BondsRates and credit
Treasury Rally Stalls Ahead Of Payrolls
Yields were little changed Friday as the post-election bond rally faded, with a record $8 trillion sitting in money-market funds and October payrolls due this morning.
The Treasury market is waiting. WSJ reports yields were little changed on Friday, with the rally that followed the midterm elections fading ahead of October payrolls. Bloomberg separately reported Treasuries sharply higher in Asian trade as the AI sell-off deepened, so the safe-haven bid exists but has not extended. The rate data in our feeds is sparse, so the macro read below leans on the economic calendar and the sector tape, not on quoted yield levels.
The flight to safety is visible in cash. Market Watch reports traders are flocking to Treasurys as the tech-led sell-off deepens, and that a record $8 trillion now sits in U.S. money-market funds, according to the Investment Company Institute. That money earns the short rate, so it has little reason to move into stocks while the Fed's next step is uncertain. It is a large pool of potential buying, and a measure of caution.
The economic data is firm, which complicates the bond bid. Third-quarter nonfarm productivity rose 3.6% against 2.8% expected, initial jobless claims were 189,000 against 196,000 expected, and the four-week average fell to 194.75. Continuing claims were 1,718,000, slightly above forecast. Strong productivity with low layoffs describes an economy that does not need cuts, which is why a good payrolls number is read as a risk for rate-sensitive assets.
The skeptical view is that Treasuries are being asked to do two jobs. Falling stocks pull yields down through safe-haven buying, while strong data and a possible Fed increase push them up, so a flat open is the net of opposing forces, not calm. Barron's frames a stable jobs report as the Fed's go-ahead to raise rates next month. The Atlanta Fed's GDPNow at 3.4% for Q4, down from 3.7%, still describes growth well above stall speed.
Payrolls come first, with a 59,000 consensus. If the figure lands near that and unemployment holds, the productivity and claims data suggest the Fed's concern is inflation, not employment. Stephen Douglass told Schwab Network the underlying inflation trend is favorable even as energy prices jump, and he did not rule out stagflation risks. With Brent above $100, energy is the variable most likely to disturb that favorable read.
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Claims And Productivity Argue Against Cuts
The data released November 5 was stronger than expected on both labor and output. Initial jobless claims fell to 189,000 versus 196,000 forecast and 195,000 prior. Productivity grew 3.6% in the third quarter versus a 2.8% forecast and 2.1% prior. Continuing claims ticked up to 1,718,000 from 1,695,000 prior, a small sign that hiring is slow even though firing is rare.
That mix, low layoffs and little hiring, fits the 59,000 payroll forecast. Faster productivity lets output grow without new workers, which also eases unit labor cost pressure on inflation. For the Fed, the data lets it argue the economy is not weakening, so the stock sell-off alone is unlikely to prompt a policy reversal.
Bank Of England Raised, Sterling Slipped
InvestingCube reports GBP/USD was at 1.3406 at 08:11 GMT on Friday, down 0.31%, having touched 1.3395, a day after the Bank of England raised rates. The pound fell despite the increase because the dollar firmed ahead of U.S. payrolls, so the currency pair is trading on U.S. expectations more than on British policy.
A rate rise that fails to lift the currency suggests the market had priced it in, or that the dollar's safe-haven demand outweighs it. The data does not give the size of the increase or the vote split. The practical read is that central bank divergence matters less today than the risk-off bid for the dollar.
Lira Hits A Record Low
InvestingCube reports USD/TRY extended its climb and hit a record high as the dollar strengthened and investors reacted to the latest Turkish inflation data. The article frames the lira around policy divergence between the Fed and Turkey's central bank, the CBRT. A firm dollar and a Fed that is leaning hawkish leave emerging-market currencies with high inflation exposed.
The data gives no exchange rate level or inflation figure, so the scale of the move cannot be stated here. The direction is clear: when global risk appetite falls and the dollar rises, currencies with weak inflation control break first. Turkey is the example today, and others with similar profiles may follow.
Yen Sits At A Pivotal Level
Action Forex describes USD/JPY as at a pivotal level before the jobs report, with rejections and a bearish reaction on the four-hour chart, and buyers active above 157.20. The pair has been squeezed between dollar strength and the safe-haven demand that usually supports the yen when equities fall.
A chart read is not fundamental analysis, and the source offers no policy reasoning. What can be said is that Japan's Nikkei entered a bear market on Friday, so the yen's role as a funding currency is being tested along with its role as a haven. Payrolls are the scheduled catalyst for the pair today.
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