Morgan Stanley Fixed-Global Macro Commentary October 4-110611657

M Update Global Macro Commentary | Global October 4Morgan Stanley & Co. LLCAlexandra MaierStrategist Alexandra.Maier@morganstanley.com +1 212 761-0428 Zoe K StraussStrategist Zoe.Strauss@morganstanley.com +1 212 761-0407 Morgan Stanley MUFG Securities Co., Ltd.+Hiromu UezatoResearch Associate Hiromu.Uezato@morganstanleymufg.com +81 3 6836-8431 Morgan Stanley Asia Limited+Min DaiStrategist Min.Dai@morganstanley.com +852 2239-7983 Morgan Stanley & Co. International plc+David CuevaStrategist David.Cueva@morganstanley.com +44 20 7425-2143 Morgan Stanley & Co. LLCHeather BergerEconomist Heather.Berger@morganstanley.com +1 212 761-2296 Resoundingly strong US employment report; USTs bear-flatten as Fed policy path reprices to 25bp cuts; BoE Chief Economist Pill favors "gradual" easing; Bunds bear-flatten; PHP gains amid soft inflation; DXY has best week in over two years; DXY at 102.49 (+0.5%); US 10y at 3.967% (+12.1bp).• Resoundingly strong US nonfarm payrolls with a beat in the headline figure, 72k of upward revisions, an unexpected drop in the unemployment rate, and an upside surprise in average hourly earnings.• USTs aggressively bear-flatten (2y: +22bp) after the broad-based strength in the US labor market data as market participants price out the possibility of outsized Fed cuts with the November meeting falling to below 25bp of cuts. • GBP is supported as BoE Chief Economist Pill favors a “gradual withdrawal” of the BoE's current policy restriction, seemingly in contrast to BoE Governor Bailey’s recent call for a more “activist” approach in cutting rates.• European duration bear-flattens, after yields rise sharply alongside their US counterparts; 2y Bunds sell-off 12bp to 2.20% as the 2s10s curve (-6bp d/d) re-approaches inversion with 10y Bunds at 2.21%.• PHP gains 0.2% against the USD following softer-than-expected local inflation and comments from BSP Governor Remolona that the central bank is comfortable with the peso’s recent rally • DXY USD Index (+0.4%) posts its best week in over two years after the strong employment data exacerbates the USD strength.Please refer to our recent publications and collaborations (Korea Reform Renaissance: WGBI Inclusion to Benefit Korean Assets; France Economics, Equities & Macro Strategy: Fiscal Consolidation Starts - What to Expect?; Israel Economics and Sovereign Credit Strategy: Risks in Focus; Snippets from China: Policy Tipping Point Threshold, Government Revenue, What's Next, Exporters' FX Conversion; EM Fixed Income Flows Update: Where Supply Meets Demand).The main G10 central bank event in the week ahead is the RBNZ monetary policy meeting (Oct 9). Minutes from the September RBA meeting (Oct 8) and September FOMC meeting (Oct 9) will also be released. Selected scheduled G10 central bank speaking engagements include St. Louis Fed President Musalem (Oct 7), ECB Chief Economist Lane (Oct 7), RBA Deputy Governor Hauser (Oct 8), New York Fed Morgan Stanley does and seeks to do bu