Good morning / afternoon / evening - please choose whichever one which best describes when ever it may be that YOU are stumbling across this weekends note…
First UP, on heels of how well the bond market cooperated with the techAmentals (long bond picture HERE?), and ahead of tomorrows UST double-header …
… I suppose those buying dips HOPING (not a strategy) 10s just north of 4.25%) holds and THAT will be enough of a concession?
Way I read through Global Wall Street, doesn’t seem like they are on board with THAT and to be honest with you … THAT kinda scares me BUT …
lets deal with a couple / few things NFP and UoMISSagain related items from the intertubes …
CalculatedRISK: November Employment Report: 199 thousand Jobs, 3.7% Unemployment Rate
CalculatedRISK: Comments on November Employment Report
…Summary
The headline monthly jobs number was at consensus expectations; however, employment for the previous two months was revised down by 35,000, combined. The participation rate and the employment population ratio both increased, and the unemployment rate decreased to 3.7%.BondDadBlog: November jobs report: signs of considerable strength, but warning signs of considerable weakness as well (so, Goldilocks it is, then?)
WolfST: The Question is Not “When” but “Why” the Fed Would Cut Rates with a Labor Market this Strong and Wage Growth Accelerating
The amazing labor market that just keeps plugging along despite the high interest rates.
… The number of multiple jobholders dipped in November to 8.34 million. As percent of all workers, multiple job holders dipped to 5.1%, same as where they’d been in November 2019. In the 1990s, multiple job holders accounted for over 6% of total employment.
Note that in this survey of households, each worker counts as one worker, no matter how many jobs they have, since this data counts people not jobs:
… The unemployment rate, which accounts for the rising labor force, dipped to 3.7%, the lowest since July. These are historically low rates. The rate has hovered in the range between 3.4% and 3.9% since February 2022.
Just to see how historically low the unemployment rate is, here are the past four decades:
WolfST: Wage Growth Not Cooperating with Rosy Scenario of a Normalizing Labor Market
Wages of production and non-supervisory employees accelerate for third month to 5% annualized. Turns out, the big drop in August was a head fake.
ZH: Goldilocks: Jobs Rise 199K, Beating Estimates As Striking Workers Return; Unemployment Rate Drops
Ahead of today's jobs report (which we previewed as being focused mostly on the unemployment rate), we said that the whisper was for a stronger report due to the mandatory political talking points for the White House taking credit for all those strikers coming back to work.…
… Finally, the number is largely in line with Goldman's market reaction matrix sweet spot:
>250k S&P sells off at least 50bps
200k – 250k S&P sells off 25 – 50bps
150k – 200 S&P + / - 25bps
50k - 150k S&P rallies 100+bps
<50k S&P sells off at least 50bps
And with payrolls largely a non-event (especially after this week's dismal labor market reports) attention now turns to next week's CPI report.
ZH: Market Confused By 'Goldilocks' Jobs Data: Fed's "Tightening Cycle May Not Be Over"
…THEN lets NOT forget about UoMISSagain ‘flation (even IF markets don’t care)…
ZH: UMich Inflation Expectations Collapsed In December; Repuboicans Drive Surge In Sentiment (convenient & something rate cut ‘istas to ultimately hang hats on …)
… AND for some more NFP recaps and victory laps, FOMC, CPI PRECAPS and 2024 year ahead outlooks , I’ll move on AND TO the reason many / most are here … some UPDATED WEEKLY NARRATIVES … some of THE VIEWS you might be able to use where, THIS WEEKEND a couple / few things stood out to ME …
ABNAmro: Global Outlook 2024 - Back to not so normal
Barclays FOMC precap (UNCH thru MOST 2024, cut Dec ‘24 and then…)
BMO 2024 Outlook: Watch the Gray Rhino, Fear the Black Swan (2s to 3.00 and 10s TO 3.50 by end 2024)
… Curve steepening will once again be the macro trade of the year; only instead of the bear steepening seen in 2023, a cyclical bull steepener will be on offer. Selecting the entry point and timing for the move represents the most significant challenge for the trade and given the Fed’s higher-for-longer rhetoric, the eventual steepening will likely occur mid-year as opposed to the timing implied by the market’s eagerness to price-in rate cuts in the first quarter
JPM FI Weekly on USTs …
… We review double auction dynamics and proximity to CPI day as Treasury is set to auction $50bn 3-year notes and $37bn reopened 10-year notes on Monday. We expect the 10-year auction to require a further concession in order to be digested smoothly
MS global MACRO weekly, “Back to Square One”
… We close our long 10y and long SFRZ4 on Z3Z4Z5 fly trades, turning neutral on duration. We add long 10s on 5s10s30s butterfly…
SocGEN FI Weekly, “Feast or famine”
… With the sharp rally, we are neutral on Treasuries over the near term and view any meaningful rise in yields as an opportunity to reinitiate longs.
TD: Taking Profit on 10y US Treasury Longs (from 12/6th … not too shabby)
Moving along and away FROM highly sought after and often paywalled and Global Wall Street narratives TO a few other things widely available and maybe as useful from the WWW
Bloomberg: Bond Rally Hinges On Jobless Rate, Not NFP Number (timely as it was noted just AHEAD of THE jobs report)
… Given the sheer velocity of the rally we have seen in the past month, traders may be looking for an excuse to take some money off the table.
Invesco: Allocating cash: Three reasons to consider ultrashort bond funds
Key takeaways
Higher yield potential
The yields for ultrashort bond funds are competitive with, or higher, than other cash yields, such as on money markets.
Higher return potential
Ultrashort returns equaled or exceeded money market and Treasury bill returns in 2023 despite rate hikes.
Timing is important
Waiting until the Fed eases and yields are low has not been the best time to consider ultrashort bonds.
… 1. Extend duration to potentially lock in higher yields than those offered by cash instruments …
2. Ultrashort returns stayed competitive despite rate hikes …
3. Waiting until yields are low may not be the best strategy
Historically, investors in ultrashort strategies have been slow to respond to Fed easing, waiting until their cash-based yields are notably lower than ultrashort yields. By that time, much of the extra total return was missed. This happened in the Fed easing cycles in the early 2000s and 2007-2008.
Conclusion
While the bond market has been challenging in 2023, extending out some cash balances in ultrashort bond funds is compelling, in our view. Invesco utilizes the breadth of its Global Liquidity, Investment Grade Credit, and Structured Investments teams’ capabilities to build ultrashort portfolios that can help position short-term bond portfolios.
… AND for any / all (still)interested in trying to plan your trades and trade your plans in / around FUNduhMENTALs, here are a couple economic calendars and LINKS I used when I was closer to and IN ‘the game’.
First, this from the best in the strategy biz is a LINK thru TO this calendar,
Wells FARGOs version, if you prefer …
… and lets NOT forget EconOday links (among the best available and most useful IMO), GLOBALLY HERE and as far as US domestically (only) HERE …
THAT is all for now. Enjoy whatever is left of YOUR weekend …
Thanks for your article...
Saw one graph, that showed a growing majority of the job growth in the
last several months was: Gov't, Healthcare and Social Services......
These sectors having lower Multipliers and less Productivity, I believe...
I'd like to post this from DoubleLine and Jeffrey Gundlach:
https://youtu.be/huyJW2OW-P0?si=0bVN3S1PAlz3fA5L