Daily Economic Update: August 4, 2023

Jobs day in 'merica! 2Y up 3bps to 4.92%, 10Y at 4.18%. If you're up for NFP guesses, submit your guesses in the comments. Prices Right Rules. Estimates +200K headline with 3.6% UE Rate and 4.2% AHE. Yields continue to rise with the 10Y hitting YTD highs 4.18%, can it get to Oct 2022 on a blowout jobs report? Across the pond there was a big beat in German factory orders, which seems good considering their data has generally been weak. Speaking of beats AMZN beat on earnings by a lot (see last comment to post yesterday), so I guess we all still have money to spend. I don't usually engage in NFP guesses, but when in Rome, so I'm going +900K. The logic we hired a ton of students. Per GS: "When the labor market is tight, payroll growth tends to remain strong in July, with average payroll gains 15k above the full-year average (see Exhibit 2). We believe this reflects the interaction between labor availability and the spring hiring season: seasonal labor market slack peaks at the start of the year, troughs in early May, then rebounds in June and July with the arrival of the student summer workforce."....I'm kidding on +900K by the way (maybe). Not much else on the calendar, so you can get back to worrying about the U.S. Fiscal situation.

 Daily Economic Update: August 3, 2023

BoJ buys bonds in unscheduled operation to keep yields from rising too fast. Warren Buffet buys bonds because he's rich and Berkshire is the largest owner of T-bills ("there are some things people shouldn't worry about...This is one of them"). Bill Ackman shorts the 30Y treasury (via options) because Bill Ackman wants a hedge on equities and because he likes attention. Yields up 2bp on the 2Y back to 4.90% and the 10Y up 6bps to ~4.14%, if you were betting on the curve bear steepening that's the been the right call. BoE raises rates in a 3 way split vote to 5.25%, indicates Higherer for Longerer https://www.linkedin.com/pulse/powells-pivot-island-robert-mangrelli and brings down growth forecast. Bailey on the mic now. In LatAm Brazil cuts 50bps to 13.25% ,25bps was largely expected so it skewed slightly dovish, but statement was perceived as slightly hawkish...we'll see.

On the day ahead it's jobless claims,  nonfarm productivity, durable goods, ISM services and Fed's Barkin

Daily Economic Update: August 2, 2023

U.S. yields down and bull steepening with the 2Y off 4bps to 4.86% and 10Y off a bp to 4.01% with the move on the heels of yesterday afternoon's down grade of U.S. debt to AA+. Much like 2011 when S&P downgraded the U.S. paradoxically there is a flight to quality and yields actually fall (though in this case nothing like 2011). If you want to know whether the stock market will care about the downgrade for long just google LK-99 and you'll get your answer. Practically speaking the downgrade shouldn't impact most investment mandates or collateral posting eligibility as often Treasuries are directly written in as eligible irrespective of rating (whether or not over time this will change some collateral models, we'll see). Whether Fitch is correct about deficits, etc. seems besides the point to me. If the U.S. isn't AAA how can anything else be AAA? Can't the govt regulate or tax some corporation or project to oblivion? Anyway, "There's a reason dealers don't like fitch" (in relation to inclusion of Fitch ratings and downgrade triggers). Speaking of Treasury we get the much awaiting quarterly refunding announcement at 830am where it's likely there will be increased coupon issuance sizes. We also get ADP and after the close the Brazil rate decision.

Daily Economic Update: August 1, 2023

Yields flat to up 2bps with curve steeper to start the day, 2Y at 4.88% and 2Y at 3.985%. Overnight the RBA was on hold at 4.1% for 2nd straight meeting, which was a bit of a dovish surprise. Elsewhere in Asia, China data continues to skew week. European PMI's looked ok. Today we get JOLTS which is of interest to the "data-dependent" FOMC. On the calendar is JOLTS, construction spending, ISM Mfg. today. Looking ahead, the size of Treasury Coupon issue to be announced tomorrow is an under-looked area of market focus.

Daily Economic Update: July 31, 2023

Month end is here. 2Y is at 4.88% (MTD down 2bps, YTD up 45bps) and 10Y up a bp to 3.96% (MTD up 12bps, YTD up 9bps). China continues to talk about stimulus and the BoJ did an unscheduled bond purchase to keep rates from rising too fast, USD-JPY weakens out to 142.19. The under the radar story has been the rise in commodities and in particular oil over the last month and whether/how that will impact inflation. On the week ahead we'll get JOLTS and ISM manufacturing on Tuesday and it's Job's day in 'merica on Friday. In between there will be plenty of Fedspeak.

Today: Chicago PMI, SLOOS, fedspeak (already had Kashkari over the weekend talking data dependent)
Tue: JOLTS, construction spending, ISM Mfg
Wed: ADP employment
Thur: Jobless claims, nonfarm productivity, durable goods, ISM services
Friday: Jobs day