Last week I noted why I thought the Warsh Credibility Tantrum could be an overreaction, and it proved the right take as US treasury yields stabilised last week and the front end has continued to price out hikes. But term premium has inched higher to the highest level since 2011, which we'll return to in more detail in the rates section.

It's also concerning that the bulls are finding their voice again on X after a big bounce in risk stocks that has also seen the VIX back below the 15 handle - levels we haven't seen since the beginning of the year! Term premiums making new highs suggests we're not quite out of the woods yet on the macro front, as well as the geopolitical front while tensions remain on a knife-edge.

Macro

LABOUR DATA

NFP was a whopping 108k below consensus expectations at -23k versus the +85k expected while the prior month was revised down to +20k from +57k. An absolute disaster of a report... Or was it? Most of the job losses came from the Government (-53k), Leisure & Hospitality (-40k), and the Retail Trade (-19.4k).

To put that into perspective, NFP excluding those 3 industries would have been +89.4k, above the Private NFP estimate of +82k. This suggests larger-than-expected distortions in tourism-heavy areas during the summer-holiday period that would have included US Independence Day and the World Cup where preparations began months in advance and ended late in July. Assuming those were the causes of the massive distortions, the report is not as weak as it looks.