims data still signals a softening labour market.
• 0bp of easing priced for today’s Fed decision, 3.5bp showing through July, 18bp through September, 29.5bp through October & 46bp through year-end.
• SOFR futures also see limited reaction.
• The FOMC will hold rates for a 4th consecutive meeting today and continue to convey a patient stance on future rate cut decisions amid elevated government policy-related uncertainty.
• The new quarterly projections will still signal the resumption of rate cuts later this year, but likely only one 25bp reduction instead of the two cuts envisaged at the March meeting.
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• -19,900 FVU5 108-06.5, sell through 108-07.25 post time bid at 0838:10ET, DV01 $867,000.
• The 5Y contract trades 108-04.5 last (+0.5).

The weekly jobless claims data confirmed recent deterioration in the labor market. There was a sizeable step higher in initial claims compared to recent payrolls reference periods along with the highest four-week moving average since Aug 2023, whilst continuing claims hovered close to the previous week's fresh high since late 2021. 

• Initial jobless claims were as expected at 245k (sa, cons 245k) in the week to Jun 14 – a payrolls reference period – after a slightly upward revised 250k (initial 248k).
• This can still be revised next week but for now it points to a clear step higher from reference payroll periods (226k for May, 216k for Apr, 225k for Mar and 224k for Feb).
• The four-week moving average increased to 246k from a marginally upward revised 241k (initial 240k) for its highest since Aug 2023.
• Continuing claims were a touch higher than expected at 1945k (sa, cons 1941k) in the week to Jun 7 after a slightly downward revised 1951k (initial 1956k).
• It rules out a larger downward revision from what had been a firm uptick in continuing claims in the prior week for a fresh high since late 2021, with only a marginal improvement seen in latest data.
• The claims rate saw a second week at 1.28% after two weeks at 1.25%. Increases from what had been sustained 1.2% readings has drawn some attention in recent weeks.