Daily Market Color

Long Term Rates Fall Nearly 10bps After Weak Private Payrolls

Rates decline after weak private payrolls print. Similar to yesterday’s JOLTS job openings report, ADP employment change in November was lower than forecasts at 103k. The data pushed rates lower at the long end of the curve, where the 20y yield saw the largest decline of 9bps. Meanwhile, the short end rose slightly, the 2y yield climbing to 4.59%. Elsewhere, oil slumped below $70 per barrel after reports detailed failures to constrain Russia’s oil exports, yet another contributor to over-supply concerns.

ADP (Automatic Data Processing) Employment Change Graph

Bank of Canada holds rates steady. The Bank of Canada held rates unchanged at 5% today for the third consecutive meeting. While officials offered a willingness to raise rates if inflationary pressures rebound, they noted dampened spending and price pressures. Furthermore, their official statement no longer cited “increased” inflationary risks. YoY CPI was 3.1% in October, a positive development and a significant decline from September’s 3.8% print. Futures currently suggest a strong likelihood of rate cuts by the end of April.

Canada Policy Rate Outlook Graph

Fed’s Standing Repo Facility sees its highest usage in years. Funding rates proved volatile over the past week, much of which can be pointed toward repo activity. Overnight SOFR rose to its all-time high of 5.39% on December 1st after an increase in repo rates, a 6bp increase from 5.33% the previous session. On December 5th, the Fed’s Standing Repo Facility saw overnight borrowings total $203 million, the most since 2020. Though far less than 2020’s peak daily borrowings, the trend is noteworthy given the rare historical usage of the facility and the recent onboarding of 5 counterparties to up the total to 25.

Overnight SOFR (Secured Overnight Financing Rate) History Graph

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