US TSYS: Tsys Futures Stead Ahead Of FOMC Minutes

In the week ending 14th of Jan (last Tuesday), CFTC positioning flows were mixed across leveraged and asset managers. In the leveraged space, GBP longs were trimmed notably. GBP has been an underperformer since the start of the year (down along with CAD), while other G10 currencies are higher YTD), as twin deficit/financial stability concerns weigh on the pound. Still, leveraged investors can cut GBP longs further. Asset managers cut GBP shorts, albeit modestly, and comfortably maintain an outright short. 

• Yen positions saw little shift from a leveraged standpoint, but asset managers added to shorts.
• For the AUD, leveraged names added to shorts, but asset managers provided some offset (although remain outright short).
• The table below for the full break down and changes in the week to 14th of Jan. 

Table: CFTC Positioning By Currency & Investor Type (Week Ending Jan 14 2025) 

Source: CFTC/BBG/MNI - Market News 

• Last week’s decline in interbank liquidity (it appears) could be targeted at bond bulls who have relentlessly pushed bond yields lower.
• The benchmark 10YR future has traded above all major EMA levels since late October last year as bond bulls took over, dragging yields lower.
• Recent developments have seen a modest pullback in the 10YR future to 109.1 where it is steady today, above the 20-day EMA of 108.9618.
• Other EMA levels: 50-day EMA 108.2276, 100-day EMA 107.3791 200-day EMA 106.4696.
• China’s 5YR future is up +0.05 today at 106.515 and 2YR future is up +0.38 to 102.816.
• The Lunar New Year holidays sees China out Jan 28-Feb 04 inclusive and it is likely that the Central Bank will provide liquidity leading into the holiday period which could see the resumption of the upward trend.
• Key data out this week: Industrial Profits Jan 27, PMI’s 27 Jan.   

In its December meeting minutes, the RBA said “a variety of labour market indicators could be signalling that progress in the labour market moving closer to its full employment level had stalled”. The December monthly labour market data were generally consistent with this statement with employment up 3.1% y/y and underemployment continuing to trend lower. 

• The RBA previously pointed out that it looks at other variables, not just employment and the unemployment rate.
• Underemployment trended lower over the second half of 2024 falling 0.7pp from the May peak to 6.0% in December. Signs that employees are working fewer hours than they would like would generally lead any drop in employment. The decline in underemployment is consistent with Governor Bullock’s view that layoffs are unlikely. 

Australia unemployment vs underemployment rates %

• Hours worked rose 0.5% m/m and 3.2% y/y, highest since July 2023, in December up from flat and 2.1% y/y. In Q4 they posted their third straight quarterly increase at 0.6% q/q, slower than Q3’s +0.8% though. The continued rise in hours is good news for households but is likely to mean that productivity remained lacklustre in Q4, an ongoing concern for the RBA.

Australia hours worked %

Source: MNI - Market News/ABS

• The youth unemployment rate is seen as a lead indicator of the labour market as a whole. The data is volatile and December rose 0.4pp but the Q4 average was 0.6pp lower than Q3 at 9.0%.
• Q4 vacancies rose 4.2% q/q, the first increase since Q2 2022, resulting in the ratio to unemployment rising almost 4pp. It has eased considerably from the post-Covid high but remains around 20pp above the historical average. SEEK monthly new job ads weren’t as optimistic though with both October and November falling leaving the level down 8.4% y/y in November.
• NAB’s measure of availability of suitable labour had been improving but also appears to have stalled.