Hello everyone, let's take a look at US Treasuries.

The latest data released by the US Commodity Futures Trading Commission shows that for the week ending November 3, speculators increased their net short positions in CBOT 5-year US Treasury futures by 246,314 contracts to 1,275,370 contracts.

In terms of market action, on November 6 local time, US Treasury yields rose across the board. The 2-year Treasury yield climbed 5.60 basis points to 4.514%, the 3-year Treasury yield rose 5.00 basis points to 4.580%, the 5-year Treasury yield gained 4.60 basis points to 4.647%, and the 10-year Treasury yield advanced 2.60 basis points to 4.859%. Throughout October, the 10-year Treasury yield fell by a cumulative 30 basis points, ending its previous streak of consecutive increases.

On the news front, a report released by the US Bureau of Labor Statistics on Friday showed that nonfarm payrolls increased by 165,000 in October, far exceeding Wall Street expectations of a 70,000 gain. The unemployment rate dropped to 4.1%, while the labor force participation rate rose to 61.9%, both defying market expectations of holding steady at September levels. Employment, unemployment, and wage indicators were broadly strong.

Following the release of the employment report, the interest rate market quickly adjusted its policy expectations. Traders' bets on a 25 basis point rate hike at the Fed's December meeting rose to approximately 85%, up from about 75% before the report was published. Market expectations for the timing of the next rate hike were also brought forward.

Lindsay Rosner, head of Goldman Sachs Asset Management, believes that this nonfarm payrolls report has cleared the way for a Fed rate hike in December. The continued tightening of the labor market provides room for the Fed to raise rates further, and a hike would not necessarily undermine its employment objectives.

Jeff Schulze, chief investment strategist at Franklin Templeton Institute, said the strong October employment report has renewed rate hike pressure on the Fed, especially against the backdrop of post-midterm election concerns that a slowdown in AI infrastructure spending could weaken rate hike expectations. Ryan Weldon of IFM Investors also believes that although another inflation report will be released before the Fed's December meeting, strong economic performance and sticky inflation make it difficult for the Fed to avoid the rate hike option.

However, some market participants believe that energy prices, the trajectory of inflation going forward, and the impact of recent volatility in AI-related asset valuations on financial markets could still influence the Fed's next move. Nick Timiraos, a journalist known as the "new Fed wire," believes that this employment report has not shaken the Fed's assessment of economic growth and inflation, but whether the recent sell-off in AI-related assets will change the financial market environment could become another variable in the Fed's December rate hike decision. Whether Fed Chair Warsh places more emphasis on lagging employment data or forward-looking market signals will become the market's next focus.

Joe Saluzzi, co-head of Themis Trading, believes that the much stronger-than-expected nonfarm payrolls figure has indeed increased the likelihood of the Fed's next rate hike. However, stock market volatility had already risen noticeably the previous day, and whether the Fed would choose to raise rates at a time when financial markets are unstable remains worth watching. Tim Holland, chief investment officer at Orion, also believes that strong employment data could push Treasury yields higher and put additional pressure on the stock market. The market is already affected by the outlook for the AI capital expenditure cycle and policy uncertainty, and if interest rates rise further, risk assets could continue to come under pressure.