Dec 5. Unemployment report; curve edges to new low in front
–Employment report today with NFP expected around 225k with rate of 5.8%. Crude oil is lower this morning by 40 cents (66.39) and is nearing the lowest settlement of the move down, which was just above 66.00.
–The curve flattened to new recent lows going into the close, with 5/30 edging to 137 and red/gold pack spread under 169. There has been consistent buying in TYH 129 calls, another 10k yesterday with open interest now at 66k. That strike is about 30 bps away from yesterday’s close. Solid bid in USH yesterday, though total open interest fell 9500 contracts (USZ and USH combined).
–The bond market has been unwavering in its dismissal of Fed forecasts, most notably by ignoring the Fed’s dots for the path of future policy. In my opinion, this week has been another small example, with Fischer and Dudley hinting at rate hikes on Monday, yet tens and bonds won’t seem to stay down.
–Last month’s payroll data featured a large jump of 683k in the household survey, but the reaction was a quick drop followed by a rally to close at the high of the day. Once again the wage component will be important, though inflation concerns have receded into the far corners.
–ECB disappointed on QE yesterday, but the euro was able to close higher on an outside day, a signal that selling pressure is abating. Bundesbank cut Germany’s growth forecast to just 1% for next year (FT).
