With the federal government still shutdown at the time of this writing, this week’s data docket will likely remain relatively sparse. All federal government statistical releases are on hold until the shutdown ends. Hence, market participants will pay close attention to the signals coming from Washington this week. With government data on hold for the moment, private-sector data releases and Fed communications will take precedent. We see a high likelihood of the shutdown continuing for at least another week. Reportedly, the Office of Management and Budget (OMB) is coordinating with government agencies to prepare layoff plans. Also roughly 150k federal workers had accepted deferred resignation offers and, of those 150k, 100k would leave the government at the end of September. This suggests that October NFP (scheduled to print in early November) is likely to be weighed down by 100k due to DOGE-led deferred resignations and we expect the additional negative impact of 50k to be reflected in subsequent months. Regarding this week’s economic calendar, Wednesday’s minutes from the September 19 FOMC meeting will be a key focus for investors. In UST auction supply, we have 3yr, 20yr & 30yr auction supply of $58 BN, $39 BN & $22 BN on Tuesday, Wednesday & Thursday respectively. There are several Fed officials speaking this week once again, with no additional information in the past couple of weeks that could have meaningfully moved officials’ outlooks, we doubt they will yield any new insights, at least not until we see the latest employment and inflation data that are currently delayed due to the government shutdown. For the next few months, employment data will be keenly watched for any weakness. We believe the Oct NFP can be a -ve no to the tune of -25k/-50k. This is because of the one-time impact of the part of the government workforce which has earlier taken voluntary retirement and are now finally getting out of the workforce by Sep end. In addition, we don’t see companies holding on to their hoarded labor if sales worsen by end CY25 due to pass on of tariffs to consumer prices. Hence, we see the delicate balance between low hiring and low firing breaking towards more firings by end CY25. So, we continue to look forward to a front-loaded rate cuts cycle of 4 cuts of 25 bps each in the next 4 meetings. In RoW data, we have Germany's factory orders and industrial production data due this week. Chinese aggregate financing data might have slowed in Sep while Japanese labor cash earnings also eased in August. RBNZ in it's monetary policy meeting on Wednesday is likely to cut rates by 25 bps to 2.75% but risk is skewed towards a bolder 50 bps cut in light of the recent weak Q2 GDP data.
