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In today's newsletter, the spotlight is on the pivotal US jobs report that has left markets on edge as traders eagerly await insights into the labor market's trajectory and potential implications for Federal Reserve interest rate decisions. While US equity futures remained steady, the S&P 500 and Nasdaq 100 contracts showed little change after a Thursday surge fueled by optimism in artificial intelligence and Big Tech prospects. Treasury bonds experienced fluctuations ahead of the report, with the 10-year yield bouncing back to 4.18%. As traders anticipate substantial Fed policy easing, fund managers pulled $4.8 billion from Treasuries, marking the largest weekly outflow since August 2022. Shifting focus to India, we delve into the decline in Indian bonds following a weekly auction that surpassed expectations, raising concerns about potential delays in rate cuts amid the Reserve Bank of India's upgraded growth projection. Lastly, the Colombian peso's standout performance as the best-performing emerging market currency is highlighted, gaining 1.12% against the US dollar in the week to December 8 and maintaining its leading position with a 21.63% year-to-date gain.

– Matheus Zani & Daniel Porto

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2. Indian Bonds Slide Amid Auction Results and RBI's Growth Outlook

Indian bonds experienced their first decline in five days as cut-off yields at the weekly auction exceeded expectations, particularly on the 7-year bond, leading to a 3bps rise in 10-year yields to 7.27%. The Reserve Bank of India (RBI) opted to keep rates unchanged at 6.50%, marking the fifth consecutive decision, but raised concerns about potential delays in rate cuts by upgrading the growth projection for the fiscal year ending March. The RBI also signaled a reduced need for open market bond sales, contributing to a sense of relief in debt markets. While liquidity tightening was noted, the central bank deferred plans for open market operations. The impact on call money and corporate term paper yields is expected to be marginal. Analysts anticipate a softening of yields in response to the policy, aligning with the global trend. Notably, India's 10-year bond yields have only slightly decreased by 1bp this month compared to a 15bps drop in the US 10-year Treasury yield. In a separate development, India's Forex reserves rose by $6.1 billion to $604 billion as of December 1, according to the RBI.

3. Colombian Peso Shines as Best-Performing EM Currency

The Colombian peso emerged as the strongest performer among emerging market currencies, gaining 1.12% against the U.S. dollar in the week ending December 8. In contrast, the Hungarian forint fared the weakest, losing 1.93% against the dollar during the same period. The Colombian peso also exhibited the highest volatility, while the Hong Kong dollar proved to be the least volatile among emerging market currencies over the last 30 days. On a year-to-date basis, the Colombian peso maintained its position as the best-performing emerging market currency, recording an impressive 21.63% gain against the dollar. In contrast, the Argentine peso faced significant challenges, ending the year as the worst-performing emerging market currency, with a notable loss of 51.35%.

Charted Territory

What to look out for today

USD Average Hourly Earnings
USD Non-farm Payrolls
USD Unemployment Rate
USD Michigan Consumer Sentiment
USD 5 Year Consumer Inflation Expectation

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