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Global Macro Commentary Summary | May 9

Core Content

The global macro commentary on May 9 highlights key developments across developed and emerging markets, with a focus on interest rates, currency movements, and central bank statements. The following are the main points and trends observed:

Key Market Movements

• Canada:

  • Employment rebounded with 7.4k jobs added in April, but the unemployment rate rose to 6.9%, the highest since November.
  • Canadian interest rates bull-steepened, with 2y yields falling by 6bp.
  • CAD weakened against USD, with USD/CAD down 0.1%.

• US Treasuries and Equities:

  • UST yields and US equities showed minimal movement, with 2y yields rising by 2bp and S&P 500 down 0.1%.
  • The market is cautious ahead of upcoming US-China trade talks.

• Japan:

  • JGB yields bear-steepened, with 5y yields down 2.0bp and 10y yields down 3.0bp.
  • The weak labor data had limited impact due to temporary calendar effects.
  • JGBs are likely to remain under pressure as the BoJ continues its purchase operations.

• Norway:

  • Despite a slowdown in inflation, NOK strengthened 0.5% against USD, aided by a 1.7% rise in Brent crude oil prices.

• DXY USD Index:

  • Closed at 100.43, down 0.2% for the day and up 0.3% for the week.

Central Bank Insights

• Fed Members:

  • Echoed Chair Powell's stance, emphasizing the Fed's patience and the importance of anchoring inflation expectations.
  • Fed Governor Kugler noted that the economic health provides time for the Fed to make decisions.
  • New York Fed President Williams stated that policy is in a good place and remains "modestly restrictive."
  • Atlanta Fed President Bostic warned against adjusting policy with limited visibility.

• Treasury Secretary Bessent:

  • Warned that the federal government may exhaust its cash and extraordinary measures by August.
  • Strategists estimate the x-date (date of exhaustion) to be in late August to early September, with risks skewed to later.

Week Ahead Highlights

• Monday, May 12:

  • BoE Deputy Governor Lombardelli, External Members Greene, Mann, and Taylor will speak.
  • Fed Governor Kugler will speak in Dublin.

• Tuesday, May 13:

  • Economic releases include CPI (India, US) and UK Employment.
  • BoE Governor Bailey and Chief Economist Pill will speak.

• Wednesday, May 14:

  • Argentina CPI will be released.
  • BoJ will conduct JGB purchase operations for 1-3y, 5-10y, and 10-25y sectors.

• Thursday, May 15:

  • Central Bank Meeting: Banxico.
  • Economic releases include US Retail Sales, GDP (UK, Norway, Poland, Eurozone, and Colombia).
  • Fed Chair Powell and Thomas Laubach Research Conference.

• Friday, May 16:

  • Economic releases include GDP (Japan, Malaysia, Hong Kong), Australia Employment, and US University of Michigan Consumer Sentiment.
  • BoJ Board Member Nakamura, ECB Vice President de Guindos, and ECB Chief Economist Lane will speak.

Emerging Markets Overview

• CEEMEA:

  • Rates sold-off broadly, with Poland, South Africa, and the Czech Republic experiencing bear-steepening.
  • Turkey's OIS curve shifted higher, with 5y yields up 23bp.
  • Brazil's IPCA rose 0.43% m/m, with core metrics surprising upwards.

• Asia/Pacific:

  • China's CPI remained flat at -0.1% y/y, with core CPI subdued at 0.3% y/y.
  • Indonesia's Consumer Confidence edged up to 121.7.
  • Hungary's CPI decreased to 4.2% y/y, while Ukraine's CPI rose to 15.1% y/y.

Tactical Trading Signals

• G4 10y Futures Smarter (beta) Trading Strategy:

  • US 10y: Total 200%, Trade Longs Only 100%, Fade Shorts Portfolio 100%.
  • Germany 10y: Total 100%, Trade Longs Only 0%, Fade Shorts Portfolio 100%.
  • Japan 10y: Total 200%, Trade Longs Only 100%, Fade Shorts Portfolio 100%.
  • UK 10y: Total 100%, Trade Longs Only 100%, Fade Shorts Portfolio 0%.

• Notes:

  • Germany's "Fade Shorts" portfolio exposure increased to 100% following a 5d MA cross below the 20d MA, with a planned exit on June 13.

Economic Data Highlights

• Japan:

  • March labor data showed a slowdown in scheduled cash earnings, but the actual growth adjusted for calendar effects was 2.9%.

• Norway:

  • April CPI slowed to 2.5% y/y, with core inflation surprising to the downside by 20bp.

• Canada:

  • Employment increased by 7.4k, but the unemployment rate rose to 6.9%.

• Italy:

  • Industrial Production edged up 0.1% m/m in March.

• China:

  • Exports slowed to 8.1% y/y, but front-running of export rerouting sustained resilient growth.

Market Data Summary

• G4 Rates Closes (5pm NY):

  • US 10y: 4.379% (0.0bp change).
  • Germany 10y: 2.561% (2.9bp change).
  • UK 10y: 4.566% (2.2bp change).
  • Japan 10y: 1.361% (3.6bp change).

• Inflation Closes (5pm NY):

  • US TIPS 5y: 1.590% (0.5bp change).
  • Germany 10y Real Yields: 0.600% (1.7bp change).
  • UK 10y Real Yields: 1.417% (3.4bp change).
  • Japan 10y Real Yields: -0.303% (0.3bp change).

• Macro Closes:

  • DXY: 100.43 (-0.2%).
  • EUR: 1.125 (+0.2%).
  • GBP: 1.331 (+0.5%).
  • JPY: 145.37 (-0.4%).
  • USD/NOK: 145.39 (-0.5%).
  • USD/TRY: 10.36 (+0.3%).

Important Disclosures

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