Curve Your Enthusiasm A very stable disequilibrium
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Aug 6, 2025 Brendan Donaher, Executive Director of STIRT trading, shares his insights into the intricate world of bond markets and monetary policies. He discusses the implications of recent U.S. job data on economic perceptions and market strategies. The conversation dives into the evolution of FOMC pricing and its effects on the Bank of Canada. Brendan also highlights the importance of pension hedging in cross-currency swaps and shares attractive trading opportunities amidst complex market environments and funding pressures.
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Labor Slack Drives Fed Risk
- US payrolls fell while unemployment stayed stable, revealing more marginally detached workers.
- Ian Pollack says that rising labor slack increases the probability of Fed cuts.
Narrative Shift Sparked A Rally
- Brendan Donaher says the market's narrative shifted after mixed positioning and Powell's comments.
- That shift caused a fast, large rally and reintroduced dovish bias across the curve.
Prefer Two-Year Belly Exposure
- Brendan Donaher recommends owning two-year and belly exposure because market participants seek twos in rallies.
- That trade plays a dovish allocation as cuts are distributed further out the curve.