德银-美股-宏观经济-12月非农就业报告：经济和策略预览-20180104-10页_749kb

Summary of US December Non-Farm Payrolls Report: Economic and Strategy Preview

Core Content

The document provides a detailed preview of the upcoming US December non-farm payrolls (NFP) report, focusing on its implications for the economy and interest rate strategies. It outlines the expectations for job growth, wage data, and market reactions, along with valuation insights and investor positioning.

Main Economic Views

• Labor Market Outlook:

  • The labor market is approaching full employment.
  • Strong job growth is expected to continue, keeping the unemployment rate on a downward trajectory.
  • The unemployment rate is forecast to remain at 4.1%, the lowest since 2000.
  • Jobless claims are at very low levels, indicating a healthy labor market.

• Wage Growth:

  • Wage data will be the key focus of the report.
  • The forecast for average hourly earnings is 0.3% month-on-month, maintaining a 2.5% year-over-year growth rate.
  • A 0.3% print would raise the six-month annualized wage growth to 2.76%, suggesting increasing wage pressures.

• Model Predictions:

  • The model for average hourly earnings is based on the day of the week of the 15th of the month and the 12-month moving average of wage changes.
  • The model has historically been accurate, with an average deviation of 7 basis points since 2014.
  • The model predicts a 0.3% increase in average hourly earnings for December.

• Private Payrolls Forecast:

  • Private payrolls are expected to grow by 220,000, up from 185,000.
  • This upgrade is based on the ADP employment report and the ISM employment components.
  • The 12-month average for private payrolls growth is forecast to reach 180,000, while the 3-month average is expected to rise to 230,000.

Key Strategy Insights

• Wage Inflation as a Market Catalyst:

  • Wage data is expected to significantly influence market sentiment.
  • A beat on wage expectations could lead to bullish steepening of the yield curve.
  • A miss may result in bearish flattening or modest curve flattening.

• Yield Curve Valuation:

  • The 5s-10s (cash) curve is 17 bp below the model's forecast.
  • The 10s-30s (swaps) curve is 6 bp below the model's forecast.
  • The 10y breakevens are 4 bp cheap to the model's forecast.

• Swap Spreads:

  • 2Y swap spreads are 2 bp cheap to the model's fair value.
  • 5Y swap spreads are 3 bp cheap to the pre-reform model.
  • 10Y swap spreads are 5 bp cheap to the pre-reform model.
  • 30Y swap spreads are 5 bp rich to the model's fair value.

• Investor Positioning:

  • Speculative investors are short the market, with positions concentrated in ED, TU, FV, and WN contracts.
  • The SMR Index is at 99.4, slightly below neutral.
  • The CFTC Specs show a decrease in short positions across multiple contracts.

Market Implications

• The report is expected to provide solid momentum for employment and economic growth in the New Year.
• This momentum could raise Fed concerns about the labor market overheating in 2018.
• The current 2y forward yield for end Q1 is 2.05%, implying a 55% probability of a low rate scenario ending at 1.75% and a 45% probability of a high rate scenario ending at 2.75%.

Risk and Disclosure Information

• The report contains important disclosures regarding potential conflicts of interest and the limitations of the models and forecasts.
• Deutsche Bank is not acting as a financial adviser and does not provide investment, legal, or tax advice.
• Derivative transactions involve significant risks, including market, counterparty, and liquidity risks.
• FX risk is a concern for investors in foreign-denominated instruments.
• The report is intended for financially sophisticated investors who can evaluate risks independently.

Additional Information

• The report includes contact details for various analysts and research teams at Deutsche Bank.
• International production locations are listed for different branches of Deutsche Bank.
• The disclosure directory and legal information can be found on the Deutsche Bank website.

Conclusion

The upcoming NFP report is anticipated to show solid job growth and moderate wage increases, which may signal a tightening labor market. These data points are expected to influence interest rate expectations and market positioning, with wage data being the most significant driver. Investors are advised to review risk disclosures and assess their own financial circumstances before making investment decisions.