Bond Traders Eye Make-or-Break Data to Chart Fed’s Next Move

Bond

Summary:

Bond traders await delayed U.S. data to gauge Fed policy after shutdown. Stronger-than-expected labor figures could reduce December rate-cut odds, lifting yields, while cooling growth keeps markets broadly bullish on Treasuries.

Bond traders are bracing for a deluge of data that will solidify expectations for how quickly the Federal Reserve will continue the interest-rate cuts that have driven US Treasuries to the biggest gains since 2020.

The end of the government shutdown means that agencies will start releasing key reports that were held back since the start of October, including the September employment report on Thursday.

The lack of government data during the closure made it difficult to gauge the direction of the economy. Data from private data sources, like the payroll company ADP, however, continued to underscore the weakening in the job market that drove the Fed to lower its benchmark rate at the September and October meetings, ending what had been a nine-month pause.

But there’s a risk that the government’s figures may surprise to the upside by showing that businesses have been adding jobs at a stronger-than-expected pace. There’s also a chance that the data may be incomplete — or distorted — by the shutdown.

With policymakers still mindful of elevated inflation, that could cause them to hold rates steady at the Dec. 10 meeting or push back on the market’s expectations for 2026.

“As the economic data starts to trickle in, it is possible that the labor market shows more stability,” said Priya Misra, a portfolio manager at JPMorgan Investment Management. “Then the market might further take down odds of a December cut and volatility may rise.”

She said they see a buying opportunity in a rise in 10-year yields to 4.25%. Yields were two basis points lower at 4.13% at 3:44 a.m. in New York.

Bond Traders Eye Make-or-Break Data to Chart Fed’s Next Move_1

Treasuries rallied strongly this year as a slowdown in employment and President Donald Trump’s trade war sowed uncertainty in an economy that in recent years consistently surprised forecasters with its strength. After traders ratcheted up rate-cut bets and yields slid, Treasuries delivered a roughly 6% return this year.

But Fed Chair Jerome Powell has indicated the central bank’s recent moves were largely protective measures to ensure that its restrictive policy doesn’t stall growth, rather than an effort to jumpstart the economy.

Last week, futures traders pushed the odds of a quarter-point rate cut in December below 50% as some Fed officials indicated that such a move is far from a sure thing. That near-term uncertainty has driven up a gauge of expected bond-market volatility, which had been hovering around a four-year low.

“There is some growing concern, although not a huge issue yet, that the Fed won’t cut rates in December based on the timeliness and quality of the economic data,” said Jack McIntyre, portfolio manager at Brandywine Global Investment Management. He said that, coupled with the pullback in yields, “keeps us biased toward a neutral exposure in US Treasuries.”

What Bloomberg Strategists say...

Investors are nervous about faltering US economic growth. You can see it in 10-year bond yields hovering just over 4% despite 3% inflation. For bond investors this could be as good as it gets though. The two biggest drags on growth — high tariffs and a US government shutdown — could soon be resolved.

The exact timing of some of the delayed releases, as well as the November jobs report that would usually come during the first week of next month, has yet to be clarified. The Labor Department said last week that it may take some time to finalize the release dates.

Money managers are mindful of positive economic shifts that could push up yields, including a Supreme Court ruling striking down Trump’s tariffs.

Yet they broadly expect the Fed to continue to keep a bias toward easing policy even if it pause next month, which would likely prevent yields from rising too far off of recent levels. And market sentiment has been relatively bullish toward Treasuries as data points to cooling growth.

Some recent trades in Treasury options targeted a slide in 10-year yields below 4%. JPMorgan Chase & Co.’s Treasury client survey for the week ending Nov. 10 showed the largest net longs since April 7. Investor demand for last week’s new 10- and 30-year bonds was also in line with recent averages.

“It would take a reemergence of strong growth and labor data to push two- and 10-year yields out of recent ranges,” said George Catrambone, head of fixed income at DWS Americas. “There isn’t an obvious reason to expect a strong rebound in the labor market.”

Source: Bloomberg

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James Whitman

Central Bank

Economic

Federal Reserve Vice Chair Philip Jefferson said on Monday the U.S. central bank needs to "proceed slowly" with any further interest rate cuts as it eases policy towards a level that would likely stop putting downward pressure on inflation.

In remarks prepared for delivery at a Kansas City Fed event, Jefferson said he agreed the central bank's quarter-percentage-point rate cut last month was appropriate, given increased risks to the job market and the likelihood that inflation risks "have declined somewhat recently."

"The current policy stance is still somewhat restrictive, but we have moved it closer to its neutral level that neither restricts nor stimulates the economy," Jefferson said. "The evolving balance of risks underscores the need to proceed slowly as we approach the neutral rate."

Fed officials are divided over the need to cut rates further, with different opinions about the level of inflation risk and whether the job market is likely to erode further.

The lack of government data has made analysis all the more complicated, and Jefferson said "it remains unclear how muchofficial data we will see" before the December 9-10 Fed policy meeting.

The Bureau of Labor Statistics will release its key monthly employment report for September on Thursday, but the full publication schedule for other data disrupted by the now-ended 43-day government shutdown has not been announced.

Source: Reuters

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Justin

Stocks

US stocks shuffled between small gains and losses on Monday, kicking off a packed week that will include earnings results from artificial-intelligence darling Nvidia Corp. and the release of long-delayed economic data.

The S&P 500 Index was up less than 0.1% as of 9:38 a.m. in New York, on track to extend a 10-week streak of winning Mondays. The Nasdaq 100 Index rose 0.2%, after falling at the opening bell. A basket of the Magnificent Seven megacap companies was flat, although Nvidia fell 1%. Alphabet Inc. rose 4.5% after a regulatory filing showed that Warren Buffett's Berkshire Hathaway Inc. said it took a stake in Google's parent company last quarter.

The week's marquee event: Nvidia earnings on Wednesday after the market closes. While a strong report could boost Nvidia shares and lead the market higher, any miss — real or perceived — could stop the rally in its tracks and add significant weight to the downside. Options traders are pricing in a roughly 6.5% swing in either direction for the stock, which would be its highest implied move in a year, according to data compiled by Bloomberg.

Among other individual stocks, Quantum Computing Inc. rallied 7.5% after reporting third-quarter net income of $2.4 million, or 1 cent per share, versus a loss of $5.7 million, or 6 cents per share, in the quarter last year. Aramark fell 5.5% after the food and facilities management company reported revenue and adjusted EPS for the fourth quarter that missed consensus estimates. EW Scripps soared 15% after Sinclair took an 8.2% stake.

Investors get a long-delayed bit of economic data on Thursday when the US jobs report for September is released, more than a month late because of the government shutdown. It's part of a data deluge that will guide expectations for how quickly the Federal Reserve will continue its interest-rate cuts. Scrutiny of Walmart Inc. and Target Corp. results will be heightened as investors seek clues on consumer appetite and the broader economy.

Investors are looking to Nvidia to "quell the recent uptick in AI skepticism that is behind this decline in tech and the S&P 500," wrote Tom Essaye, founder of The Sevens Report newsletter.

Elsewhere, Gap Inc. shares were little changed after Barclays upgraded the apparel retailer's stock to overweight, seeing "durable brand recovery" when looking past tariff pressures. Meantime, Zymeworks surged 27% after the drug developer gave topline results from a late-stage trial of its experimental combination therapy for cancer of the stomach and esophagus. Shares of partner Jazz Pharmaceuticals jumped 19%.

Government funding resumed days ago following the longest shutdown in US history, but agencies are running behind on most data collection for key October reports on employment and inflation. The process of catching up will likely stretch well into November on economic information that in any event is growing increasingly stale.

The dearth of official data helps explain recent comments by a number of Fed policymakers that they should hold the line on interest rates when they meet next month. The central bank on Wednesday will issue minutes of its October meeting. Traders have trimmed bets that the Fed will cut rates at its December meeting as Fed speakers have raised concerns about inflation.

Fed Vice Chair Philip Jefferson on Monday said he sees increased downside risks to employment, though repeated his view that policymakers need to proceed slowly as interest rates approach neutral.

Among upcoming private-sector data, figures from the National Association of Realtors on Thursday are projected to show little change in October sales of previously owned homes. The report is expected to illustrate a housing market still challenged by limited affordability.

Source: Bloomberg Europe

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Justin

Forex

Political

Economic

Budget speculation has depressed the UK property market, figures from a leading property website have suggested, with asking prices slipping in the run-up to Rachel Reeves's much anticipated fiscal set piece on 26 November.

The average new seller asking price fell by 1.8%, or £6,589, month on month in November, the figures collated by the property website Rightmove set out, taking the average price tag on a British home put up for sale to £364,833.

The data has emerged as the chancellor has come under pressure to reform property taxes, with housing market experts including the TV presenter Kirstie Allsopp saying "people are in a panic" about potential stamp duty changes, and "sitting tight" before the budget.

It is fairly common for prices to fall month on month in November, when the average monthly price drop has been 1.1% over the past decade, Rightmove says.

However, the current fall is the biggest for this time of year since 2012, with 34% of homes on the market reducing their asking prices and then implementing an average price cut of 7%. Both numbers are the highest since February 2024, the website says.

The gloom in the market is thought to have been partly fuelled by speculation about the contents of the budget, particularly for more expensive properties.

Colleen Babcock, a property expert at Rightmove, said: "The decade-high number of homes available on the market continues to restrict price growth, with many new sellers keen to avoid standing out by overpricing compared with their competition.

"The budget is a big distraction, and is later in the year than usual, with many would-be buyers waiting to see how their finances will be impacted. It appears that the usual lull we'd see around Christmas time has arrived early this year, and sellers who are keen to move are having to work especially hard to entice buyers with competitive pricing."

Homes priced at under £500,000 had been less affected by potential policy change rumours, the survey said.

The figures were released as a separate report predicted that UK mortgage lending growth will weaken in 2026.

After expected net growth of 3.2% this year, UK mortgage lending is forecast to slow to 2.8% next year, as stretched affordability and a squeeze on real incomes drive a dip in housing demand, according to the EY Item Club outlook for financial services.

A challenged global economy and reduced real income growth were set to affect the banking sector in 2026, the study said.

Martina Keane, the EY UK and Ireland financial services leader, said: "The UK economy made a strong start to 2025, but momentum is slowing and we are facing a challenging market. Ongoing global uncertainty and the prospect of further domestic tax rises in the upcoming budget are likely to impact the financial services sector next year. However, our industry is resilient and adaptable, and our fundamentals remain solid."

It said the anticipated dip in 2026 was "likely to be temporary" and followed by improvement in growth levels across most UK financial services in 2027 and 2028.

Source: GUARDIAN

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Adam

Economic

While the Federal Reserve remains divided over whether to cut interest rates for a third time ahead of its last policy meeting of the year, coming changes in the composition of the committee are beginning to give shape to the direction of policy next year.

Atlanta Fed president Raphael Bostic announced this week he will retire when his term ends in February, opening up a key seat that’s currently held by an interest rate hawk.

If the board of the Atlanta Fed appoints a replacement with a more dovish policy view, that could help tilt the interest rate-setting committee toward more rate cuts — though Atlanta doesn’t have a vote until 2027.

“Non-voting members can still meaningfully influence the Fed policy debate and decisions,” said Evercore ISI analyst Marco Casiraghi. “Not knowing anything about the next Atlanta Fed president, for now we think that Bostic’s decision to retire removes a hawkish voice and edges the FOMC fractionally more dovish in expectation.”

Bostic’s announcement comes as the Fed’s Board of Governors in Washington has to agree to the reappointment of all 12 of the regional Fed bank presidents to new five-year terms beginning March 1. That’s historically been a routine process, which occurs every five years and ends with the reappointment by a majority of the Fed’s board.

Questions have arisen about whether the Trump administration could try to influence that reappointment process.

A wildcard for the Fed’s composition is whether the Supreme Court rules in January that Fed governor Lisa Cook — a Biden appointee — can be fired by President Trump. If the Supreme Court rules in Trump's favor, that would open another spot on the Fed’s board for the president to appoint a new governor whose views are more in line with his for lower interest rates. That person could also influence the affirmation of the 12 regional Fed bank presidents.

But Benson Durham, head of global policy and asset allocation for Piper Sandler, said he doesn’t expect any “drama” or rate any impact of a “Trump majority” that would mold the rest of the Committee.

Durham said he struggles to imagine Fed governors telling regional Fed bank presidents, “‘So, I know we’ve been working alongside one another for some time now, but turns out you’re just not MAGA enough, and it’s 2026, so you’re out,’” he said.

Perhaps most consequential, Trump will nominate a replacement for outgoing Fed Chair Jerome Powell, whose term is set to expire in May. On the shortlist are current Fed governors Michelle Bowman and Chris Waller — both appointed by Trump during his first term — as well as former Fed governor Kevin Warsh, National Economic Council Director Kevin Hassett, and head of fixed income at BlackRock Rick Rieder. Any of those choices would likely put leadership in a more dovish position given that these candidates' policy views lean toward lower interest rates.

“The strength of the institution is that it can handle changes in leadership, including chair, governors, and Federal Reserve Bank presidents, without disruption because the culture of the Fed is one in which all leaders focus on delivering the goals that the Fed has been given in the Federal Reserve Act,” said Loretta Mester, former Cleveland Fed president and adjunct full professor of finance at the University of Pennsylvania's Wharton School. “I am hopeful that those chosen to lead will continue that culture, which has served this country very well.”

Anne Walsh, chief investment officer of Guggenheim Partners Investment Management, said she thinks that, no matter what happens, the composition of the Fed will become more dovish.

“That means we're back to my concept of and belief in a much lower neutral rate going forward, which should be helpful for the ... interest-sensitive parts of the economy, the lower-end consumer to some level, for example,” Walsh said at Yahoo Finance's Invest event.

Hawks out, hawks in

Next year will also bring the annual rotation of four regional Fed presidents. Each year, five of the 12 regional bank presidents get a vote — four rotate each year, and the fifth, the New York Fed, has a permanent vote. 2026 will see Cleveland, Dallas, Philadelphia, and Minneapolis Fed presidents come on as voting members, while Kansas City, Chicago, Boston, and St. Louis will rotate off.

All four of the current voting regional bank presidents have leaned hawkish.

Boston Fed president Susan Collins said this week that while she supported cutting interest rates at the last policy meeting, the bar for cutting rates further is “relatively high” and that it’s likely appropriate to hold rates at current levels for “some time.”

St. Louis Fed president Alberto Musalem said this week that he supported cutting rates at the last policy meeting, but that going forward “we need to proceed and tread with caution because I think there's limited room for further easing without monetary policy becoming overly accommodative.”

He cautioned that inflation is still at 3%, and that interest rates right now are getting close to neutral — a level designed to neither spur nor slow economic growth. “I believe we need to continue to lean against above-target inflation while providing some support to the labor market,” he said.

Kansas City Fed president Jeff Schmid reiterated Friday that he thinks inflation is “still too high,” and that while tariffs are likely contributing to higher prices, his concerns are much broader than tariffs alone, including higher electricity and healthcare prices. He dissented against the Fed's rate cut in September.

Meanwhile, Chicago Fed president Austan Goolsbee previously told Yahoo Finance that the threshold for cutting again is higher, noting that he’s nervous inflation has been above the Fed’s 2% goal for nearly five years and is trending in the wrong direction.

The regional Fed bank presidents coming on to vote next year also look like they could slant hawkish. While the addition of Philadelphia could bring moderation to the committee, Minneapolis Fed president Neel Kashkari has expressed reservations about cutting rates more, noting the resilience of the underlying economy. And both Cleveland Fed president Beth Hammack and Dallas Fed president Lorie Logan have made clear they’re more concerned about inflation and are hesitant to cut rates.

Those members could create a division next year.

“Next year, we can anticipate a more hawkish regional Fed composition alongside a more dovish board,” said EY-Parthenon chief economist Gregory Daco. “However, it is important not to oversimplify the situation by envisioning only two factions.”

Daco said he envisions three groups. He predicts the new Fed chair, plus Fed governor Bowman, and the governor set to replace Fed governor Stephen Miran, align with the dovish camp. He predicts Cleveland Fed’s Hammack, Minneapolis Fed’s Kashkari, and Dallas Fed’s Logan will fall into the hawkish camp. Finally, Fed governors Jefferson, Waller, Williams, Cook, and Philadelphia Fed president Anna Paulson would be in a more agnostic group.

Source: finance.yahoo

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Gerik

Economic

Tariffs Return to the Spotlight Amid AI Market Cool-Down

After dominating headlines for weeks, concerns over a potential artificial intelligence market bubble have begun to subside. This shift in investor focus was underscored on Friday, as the Nasdaq rebounded from a three-week low, driven by renewed interest in key tech stocks. However, even as AI-related volatility eases, a familiar theme in 2025 has resurfaced tariffs.

President Trump’s administration announced a significant trade deal with Switzerland, agreeing to reduce tariffs on Swiss exports from 39% to 15%. In return, Switzerland committed to invest $200 billion in the United States by the end of 2028. This marks a strategic pivot that could reshape bilateral trade ties and signal a broader relaxation of protectionist policies.

Domestically, the administration has started to roll back tariffs on goods including coffee, fruits, and select beef products. The move appears to be a response to rising consumer prices, especially for coffee, which Trump acknowledged were “a little bit high.” This admission runs counter to the previous stance that tariffs do not impact consumer prices, revealing a shift in economic messaging.

Despite attempts to steer political narratives, these developments reaffirm fundamental economic principles tariffs do impact prices, and their adjustment can be a powerful tool in domestic economic management.

Geopolitical and Economic Tensions Intensify Across Asia

In other key developments, Japan's economy contracted for the first time in six quarters. The country's GDP shrank 0.4% in Q3 2025 on a quarter-over-quarter basis, with an annualized contraction of 1.8%. While not as severe as anticipated, the decline raises concerns about regional economic resilience, especially amid ongoing diplomatic strife.

This tension is playing out visibly between Japan and China. Following controversial comments from Japan’s new prime minister about a potential conflict involving Taiwan, Beijing issued a travel advisory warning Chinese citizens against visiting or studying in Japan. This diplomatic warning triggered a sharp selloff in tourism-linked Japanese stocks. In response, Tokyo dispatched senior foreign ministry official Masaaki Kanai to China for urgent talks, signaling a potential effort to stabilize relations.

Other Global Headlines

Trump calls for Epstein files release: A notable reversal from earlier resistance, the U.S. president urged Republican lawmakers to unseal documents related to Jeffrey Epstein.

Alibaba and military links: A White House memo cited by the Financial Times alleges Alibaba has supported China’s military in targeting the U.S. The company denied the claims, calling them “completely false.”

Goldman Sachs long-term forecast: According to a new report, artificial intelligence and emerging markets are expected to be the dominant investment themes of the next decade.

As 2025 progresses, the global economic narrative is evolving from AI-fueled speculation to a broader reflection on trade policy, geopolitical risk, and macroeconomic stability. While AI and emerging markets remain in focus for long-term investors, near-term sentiment appears more sensitive to changes in tariffs and international diplomacy. With the Trump administration actively rewriting trade terms and Japan-China tensions escalating, global markets are navigating a complex web of political and economic crosswinds.

Source: CNBC

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Michelle

Forex

Economic

New York state factory activity in November expanded at the fastest pace in a year as new orders and shipments picked up.

The Federal Reserve Bank of New York's general business conditions index increased 8 points to 18.7, figures issued Monday showed. Readings above zero indicate expansion, and the number exceeded all estimates in a Bloomberg survey of economists.

Gauges of new orders and shipments also advanced to the highest in a year. The overall outlook over the next six months moderated but has been positive for most of the year.

A measure of factory employment edged up and a gauge of hours worked climbed to the highest since May 2022 against the backdrop of steadier demand. The outlook for employment in the next six months climbed to the highest since the start of the year.

While the report is largely positive for a sector that's struggled for momentum in recent months, the overall index has been prone to wide swings amid rising prices for inputs, inconsistent demand and uncertainty from President Donald Trump's erratic tariff announcements.

The Fed's report showed gauges of prices paid for materials as well as a measure of prices received both eased. Forward-looking metrics for both also cooled.

The survey responses were collected between Nov. 3 and 10.