More than two 25 bps cuts being priced for '25. Credit jitters premium

As Fed cuts rates and returns on cash deteriorate, economy should reflate and seeds will be planted for the next tightening cycle. Current cut cycle terminal rate back below 3%

Powell not stirring things up much with his comment that QT to end in coming months

FWIW: "Applications for US unemployment benefits rose (to 235,000) last week, according to a Goldman Sachs Group Inc. analysis of state-level filings released during the federal government shutdown."

10s have been a favorite this year as more generous term premium attracted buyers to the tenor. Looking a bit pricey here relative to recent auctions but still enough TP juice to attract a bid.

Absolute madness.

Starting to get spooky.... another spin up day for pure play quantum stocks.

With year-end overnight rate priced at 3.64 (EFFR), it should be an easy 3y note UST auction today. WIs 3.62

Regular reminder that there is nothing unusual about long end pricing. In fact, there is scope for higher yields even with overnight rates at 3% (~ current terminal rate) Average 30y spread to EFFR

With the continued government shutdown, no NFP print but ISM Services does have an employment index to give Ts a but of excitement. The gauge has been relatively weak recently, with Aug at 46.5

Job week could be down to ADP and the ISM Services labor market gauge. So some eye-twitching for ADP this morning?

Another cycle low in the Conference Board's labor market gauge

A jobs week quarter-end will cause some challenging flows next few days especially with a govt shutdown looming. With another rate cut in Oct priced above 80%, Friday's payroll print will have an outsized impact should it actually happen. Exp are for a 51K headline

Yen has been the worst anti-USD play and no better measure of that than EURJPY eyeballing ATHs

Silver prices are now 32% above their 200 DMA and definitely overbought but it isn't epic yet.

Swap spreads widened a bit after Fed's Logan floated the idea of moving to a different benchmark rate. She suggested TGCR which is an overnight funding rate for USTs and as such would make the Fed more sensitive to daily funding changes and reduces tail risks of crazy rates like 2019

While I am no fan of the belly, 5s have cheapened significantly recently and is well set up for it's auction today. 2s5s30s 'fly

Front-end pressure continues with supply this week (2s, 5s and 7s) but '25 rate cuts holding up with market pricing another 44 bps of cuts for the remainder of the year. 2s look attractive

Quiet supply week for USTs so I thought it might be useful to update my Fed balance sheet chart now that TGA is almost refilled and RRP drained. Bank reserves are down to 10% (ish) of NGDP and probably still have room to go lower before EFFR elevates.

Looking like a difficult year-end for funding UST collateral. Overnight SOFR expected to exceed Fed funds by 7 bps on average in Nov and similar pattern going forward. No reprieve either with TGA rebuilding and Fed balance sheet slowly shrinking.

If you are playing for a stock market melt-up bubble, it is handy to have a way of judging scale. Tech bubble peaked at 57% above 200DMA. Currently 14%

My made up Quantum index RIQ spinning higher again Market cap chart

Polarizing Chinese stocks making new highs

It has been a painful 10 days for the belly as 5s30s unwinds the whole NFP agita and revisits August levels

Overnight SOFR averaged above the SFR rate yesterday. Corp tax date and UST settlements pressured rates higher

USD index eyeballing cycle lows

TGA rebuild and the continuing low-key Fed balance sheet runoff pushing overnight liquidity to cycle lows and pressuring overnight rates. It will be a relatively treacherous year-end but hopefully nothing like 2019. SRF and Fed awareness should help

New admin's regulation relief was supposed to help widen swap spreads this year but it never happened and everyone's favorite '25 trade remained a loser. With quarter-end and overnight rate pressure in view, it is time to abandon

PCE components of PPI

It's a PPI before CPI month which is generally easier to trade, but with labor market weakening, inflation is now in the backseat and not looming as large as it used to

Highest underemployment rate (U6) of the cycle

Unusual to see hedging for a weak NFP this cycle but here we are 16 hours to go and '25 cuts are at days high (61 bps)

Could be a new closing low for the terminal rate if we stay at current levels (SR3)

ISM employment gauge remained soft despite headline strength

ADP 4-month average down to 42K, low of the cycle

Busy IG corp bond sales day with up to 25 issuers likely to raise cash Tuesday. Welcome Sept

5s king into month-end 2s5s30s 'fly

Silver eyeballing $40. It would be first such print since 2011

It will be a refunding month-end tomorrow so a larger duration extension, but corp IG issuance ramps up next week (Sept) so some cross-currents to watch out for in trading Ts. Also expecting more belly issuance given the long-end agita

5y auction

A bit of belly squeeze with 5s historically rich on the 'fly (2s5s10s) before today's 1 pm auction

Another notable decline in the Conference Board's labor market gauge

The steepening has been mostly real

Broad UST curve has no better friend than Trump. Another cycle high for 2s30s above 122bps

With the current extreme duration angst, remarkable that there isn't more inflation risk built into USTs. Long run breakevens are currently a tame 2.29

Post-dovish JP focus should shift to front-end supply and futures rolls next week which on net should pressure 2s and 5s

30y TIPS reopening auction with breakevens at a relatively depressed 2.27

Just because Trump is an idiot in his assault on Fed independence doesn't mean cutting rates is the wrong move. Enough evidence that labor market has weakened and Fed needs to get ahead of this

PMIs haven't been a good guide this cycle but we refuse to give up on them apparently.