Weak Labor Market Fuel for Rally: Nomura's Nicholson

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00:00I think the biggest thing probably among some of the bond traders is this U.S. jobs report, right?

00:04Yeah.

00:04And whether we see anything there that can change market expectations.

00:09Still with us is Gareth Nicholson, CIO and head discretionary portfolio management at Nomura.

00:13Gareth, yeah, I think one question is whether this government shut down,

00:16can they avoid it so that we actually see these jobs numbers?

00:19But in particular for the bond market, I mean, is there anything that you think in this print

00:23that could change what's already been near guaranteed pricing

00:27that we might actually see a Fed rate cut in October?

00:30Do you think anything could change that view?

00:33Well, I think if we don't get the data report, that could change the view.

00:36So to your point, if the shutdown, 1159, there is no negotiation in the BLS,

00:44non-essential closure of functionality, which includes the payroll report not coming out.

00:51If this happens, I think, you know, traders hate that.

00:54They hate uncertainty.

00:55The labour market is a huge indicator of where risk is going to go.

00:59Now, this is definitely not our base case, but with many things in geopolitics this year,

01:03the base case has turned out to be off.

01:05So we're keeping a very close eye on to 30 September to see how that plays out.

01:11Get past that.

01:12Non-farm payrolls, we don't expect a big surprise.

01:14We expect actually a relatively weak labour is a fuel for the rally.

01:19That will continue to put pressure on the front end to come down.

01:24We expect rate cut in October and December and a few more next year.

01:28This is a little bit more than an insurance cut.

01:31There is weakness forming, but, you know, the market is seeing through that.

01:36But the economy is struggling a little bit.

01:37So from a labour perspective, slightly weaker labour, fuel for the rally.

01:42And we think, again, 100% price in October rate cuts, which is our base case.