EXECUTIVE SUMMARY
- MNI: Fed Gov Cook: Can Be More Cautious On Further Cuts
- MNI US: Trump Denies WAPO Story On Watering Down Tariffs
- MNI US DATA: Capital Investment Steadying Despite Downward Revisions
- MNI US DATA: Services PMI Revised Firmly Lower But Still Highest Since Early 2022
US
MNI: Fed Gov Cook: Can Be More Cautious On Further Cuts
The Federal Reserve can move more gradually on lowering interest rates this year as inflation looks stickier and the labor market has stayed strong, Fed Governor Lisa Cook said Monday. "Since September, the labor market has been somewhat more resilient, while inflation has been stickier than I assumed at that time. Thus, I think we can afford to proceed more cautiously with further cuts," she said in remarks prepared for a University of Michigan Law School conference in Ann Arbor, Mich.
NEWS
MNI US: Trump Denies WAPO Story On Watering Down Tariffs
US President-elect Donald Trump has issued a statement on Truth Social denying a widely circulated reportpublished by the Washington Post this morning claiming that Trump's aides are exploring "tariff plans that would be applied to every country but only cover critical imports". See: US: Trump Aides Exploring More Limited Universal Tariff Plan, WAPO . Trump: "The story in the Washington Post, quoting so-called anonymous sources, which don't exist, incorrectly states that my tariff policy will be pared back. That is wrong. The Washington Post knows it's wrong. It's just another example of Fake News."
MNI US: Trump Aides Exploring More Limited Universal Tariff Plan, WAPO
The Washington Post reports that US President-elect Donald Trump’s aides are "exploring plans" to apply tariffs to every country “but only cover critical imports” – a step removed from Trump’s more hardline campaign proposal to impose a 10-20% universal baseline tariff on all imports. The report suggests that Trump’s initial tariff plan may track relatively closely with the Biden administration’s targeted tariffs, which already applies duties on Chinese imports in sectors deemed critical to national security or subject to “anticompetitive and non-market” practices.
MNI CANADA: Betting Markets Shift To 95% Probability Of Imminent PM Resignation
Following earlier headlines in the domestic press claiming that PM Justin Trudeau could resign/announce his resignation as soon as 7 Jan (see 'CANADA: Trudeau Increasingly Likely To Announce Exit This Week-Globe&Mail', 0725GMT), betting markets have shifted significantly. Data from Polymarket shows political bettors assigning a 95% implied probability that Trudeau will announce his resignation before February, while data from Kalshi shows bettors assigning the same 95% implied probability that Trudeau will resign before April. Prior to the publication of the speculation on 5 Jan, the implied probability of an immediate resignation stood around 50%.
MNI UKRAINE: Macron-Ukraine Must Have 'Realistic Position' On Territorial Questions
Speaking at the annual meeting of ambassadors at the Elysee Palace, French President Emmanuel Macron says “We cannot let Russia win in Ukraine. For the international order and for our own security...[We] must organise ourselves so Ukraine [is] in [the] best position to negotiate." Says that there is "no quick and easy solution", and "no solution can be found without Ukraine and Europe being involved in the process."
MNI US TSYS: Early Market Swings on Universal Tariff Story Denied by Trump
- Treasuries look to finish mostly lower, curves steeper (2s10s climbing to new 3Y high of 37.004) with the short end outperforming.
- Early market swings tied to a Washington Post article reporting the Trump admin was "exploring plans" to apply tariffs to every country “but only cover critical imports”. The report suggests that Trump’s initial tariff plan may track relatively closely with the Biden administration’s targeted tariffs.
- Both rates and equities surged higher on the article - until Trump denied the watered down approach - with Treasuries reversing course and extending lows by midmorning. Stocks walked back support more gradually, near lows in lat etrade.
- Record corporate debt issuance for a single session climbed over $50B, rate lock hedging added additional pressure to rates.
- Tuesday Data Calendar includes JOLTS, ISM Services and Tsy 10Y Re-Open.
OVERNIGHT DATA
MNI US DATA: Capital Investment Steadying Despite Downward Revisions
Factory orders came in stronger than expected in November when accounting for upward revisions in the final Manufacturers’ Shipments, Inventories, & Orders report, though core capital goods orders were slightly weaker than they first appeared.
- The 0.4% M/M fall in factory orders (vs -0.3% expected) was offset by an upward revision to October (+0.5% vs +0.2%), while ex-transportation growth came in at +0.2% for a second month (reflecting a 0.1pp upward revision to prior).
- Broader durable goods orders were revised down slightly (-1.2% vs -1.1% prelim), due to slower growth in machinery orders than previously estimated (-0.6pp to +0.4%). Core capital goods orders growth was revised down to 0.4% M/M from 0.1% (0.7% prelim), with core shipments down to 0.3% (0.5% prelim).
- The latter figures meant that while November was a fairly solid month in the context of a poor 2024 for core capital goods, the preliminary estimates painted an overly flattering picture.
- Despite the downward core revisions, we note the final data were still much better than expectations vs the preliminary release (core cap goods orders had been expected +0.1%), and we continue to regard the data as indicative of stabilizing domestic durable goods orders. That should translate into more solidity in broader business investment. Core capital orders have been positive for the past couple of months on a Y/Y basis (0.8% in Nov, after 0.7% in Oct), with shipments flat on a Y/Y basis (after 6 negative months).
- Though as broader surveys indicate (including ISM Manufacturing and MNI Chicago PMI), the manufacturing sector appears to have improved since a summer bottom even if activity remains weak.
MNI US DATA: Services PMI Revised Firmly Lower But Still Highest Since Early 2022
- Services PMI: 56.8 (cons & prelim 58.5) in Dec after 56.1 in Nov.
- Composite PMI: 55.4 (prelim 56.6) in Dec after 54.9 in Nov.
- The services PMI saw a marked downward revision in the final December release, removing the 58.5 that had been its strongest reading for thirty-three months, although it nevertheless still marks a further improvement to its highest since Mar 2022.
- Despite stronger economic activity, cost inflation eased to its slowest for almost a year: “US service providers saw rates of expansion in business activity and new orders strengthen further in December amid a greater willingness among customers to spend following the Presidential Election result. Business confidence also perked up. With workloads rising, companies increased employment for the first time in five months. Meanwhile, cost inflation eased to the slowest for almost a year, with charges again up only modestly.”
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA down 68.4 points (-0.16%) at 42661.73
S&P E-Mini Future up 25 points (0.42%) at 6014.5
Nasdaq up 224 points (1.1%) at 19845.3
US 10-Yr yield is up 2.4 bps at 4.6219%
US Mar 10-Yr futures are down 4.5/32 at 108-16
EURUSD up 0.0079 (0.77%) at 1.0387
USDJPY up 0.36 (0.23%) at 157.61
WTI Crude Oil (front-month) down $0.56 (-0.76%) at $73.40
Gold is down $5.71 (-0.22%) at $2634.54
European bourses closing levels:
EuroStoxx 50 up 115.19 points (2.36%) at 4986.64
FTSE 100 up 25.68 points (0.31%) at 8249.66
German DAX up 310.11 points (1.56%) at 20216.19
French CAC 40 up 163.47 points (2.24%) at 7445.69
US TREASURY FUTURES CLOSE
3M10Y +3.005, 32.038 (L: 26.787 / H: 33.809)
2Y10Y +2.855, 34.323 (L: 32.262 / H: 37.004)
2Y30Y +3.721, 56.538 (L: 53.533 / H: 59.238)
5Y30Y +2.245, 41.982 (L: 39.635 / H: 42.531)
Current futures levels:
Mar 2-Yr futures steady at at 102-23.875 (L: 102-22.5 / H: 102-26)
Mar 5-Yr futures down 1.75/32 at 106-5.25 (L: 106-02 / H: 106-10.75)
Mar 10-Yr futures down 4.5/32 at 108-16 (L: 108-10.5 / H: 108-25.5)
Mar 30-Yr futures down 16/32 at 113-1 (L: 112-26 / H: 113-24)
Mar Ultra futures down 18/32 at 117-25 (L: 117-16 / H: 118-22)
MNI US 10YR FUTURE TECHS: (H5) Trend Needle Points South
- RES 4: 111-20+ High 6 and the bull trigger
- RES 3: 110-25 High Dec 12
- RES 2: 110-09 50-day EMA
- RES 1: 109-10+ 20-day EMA
- PRICE: 108-16 @ 18:15 GMT Jan 06
- SUP 1: 108-06+ Low Dec 26
- SUP 2: 108-00 1.500 proj of the Oct 1 - 14 - 16 price swing
- SUP 3: 107-19+ 1.618 proj of the Oct 1 - 14 - 16 price swing
- SUP 4: 107-04 1.764 proj of the Oct 1 - 14 - 16 price swing
The trend condition in Treasury futures remains bearish. Recent weakness reinforces the current bear cycle - the contract has traded through key short-term support and the bear trigger at 109-02+, the Nov 15 low. The breach confirms a resumption of the downtrend and opens 108.00, a Fibonacci projection. Short-term gains are considered corrective below the 109-10+ 20-day EMA.
SOFR FUTURES CLOSE
Mar 25 -0.010 at 95.80
Jun 25 -0.010 at 95.920
Sep 25 -0.010 at 95.980
Dec 25 -0.010 at 96.010
Red Pack (Mar 26-Dec 26) -0.035 to -0.015
Green Pack (Mar 27-Dec 27) -0.06 to -0.045
Blue Pack (Mar 28-Dec 28) -0.07 to -0.06
Gold Pack (Mar 29-Dec 29) -0.07 to -0.065
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.00904 to 4.30639 (-0.03952 total last wk)
- 3M -0.00549 to 4.28820 (-0.03509 total last wk)
- 6M +0.00017 to 4.24202 (-0.04298 total last wk)
- 12M +0.01299 to 4.17770 (-0.07460 total last wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.31% (-0.09), volume: $2.398T
- Broad General Collateral Rate (BGCR): 4.29% (-0.07), volume: $845B
- Tri-Party General Collateral Rate (TGCR): 4.29% (-0.07), volume: $821B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $102B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $289B
FED Reverse Repo Operation
Well off last week's year-end high of $473.460B (highest level since June 28) RRP usage continues to recede, $231.926B this afternoon from $237.377 Friday. Compares to $98.356B on Friday, December 20 - the lowest level since mid-April 2021. The number of counterparties steady at 57.
MNI PIPELINE: Single Day Corporate Issuance Nearing Record $50B
Corporate issuance rises to the largest single day on record with $48.8B so far with Saudi Arabia and World Bank details yet to be announced.
- Date $MM Issuer (Priced *, Launch #)
- 01/06 $8.5B #Mexico $2B 5Y +170, $4B 12Y +230, $2.5B 30Y +255
- 01/06 $3B #Broadcom $1.1B +3Y +53, $800M +5Y +63, $1.1B +7Y +70
- 01/06 $3B #CRH SMW Finance $1.25B 5Y +75, $1.25B 10Y +90, $500M 30Y +105
- 01/06 $2.75B #NAB $750M 5Y +50, $750M 5Y SOFR+79, $1.25B 11NC10 +130
- 01/06 $2.75B #National Australia Bank (NAB) $750M 5Y +50, $750M 5Y SOFR+79, $1.25B 11NC10 +130
- 01/06 $2.6B #Toyota Motor Cr $650M 2Y +35, $400M 2Y SOFR+47, $700M 5Y +58, $850M 10Y +75
- 01/06 $2.5B #Societe Generale $1B 4.25NC3.25 +120, $500M 4.25NC3.25 SOFR+141, $1B 8.25NC7.25 +160
- 01/06 $2.3B #CIBC $1B 3NC2 +60, $400M 3NC2 SOFR+72, $900M 6NC5 +83
- 01/06 $2.25B #MUFG $1.1B 6NC5 +78, $1.15B 11NC10 +95
- 01/06 $2.25B #BNP Paribas 8NC7 +127
- 01/06 $2B #Hyundai Cap Am $850M 3Y +75, $350M 3Y SOFR+92, $800M 5Y +93
- 01/06 $1.9B #EDF $700M 10Y +120, $800M 30Y +155, $400M 2064 Tap +170
- 01/06 $1.75B #JBS $1B 10Y +135, $750M 30Y +162.5
- 01/06 $1.5B #Southern Cal Edison $850M 10Y +85, $650M 30Y +108
- 01/06 $1.5B #AerCap Aviation $750M 3Y +75, $750M 7Y +98
- 01/06 $1.5B #Williams Cos $1B 10Y +100, $500M 30Y +120
- 01/06 $1.25B #Caterpillar $450M 2Y +25, $350M 2Y SOFR+38, $450M 5Y +42
- 01/06 $1.25B #UBS 3NC2 +60
- 01/06 $1.2B #Jackson National Life $700M 2Y +65, $500M 5Y +95
- 01/06 $1B #India Export-Import Bank 10Y +100
- 01/06 $900M #John Deere Capital 00M $2Y +25, $500M 3Y +35
- 01/06 $800M #Corebridge Funding $500M 3Y +58, 3Y SOFR+75
- 01/06 $750M #Sixth Street Lending 5Y +185
- 01/06 $600M #RGA Global Funding 5Y +85
- 01/06 $500M #Lincoln Financial 5Y +88
- 01/06 $Benchmark Saudi Arabia 3Y +85, 6Y +100, 10Y +110
- 01/06 $500M DBJ WNG 10Y SOFR+78a
- 01/06 $Benchmark Kexim investor calls
- 01/06 $Benchmark World Bank 7Y +57a
MNI BONDS: EGBs-GILTS CASH CLOSE: Inflation Uptick Sees Bunds Underperform
Core European yields rose to start the week, with Bunds underperforming Gilts Monday.
- State-level German data in the morning correctly pointed to an upside surprise in the preliminary December national level inflation release in the afternoon.
- Having apparently confirmed the trend seen in solid Spanish and Portuguese data last week, inflation breakevens rose (EUR 5Y5Y swap +2.9bp to the highest since mid-Nov at 2.08%), paring ECB cut pricing. Final Eurozone PMIs for December also saw upward revisions and firmer price pressures.
- Supply concerns also weighed on core FI, with UK, Austrian and German auctions Tuesday alongside an expected Belgian 10Y syndication.
- The German curve bear flattened, with the UK's lightly bear steepening.
- Periphery/semi-core spreads tightened, with OATs slightly outperforming in a partial reversal of late December's sell-off.
- Tuesday's early highlights include inflation data from Switzerland, France, Italy, and the Eurozone.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 3.3bps at 2.194%, 5-Yr is up 3.3bps at 2.263%, 10-Yr is up 2.2bps at 2.447%, and 30-Yr is up 1bps at 2.663%.
- UK: The 2-Yr yield is up 1.1bps at 4.433%, 5-Yr is up 1.6bps at 4.401%, 10-Yr is up 1.7bps at 4.61%, and 30-Yr is up 2.3bps at 5.179%.
- Italian BTP spread down 3.8bps at 112.5bps / French OAT down 5.0bps at 81.1bps
MNI FOREX: Greenback Settles Lower Following Tariff Report Induced Volatility
- FX volatility was stoked Monday on the back of a Washington Post report suggesting that US President-elect Donald Trump’s aides are "exploring plans" to apply tariffs to every country “but only cover critical imports”. The potential for slightly less protectionist trade policy bolstered the existing direction of travel for the greenback, with the USD index extending session lows and briefly bringing the DXY’s pullback to around 1.5% from last week’s highs.
- However, President-Elect trump later claimed the article to be fake news and the US dollar partially recovered from its lowest levels. The USD index is currently down 0.64% ~108.30 as we approach the APAC crossover.
- EURUSD surged through 1.0400, and notably rose above the 20-day EMA resistance to print a 1.0437 high, recovering over 200 pips from the 1.0226 lows on Jan 02. The rally was supported by higher-than-expected inflation figures from Germany, substantially narrowing the gap to resistance at the Dec 30 high of 1.0458. Spot has since slipped back to 1.0380.
- Similar strength seen across higher beta currencies such as GBP (+0.76%), which has risen back above 1.25 and will look to initial firm resistance at 1.2562, the 20-day EMA. Similarly in emerging markets, USDMXN is 1.3% lower on the day at 20.35.
- USDJPY volatility was in focus, as the pair slipped from a 157.96 high to a 156.24 low after the news. However, we have recovered roughly 1% from the lows, as the Dec 26 high at 158.08 remains in sight.
- CAD is also 0.6% higher and has received particular attention given PM Trudeau has decided to resign. USDCAD’s pullback is seen as technically corrective at this juncture, with initial firm support only briefly being pierced at 1.4320, the 20-day EMA.
- Swiss and Eurozone inflation data are due early Tuesday, before US ISM Services PMI and JOLTS data headline the docket in the US.
TUESDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 07/01/2025 | 0730/0830 | *** |  CH | CPI |
| 07/01/2025 | 0745/0845 | *** |  FR | HICP (p) |
| 07/01/2025 | 0830/0930 | ** |  EU | S&P Global Final Eurozone Construction PMI |
| 07/01/2025 | 0900/1000 | ** | EU | ECB Consumer Expectations Survey |
| 07/01/2025 | 0900/1000 | *** |  DE | Bavaria CPI |
| 07/01/2025 | 0930/0930 | ** |  GB | S&P Global/CIPS Construction PMI |
| 07/01/2025 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 07/01/2025 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 07/01/2025 | 1000/1100 | *** | EU | HICP (p) |
| 07/01/2025 | 1000/1100 | ** | EU | Unemployment |
| 07/01/2025 | 1000/1100 | *** |  IT | HICP (p) |
| 07/01/2025 | 1330/0830 | ** |  CA | International Merchandise Trade (Trade Balance) |
| 07/01/2025 | 1330/0830 | ** |  US | Trade Balance |
| 07/01/2025 | 1330/0830 | ** | CA | International Merchandise Trade (Trade Balance) |
| 07/01/2025 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 07/01/2025 | 1500/1000 | * | CA | Ivey PMI |
| 07/01/2025 | 1500/1000 | *** | US | ISM Non-Manufacturing Index |
| 07/01/2025 | 1500/1000 | *** | US | JOLTS jobs opening level |
| 07/01/2025 | 1500/1000 | *** | US | JOLTS quits Rate |
| 07/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 07/01/2025 | 1800/1300 | ** | US | US Note 10 Year Treasury Auction Result |
| 08/01/2025 | 0030/1130 | *** |  AU | CPI Inflation Monthly |