EXECUTIVE SUMMARY
- MNI US DATA: Existing Home Sales Remain In Stasis
- MNI US DATA: Partisanship Continues To Cloud UMich Inflation
- MNI US DATA: Services PMI Miss Offset By Expectations And Price Pressures
- MNI US DATA: 5-10Y Consumer Inflation Expectations Trimmed But Still Elevated
MNI US TSYS: Treasuries Well Off Early Lows After S&P Flash PMIs Decline
- Treasury futures look to finish mildly firmer Friday, well off early session lows after this morning's S&P Global US composite PMI surprisingly fell in the January flash release to its lowest since April after the 55.4 in December marked a 32-month high.
- However, firms' expectations of output over the coming year remain strong looking at policies under the second Trump administration and inflationary pressures saw a four-month high which helped limit the dovish reaction from the headline services miss.
- Meanwhile, U.Mich long-run inflation expectations were trimmed in the final January release from what had been a particularly sharp increase to the highest since 2008. 3.2% is still elevated though, having twice in the past three months exceeded what had been a typical 2.9-3.1% range since mid-2021.
- The Greenback declined during the APAC session as headlines crossed from US President Trump around not wanting to use tariffs on China,. The theme has prevailed throughout the session (later bolstered by weaker than expected US PMI), cementing USD index losses in the region of 0.7%, and extending the weekly decline to around 2%.
- After the bell, the Tsy Mar'25 10Y futures contract trades +3 at 108-15 vs. 108-07.5 low, well within technicals: resistance above at 109-04/109-06 (High Jan 21 / High Dec 31) vs. support at 108-00/107-06 (Low Jan 16 / 13 and the bear trigger). Curves well off early highs, 2s10s +0.110 at 35.143 vs. 38.045 high, 5s30 +0.270 at 41.706 vs. 44.753 high.
- Focus turns to next week's FOMC policy announcement on Wednesday, January 29 at 1400ET.
NEWS
MNI US: Trump Reiterates Call For OPEC To Cut Oil Prices
President Donald Trump, speaking at a North Carolina airfield, has told reporters that OPEC must cut the price of oil, but refused to expand on his administration's response if OPEC declines. The presser signals that the Trump White House will provide significantly more press access than the Biden White House, but that access may be unpredictable and offer little clarity on Trump's policy.
MNI RUSSIA: Kremlin Rebuts Trump Claim Low Oil Prices Could End War In Ukraine
State media reporting comments from Kremlin spox Dmitry Peskov. Speaking largely on US-Russia issues following US President Donald Trump's wide-ranging address to the World Economic Forum annual meeting on 23 Jan, Peskov says that Russia is 'ready for a Putin-Trump call and is waiting for a signal from Washington that it wants to go ahead'. In response to Trump's claim that Ukrainian President Volodymyr Zelenskyy is ready for a deal to end the war in Ukraine, Peskov says Zelenskyy "cannot be ready because he has banned himself from holding negotiations" in a decree.
MNI EU-RUSSIA: EU Ambassadors Meet On Rolling Over Sanctions, Eyes On Hungary
Permanent representatives to the EU are meeting in Brussels to decide on whether to roll over sanctions on Russia for another six months. Given that unanimity among member states is required to maintain the measures, there has been focus on whether the Hungarian gov't will utilize its veto. On 21 Jan, Hungarian PM Viktor Orban posted on X: "It’s time to talk about sanctions! Did they bring the war to an end? - No. [...]The time for change has come!".
MNI EurActiv-'Competitiveness Compass' Calls For 'Unprecedented' Red-Tape Cut
EurActiv reports "The European Commission will call for an “unprecedented” reduction of red tape to boost the bloc’s faltering economy over the coming five years, according to a draft of the EU executive’s much-vaunted Competitiveness Compass,". Following a delay to its announcement after Commission President Ursula von der Leyen suffered a severe bout of pneumonia early in the year, on Wednesday 29 Jan the Commission will demand the EU "simplify and accelerate" its notoriously cumbersome bureaucratic procedures and regulations in order to promote competitiveness on the global economic stage.
MNI ISRAEL: PM's Office-Military Will Not Full Withdraw From Lebanon By Deadline
The office of the prime minister has said that the Israeli Defence Forces will not complete their withdrawal from southern Lebanon by the 60-day ceasefire deadline on 26 Jan as the "agreement is not fully enforced". Other reports have suggested that the Israeli gov't is seeking approval from the US for an additional 30 days to bring its troops out of Lebanon.
(Reuters) France pushes for 'massive' pause in EU red tape amid US pressure
OVERNIGHT DATA
MNI US DATA: Partisanship Continues To Cloud UMich Inflation Expectations Signal
A reminder that the UMichigan inflation expectations gauge is highly skewed by respondents' political party partisanship:
- Vs overall 1-year expectations of 3.3% inflation, Democrats see 4.2% (highest since June 2022, vs 3.1% prior and 1.5% in October pre-election), while Republicans see 0.1% (record low in a series that goes back to November 2020, vs 1.3% prior and 3.6% in Oct).
- And for longer-term (5-10Y) expectations, the overall reading was 3.2%, but Democrats saw 3.9% (a new high, vs 3.4% prior and 2.7% Oct) and Republicans saw 1.7% (new low, vs 2.4% prior and 3.4% pre-election).
- In other words, these figures should not be taken at face value as consumers' unbiased expectations for future inflation.
MNI US DATA: 5-10Y Consumer Inflation Expectations Trimmed But Still Elevated
U.Mich long-run inflation expectations were indeed trimmed in the final January release from what had been a particularly sharp increase to the highest since 2008. 3.2% is still elevated though, having twice in the past three months exceeded what had been a typical 2.9-3.1% range since mid-2021.
- 1Y: 3.3% (cons 3.2, prelim 3.3) in Jan after 2.8% in Dec, confirmed at the highest since May.
- 5-10Y: 3.2% (cons 3.2, prelim 3.3) in Jan after 3.0% in Dec
- Elsewhere within the report, consumer sentiment was revised down to 71.1 (prelim 73.2) from 74.0 in December. It's only a little above pre-election result levels of 70.1 in September and equally a little under the 72.5 averaged in 2024.
- “While assessments of personal finances inched up for the fifth consecutive month, all other index components pulled back. Indeed, sentiment declines were broad based and seen across incomes, wealth, and age groups.”
MNI US DATA: Services PMI Miss Offset By Expectations And Price Pressures
The S&P Global US composite PMI surprisingly fell in the January flash release to its lowest since April after the 55.4 in December marked a 32-month high. However, firms' expectations of output over the coming year remain strong looking at policies under the second Trump administration and inflationary pressures saw a four-month high which helped limit the dovish reaction from the headline services miss.
- Manufacturing PMI: 50.1 (cons 49.8) after 49.4, above the 50 breakeven level (just) for the first time in six months.
- Services PMI: 52.8 (cons 56.5) after 56.8, lowest since April.
- Composite PMI: 52.4 (cons 55.6) after 55.4.
- From the press release (in full here): “Firms' expectations of output in the coming year meanwhile continued to run at a level not surpassed since May 2022, buoyed by optimism about the new government's policies, encouraging firms to take on staff at the steepest rate for two-and-a-half years."
MNI US DATA: Existing Home Sales Remain In Stasis
Existing home sales picked up a little more than expected in December to 4.24mln SAAR (4.20mln expected, 4.15mln prior), for a 10-month high.
- While the overall volumes of existing home sales remain depressed by historic standards, they at least continue to show signs of bottoming out: the 9.3% Y/Y rise in sales was the largest such gain since June 2021, while the median existing home sales price rose 6% Y/Y $404,400.
- But at the same time, inventories dropped 13.5% M/M to 1.15mln, leaving the ratio of sales/inventory at 3.3 - a 9-month low and well off from the recent high of 4.3 in September.
MNI CANADA DATA: LFS Revisions Don’t Materially Alter Trends
Newly revised labour market data point to a slightly softer jobs market through Sep-Nov (with downard revisions led by full-time positions) before the same booming Dec but the changes don’t look particularly significant to us considering the underlying volatility in the data. The rough trend remains one of a rising unemployment rate, in December at 6.7% having started 2024 at 5.7% (unrevised) and 2023 at 5.1% (previously 5.0%), albeit with a welcome patch of strong jobs growth in the final two months of the year.
STATSCAN REVISES DEC EMPLOYMENT +0.9% OR +179K TO 20.9M
STATSCAN REVISIONS MADE TO REFLECT CENSUS DATA
STATSCAN SAYS DEC UNEMPLOYMENT UNCHANGED AFTER REVISION
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA down 220.12 points (-0.49%) at 44346.44
S&P E-Mini Future down 28.5 points (-0.46%) at 6124
Nasdaq down 139.9 points (-0.7%) at 19914.96
US 10-Yr yield is down 1.8 bps at 4.6255%
US Mar 10-Yr futures are up 2/32 at 108-14
EURUSD up 0.0074 (0.71%) at 1.0489
USDJPY down 0.07 (-0.04%) at 155.98
WTI Crude Oil (front-month) up $0.1 (0.13%) at $74.72
Gold is up $17.59 (0.64%) at $2772.44
European bourses closing levels:
EuroStoxx 50 up 1.87 points (0.04%) at 5219.37
FTSE 100 down 62.85 points (-0.73%) at 8502.35
German DAX down 16.6 points (-0.08%) at 21394.93
French CAC 40 up 35.01 points (0.44%) at 7927.62
US TREASURY FUTURES CLOSE
3M10Y -1.138, 31.056 (L: 27.938 / H: 34.061)
2Y10Y +0.11, 35.143 (L: 34.542 / H: 38.045)
2Y30Y +0.258, 57.643 (L: 56.923 / H: 61.415)
5Y30Y +0.299, 41.735 (L: 41.515 / H: 44.753)
Current futures levels:
Mar 2-Yr futures up 0.75/32 at 102-24 (L: 102-22.875 / H: 102-26)
Mar 5-Yr futures up 1.75/32 at 106-4 (L: 106-00.5 / H: 106-08.5)
Mar 10-Yr futures up 2/32 at 108-14 (L: 108-07.5 / H: 108-21)
Mar 30-Yr futures up 8/32 at 113-4 (L: 112-17 / H: 113-09)
Mar Ultra futures up 12/32 at 117-26 (L: 117-02 / H: 118-01)
MNI US 10YR FUTURE TECHS: (H5) Gains Considered Corrective
- RES 4: 110-25 High Dec 12
- RES 3: 109-31 High Dec 18
- RES 2: 109-14 50-day EMA
- RES 1: 109-04/109-06 High Jan 21 / High Dec 31
- PRICE: 108-18+ @ 1235 ET Jan 24
- SUP 1: 108-00/107-06 Low Jan 16 / 13 and the bear trigger
- SUP 2: 107-04 Low Apr 25 ‘24 and a key support
- SUP 3: 107-00 Round number support
- SUP 4: 106-11 2.00 proj of the Oct 1 - 14 - 16 price swing
The medium-term trend condition in Treasury futures is unchanged and the direction remains down. The recovery that started Jan 13 is considered corrective. The contract has traded through the 20-day EMA, at 108-17. This exposes 109-06, the Dec 31 high, and 109-14, the 50-day EMA. A clear break of the 50-day average is required to strengthen a bullish theme. The bear trigger is unchanged at 107-06, the Jan 13 low.
SOFR FUTURES CLOSE
Mar 25 +0.010 at 95.775
Jun 25 +0.020 at 95.915
Sep 25 +0.015 at 95.995
Dec 25 +0.015 at 96.035
Red Pack (Mar 26-Dec 26) +0.005 to +0.010
Green Pack (Mar 27-Dec 27) steady to +0.005
Blue Pack (Mar 28-Dec 28) -0.005 to steady
Gold Pack (Mar 29-Dec 29) -0.005 to steady
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M +0.00477 to 4.31541 (+0.01501/wk)
- 3M -0.00023 to 4.29984 (+0.00975/wk)
- 6M -0.00417 to 4.25906 (+0.00525/wk)
- 12M -0.00726 to 4.19880 (+0.00455/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.35% (+0.05), volume: $2.269T
- Broad General Collateral Rate (BGCR): 4.34% (+0.06), volume: $906B
- Tri-Party General Collateral Rate (TGCR): 4.34% (+0.06), volume: $877B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $93B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $260B
FED Reverse Repo Operation
RRP usage falls back to $104.877B this afternoon from yesterday's $132.031B. Compares to Thursday Jan 16 low of $94.489B, the lowest level since mid-April 2021. The number of counterparties falls to 23 from 34 prior.
MNI PIPELINE: No New Issuance Friday after $9.75B priced Thursday, $31.3B total on the week
- Date $MM Issuer (Priced *, Launch #)
- 01/23 $3B *KDB $900M 3Y SOFR+57, $1.2B 5Y +76, $900M 5Y SOFR+76
- 01/23 $2.25B *Philippines $1.25B 10Y +90a, $1B 25Y 5.9%
- 01/23 $1.25B *Orlen 10Y +155
- 01/23 $1B *Bank of Nova Scotia 60NC5 7.35%
- 01/23 $1B *Fifth Third Bank $700M 3NC2 +68, $300M 3NCc SOFR+81
- 01/23 $750M *National Bank of Canada 3NC2 +67
- 01/23 $500M *American National Global 5Y +115
MNI BONDS: EGBs-GILTS CASH CLOSE: Expansionary PMIs Bear Flatten German Curve
The German curve bear flattened Friday, with Bunds underperforming Gilts as regional PMIs came in stronger than expected.
- Yields jumped in early trade as German and Eurozone composite PMIs unexpectedly returned above the 50.0 mark in the January flash reading, with the UK's and France's also exceeding expectations (driven by manufacturing beats).
- Core Fi recovered slightly in mid-afternoon trade as US PMIs missed expectations on the headline measures, but expectations and inflation subindices muted the reaction.
- All in all it was a less volatile week for the space by recent standards, with 10Y Bund yields up 3.4bp and Gilt down 3.1bp; the German curve bear flattened on the week with the UK's bull steepening.
- Periphery EGBs spreads tightened early but widened in the afternoon as the equity rally fades, with Greece outperforming on the day.
- The ECB decision (25bp cut is 97% priced) and January Eurozone flash inflation prints are next week's focus.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 4.5bps at 2.29%, 5-Yr is up 3.1bps at 2.381%, 10-Yr is up 1.9bps at 2.569%, and 30-Yr is up 0.7bps at 2.785%.
- UK: The 2-Yr yield is unchanged at 4.325%, 5-Yr is up 0.1bps at 4.337%, 10-Yr is down 0.7bps at 4.629%, and 30-Yr is down 0.3bps at 5.19%.
- Italian BTP spread down 1bps at 108.7bps / Greek bond spread down 2.1bps at 85.6bps
MNI FOREX: Greenback Extends Weekly Decline, GBPUSD Recovers Back to 1.25
- In a very volatile session for G10 currency markets, it is best to run through it in chronological order. Initial moves were USD negative in APAC as headlines crossed from US President Trump around not wanting to use tariffs on China, providing the sense there is potential for negotiations between the two sides and an imminent tariff hike may not be on the cards.
- This theme has prevailed throughout the session (later bolstered by weaker than expected US PMI), cementing USD index losses in the region of 0.7%, and extending the weekly decline to around 2%.
- Elsewhere in APAC, the Bank of Japan hiked rates as widely expected, prompting some initial Yen optimism. USDJPY traded as low as 154.85 in the aftermath, however, ongoing caution from Governor Ueda over the BOJ’s easy stance eventually filtered through to a strong USDJPY recovery, briefly rising to a session high of 156.57 as the US session began.
- In Europe, stronger-than-expected flash PMI data in Germany and the UK in particular have boosted sentiment for EUR and GBP, with both taking advantage of the softer dollar backdrop to extend recovery highs to 1.0521 and 1.2502 respectively. GBPUSD has narrowed the gap substantially to the 50-day EMA, at 1.2522 and an important resistance, while the medium-term trend does remain bearish.
- Single currency strength helped EURCHF rise above 0.9500 and reach a 5-month high in the process. Importantly, the cross has breached a cluster of highs around this mark, which may signal scope for a stronger recovery towards the August 15 high at 0.9581, before a Fibonacci retracement level at 0.9655.
- While Trump remarks continue to drive short-term sentiment in FX markets, central banks come back into focus next week, with the Riskbank, BOC, Fed and ECB meetings all scheduled. US Q4 growth data is also on the calendar.
MONDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 27/01/2025 | 0810/0910 |  EU | ECB's Lagarde Pre-Recorded lecture organised by Hungarian central bank | |
| 27/01/2025 | 1000/1100 | *** |  DE | IFO Business Climate Index |
| 27/01/2025 | 1400/1500 | ** |  BE | BNB Business Confidence |
| 27/01/2025 | 1500/1000 | *** |  US | New Home Sales |
| 27/01/2025 | 1530/1030 | ** | US | Dallas Fed manufacturing survey |
| 27/01/2025 | 1535/1635 | EU | ECB's Lagarde remarks at IHRD occasion | |
| 27/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 27/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for 2 Year Note |
| 27/01/2025 | 1800/1300 | * | US | US Treasury Auction Result for 5 Year Note |
| 27/01/2025 | 1800/1300 | * | US | US Treasury Auction Result for 13 Week Bill |