[MARKET ANALYSIS] Rangebound action for fixed benchmarks into NFP

• In brief, benchmarks are contained into today's NFP report (delayed due to the brief shutdown), which includes benchmark revisions. US labour data during the window has been on the softer side of things, with claims steady, continuing easing, ADP weak and Revelio posting job losses. Furthermore, Challenger cuts were the highest for January since 2009, and JOLTS were at the lowest since September 2020.
• USTs approach this, and then data and Fed speak afterwards, firmer by a tick or two in a thin 112-15 to 112-18 band; note, trade was quiet overnight with no cash trade due to Japan's market holiday. For the Fed, markets currently fully price a cut in June (-25.2bps implied), with around a 20% chance of one occurring earlier in March and c. 40% in April.
• EGBs in-fitting with the above, Bunds firmer but only marginally so in a 128.60-74 band. ECB speak this morning once again sticking to the script. Interestingly, the latest ECB wage tracker was hot across the board and factors in favour of those who think the next move will be a hike rather than a cut. Adding to the hawkish narrative from/affecting some global central banks in recent sessions, i.e. the RBA and Norges Bank.
• Gilts are contained in a 90.71-90 band. UK specifics are much quieter thus far vs the last few sessions, with a busy docket of data scheduled for next week. Much of the UK press is focused on Angela Rayner after it was revealed that a "Rayner for leader" site briefly went live in January; a Bloomberg write-up on the subject characterises the discussion/view of insiders neatly as "Buy Rayner and Sell Streeting".

Markets are trading within defined ranges ahead of the NFP report, which may carry significant implications for future monetary policy. Given the softer trend in US labor data and expectations for a Fed cut, the cautious stance in USTs suggests traders are positioning for potential volatility post-release. Meanwhile, mixed signals from European benchmarks hint at a divergent outlook, particularly with hawkish trends in ECB communications, which could impact USD and EUR dynamics shortly.