Member Services Desk Weekly Market Update

This MSD Weekly Market Update reflects information for the week ending September 26, 2025.

Economist Views

Data over the past week was generally mixed but portrayed an underlying economic resilience. The final estimate for Q2 GDP, for instance, was a stronger-than-expected 3.8%. While this number can be distorted by trade and inventory dynamics, it nonetheless reflects the continued growth led by rising consumer spending. The New Home Sales figure for August was notably stronger than expected, while Existing Home Sales declined from the month prior but to a lesser degree than predicted. On the employment front, jobless claims moderated from prior weeks’ levels. Inflation measures remain elevated to the Fed’s goal, and Friday’s (just prior to this Update’s release) monthly Personal Consumption expenditure data will shed important light on the recent trend.    

The upcoming week serves another busy slate of data, particularly in labor market-related measures. The highlight should be the employment situation report, but the JOLTS and ADP reports are now garnering closer attention than in the past. Without stronger-than-expected inflation data or a major reversal in labor market momentum, another rate cut or two still appears likely this year.  There is risk lurking in the background of a federal government shutdown, a situation that will be monitored by economists. 

Pending Home Sales: Sales are expected to show a slight rebound of .1% vs. last month’s .40% decrease.

Conference Board Consumer Confidence: Confidence is expected to reveal a retreat from last month’s 97.4 reading.

Job Openings & Labor Turnover Survey: The report will provide valuable clues on labor market conditions, such as levels of quits/layoffs/openings.

ADP Employment Change: A 48K increase is expected for September.

ISM Manufacturing: The September projection is expected to show continued contraction, with a 49.3 reading.

Initial and Continuing Jobless Claims: Initial Claims decreased last week to 218k, and Continuing Claims also revealed a slight decrease, thereby indicating a relatively low-layoff labor climate.

Durable Goods Orders: The final reading for August is expected to show a 2.9% increase.

Employment Situation Report and Change in Nonfarm Payrolls: This tier-1 report’s results from the last few months essentially sparked the Fed’s move towards this month’s rate cut. Payrolls are expected to modestly improve, with the unemployment rate remaining steady.

Federal Reserve Bank Appearances:

• 9/26/2025 13:00  Fed's Bowman speaks on Monetary Policy at Cornell Club NYC
• 9/29/2025 18:00  Fed's Bostic moderates a conversation with Delta CEO
• 9/30/2025 13:30  Fed's Goolsbee participates in a Q&A at Midwest Agriculture Co.
• 10/02/2025 10:30  Fed's Logan Speaks at University of Texas conference
• 10/03/2025 6:05  Fed's Williams speaks in Amsterdam

Key Market Trends

Sources: Bloomberg; Moody’s Analytics. The past week’s GDP data was driven by higher consumer spending, which consistently comprises the largest share of the U.S. economy and represents ~70% of GDP. Perhaps unsurprisingly, wealthy consumers remain the dominant force underlying sturdy spending trends. As seen here, folks in the top 10% of the income distribution accounted for 49.2% (RHS, %) of total spending in Q2, thereby marking the highest level since 1989, according to a Moody’s analysis. This spending has provided a bulwark of sorts to any recession pressures, but the support could turn shaky upon any sustained downturn in labor and/or equity markets. This backdrop likely provided the Fed with further reason for its precautionary rate cut this month.

Source: Bloomberg. This upcoming week’s employment situation report will, as usual, be highly anticipated and possess the ability to move markets. Due partly to changes in immigration and labor force size, as well as tepid hiring, the jobs-added figure is expected to modestly improve from that of August. Given these changes, the Fed and markets will pay close attention to the unemployment (Green, RHS, %) and underemployment rates (White, LHS, %). Both measures are expected to remain steady at 4.3 and 8.1%, respectively. While the underemployment rate usually garners less attention or headlines, it has risen to a relatively more pronounced degree and can reflect important trends in the health of labor and hiring markets.

Source: Bloomberg. Top pane is yield (LHS, %); bottom pane is change (LHS, bps). As of Thursday afternoon, the UST term curve was higher from a week ago, led by the 2- and 3-year tenors, which rose by ~11 bps. The backup in yields was spurred by a set of resilient economic data and mixed, non-committal comments from Fed members regarding rate cuts. The market, consequently, pared back its pricing of projected Fed easing. As of Thursday afternoon, the market priced end-2025 Fed Funds at 3.71%, or 7.5 bps higher than a week ago and which equates to just over 1.5 25-bps rate cuts before yearend. The market’s end-2026 forward is ~3.075%, or 16 bps higher than a week ago.

Source: Bloomberg. Our SOFR ARC (floating rate advance) spreads, particularly in the shorter tenors, this past week hit the lowest levels in recent memory. One driver has been an elevated SOFR curve in recent months, as seen here in the SOFR swaps curve vs. T-bills (RHS, %) differential for 3-month, 6-month, and 1-year. The elevated SOFR curve has been driven partly by recurrent overnight financing pressures emanating from large UST auction settlements, as the US Treasury has rebuilt its General Account over the last few months. Meanwhile, our funding/credit spreads have improved in recent weeks, helped by robust Money Market Fund demand and funds extending duration in the short-end markets in anticipation of further Fed rate cuts. Consequently, our funding curve has tightened to the SOFR curve, thereby spurring lower spread levels on floating advances. Please call the Member Services Desk for further color or advance levels.

FHLBNY Advance Rates Observations

Front-End Rates

• As of midday Thursday, short-end rates were 1 to 4 bps higher than a week ago, mostly owing to the market paring back its pricing of prospective Fed rate cuts. Overnight remains highly subject to changes due to dynamics in the financing markets and SOFR. With quarter-end looming, plus ~$98bn of UST settlements on September 30th, there is a high probability for a typical rise in SOFR at and around the quarter-end date. Note that SOFR rose by a total of 21 bps in the two days surrounding 2024 Q3-end. Strong demand, meanwhile, for short-end paper has helped to tighten our funding spreads out the short-end curve, and Money Market AUM remains robust and has extended duration in the past month. Net T-bill issuance should moderate over the coming weeks, as the bulk of the heavy net issuance of the past few months is likely in the rearview mirror now that Treasury has significantly rebuilt its General Account.
• The labor market data to be released this week will likely possess the most potential to move short-end markets.

Term Rates

• The longer-term curve, as of Thursday afternoon and generally mirroring the moves in USTs and swaps, was higher than it was a week ago. The 2- to 5-year sector led the move via a rise of 10 to 11 bps, while the 6- to10-year rose by 6 to 8 bps. Kindly refer to the previous section for color on market dynamics and changes.  
• On the UST term supply front, the upcoming week serves as a reprieve from auctions. Note that UST auctions usually occur at 1pm and can occasionally spur volatility around that time. Please contact the Member Services Desk for further information on market dynamics, rate levels, or products.