Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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Morning Brew September 5 2024
Erik Schafhauser
Senior Relationship Manager
Summary: US Yield Curve normalizes
Good morning.
Traders remain on the edge as we head into more key data. Yesterday, we saw a fairly bad JOLTS Job opening number, the lowest in 3.5 years and this raised worries the second mandate of the Fed may require urgent action. Federal Reserve Bank of San Francisco President Mary Daly pointed out in an interview with Reuters: “Labor market health has to be sustained and protected, and we have to be very mindful that if policy is overly tight, you might get additional slowing in the labor market, and to my mind, that would be unwelcome."
This puts the focus on the labor market data today and tomorrow. The ADP employment (expected 145k) comes at 14:30 alongside the Initial Jobless claims (expected 230k) will be more closely watched than usual ahead of the Nonfarm Payroll and the Unemployment rate tomorrow.
US Yields fell to and the probability for a 50 Basis point cut rose to 45%, the spread between the 10 and the 2 years US treasuries dis-Inverted yesterday – basically it normalized.
The USD Index fell as the carry trade unwind boosted the Japanese Yen, now at 143.45, EURUSD is 1.1080 and GBPUSD 1.3150. Gold and Silver could rise off the recent lows are are 2495 and 28.28. The Canadian Dollar lost yesterday on the Bank of Canada decision and the ruling coalition breaking up.
Equities lost some more ground yesterday but at a slower pace, the big three indexes lost sell than 0.2% yesterday and are little changed this morning, the Nikkei remains under pressure due to weak AI stocks and the strong yen. The GER40 is holding at 18560 but remains in danger until we close above 18991 Nvidia lost 1.7% yesterday, Tesla gained more than 4% and AMD 3%, Dollar Tree shed more than 20% in Value after weak outlook.
There seems to be a lot of mentions in the press that September is traditionally the weakest month, that may weigh on sentiment and increase caution if we turn positive it may be a strong signal.
In commodities, Ole wrote on recovering Wheat prices , oil remains weak on Chinese demand,
Our Koen is back: Market on edge: navigating market turmoil and rising volatility
Next to the employment numbers, there is a lot of datapoints through the day and the Broadcom earnings!
With the Vix relatively high, consider your strategy and consider covered calls to exit, cash covered puts to enter positions if it suits your risk willingness.
Thursday
- Data AU Trade, DE Industrial Orders, US Initial Jobless Claims, ADP ISM Manufacutring PMI
- Earnings CVC BNP Paribas Broadcom,
Speakers:
Friday
- Data EU GDP US Nonfarm Payrolls
- Earnings: Williams
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