Halister News

(Bloomberg) -- Range of forecasts for September nonfarm payrolls change is biggest in years, owing to uncertain impact of hurricanes. A study of market reaction to jobs reports since 2000 shows that “when the forecast is highly variable, Treasury traders have tended to look past the NFP data point,” Wells Fargo strategists led by Mike Schumacher write in note.

• “We recommend fading the move if Treasuries react significantly in the first hour or two of trading after NFP is released tomorrow”
• Standard deviation of forecasts (80k median in Bloomberg survey) is 44k, largest since 2010 and more than twice the 20k norm for the past year
• In months when the standard deviation has been 40k-50k, regression produces R-squared of 0.01, which “is not a misprint”; for last 12 months, R-squared is 0.11

To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net

--KRISTIN JENSEN

--ANDREW J. BARDEN

(Bloomberg) -- Fed’s balance-sheet reduction, ECB tapering, U.S. debt ceiling, govt budget battles and geopolitical risks “all loom as potential triggers” of higher volatility, Wells Fargo Securities strategists write in Oct. 4 note.

• “Volatility remains low, but should pick up soon”: strategists Michael Schumacher, Boris Rjavinski, Zachary Griffiths write
• Implied volatility “could rise substantially over the next few months”  
  • Fed’s “balance sheet diet” to contribute to rise; impact could take effect “in earnest” in 1H 2018 as market participants “come to grips” with combination of reduced central-bank buying, increased UST supply 
  • WFS expects Treasury 2s/5s and 10s/30s to steepen
  • Reductions in central bank’s portfolio should outweigh supply effect in 5s/10s; this part of curve should flatten 
• Market’s assessment of Fed’s likely rate increases this year and next “looks much more reasonable now than it did a month ago”
  • WFS sees next hike in December and two more in 2018
• Investors who expect sharp increase in inflation in near-term should consider buying 2018 TIPS outright or on breakeven basis

To contact the reporter on this story: Vivien Lou Chen in San Francisco at vchen1@bloomberg.net To contact the editors responsible for this story: Boris Korby at bkorby1@bloomberg.net Mark Tannenbaum

(Bloomberg) -- Market expects Brazil inflation as measured by IPCA to show another deceleration in September, the second monthly slowdown in a row. Analysts are looking for signals that food prices might reduce their historical fall and enter a rising cycle that could influence Selic rate’s path.

• Median estimate in Bloomberg survey points out to 0.09% m/m increase in Sept. IPCA
• Itau reduced its projection for 2018 CPI from 4% to 3.8% because of food and services prices, and said that BCB has room to reduce its estimatives as well, which could lead to a 6.5% Selic rate, according to the bank’s chief economist Mario Mesquita’s report
• Camila Abdelmalack, CM Capital economist, has doubts about how long food deflation trajectory will last, but notes that general price indexes known as IGPs continue to show negative agricultural price data
• "Market has already priced in the fall in food prices in the short term, so it probably won’t have much relation to the monetary policy in general" says Matheus Gallina, Quantitas Gestião de Recursos fixed income trader
  • He acknowledges, however, that inflation in September and in the next two months could have a small effect on the "fine tuning" between 6.5% and 7% for the final Selic range

Original Story: Prévia: Mercado espera IPCA com alimentos e ciclo do BC em foco --With assistance from Patricia Lara and Vitor Martinez. To contact the translator on this story: Ana Carolina Siedschlag in São Paulo at asiedschlag@bloomberg.net To contact the translation editor responsible for this story: Giulia Camillo at gcamillo@bloomberg.net Reporters on the original story: Josue Leonel in Sao Paulo at jleonel@bloomberg.net; Ana Carolina Siedschlag in São Paulo at asiedschlag@bloomberg.net Editors responsible for the original story: Daniela Milanese at dmilanese@bloomberg.net Marisa Castellani