EXECUTIVE SUMMARY
- MNI FED: MNI Fed Preview - Jan 2025: Analyst Outlook
- MNI FED WATCH: Rate Cuts On Pause But FOMC Keeps Easing Bias
- MNI US: Americans Supportive Of Plans To Reduce Federal Inefficiency And Red Tape
- MNI US DATA: New Home Sales Pick Up, But Outlook Remains Subdued
US
MNI FED WATCH: Rate Cuts On Pause But FOMC Keeps Easing Bias
The Federal Reserve is set to keep interest rates on hold Wednesday after delivering 100 basis points of cuts at the end of 2024, shifting to a more cautious stance as it awaits further signs that disinflation will continue. Upside risks to inflation have risen while continued strength in U.S. economic activity and the labor market allow officials to be patient in deciding when to take another step toward neutral. The federal funds rate is currently trading in a 4.25%-4.5% range.
MNI FED: MNI Fed Preview - Jan 2025: Analyst Outlook
Analysts enter the first FOMC meeting of 2025 expecting anywhere from zero rate cuts to 125bp worth of reductions by year-end, with March the first plausibly “live” meeting. The central expectation is for 50bp of reductions in 2025, with analysts either looking for front-loaded (March, June) or back-loaded (September, December) reductions.
LINK: FedPrevJan2025 - With Analysts.pdf
NEWS
MNI US: Americans Supportive Of Plans To Reduce Federal Inefficiency And Red Tape
A new surveyfrom AP-NORC finds that “Majorities [of US adults] believe that corruption, inefficiency, and red tape are major problems within the federal government.” AP: “Republicans are more likely to believe corruption, inefficiency, red tape, and defiant civil servants are all major problems within the federal government.
MNI EU-RUSSIA: EU Foreign Mins Agree Rollover Of Russia Sanctions
Reuters reporting comments from EU diplomats saying that the Foreign Affairs Council has agreed to another six-month rollover of sanctions on Russia. There had been some speculation that permission could be withheld from Hungary, and given the requirement for unanimity in sanctions the prospect of the deal being scuppered.
MNI UKRAINE: Zelenskyy To Meet w/Macron & EUCO Pres On Poland Visit
A spox for President Volodymyr Zelenskyy has said that the president is set to meet with his French counterpart Emmanuel Macron as well as European Council President Antonio Costa during the course of the day. The three are in Poland to attend the commemoration events for the 80th anniversary of the liberation of the Auschwitz-Birkenau Nazi death camps.
MNI US TSYS: China AI Startup DeepSeek Rattles Broader Markets
- Heavy risk-off moves occurred Monday as Chinese AI startup DeepSeek rattled broader markets: new competition for US AI developers weighed heavily on chip stocks, the tech heavy Nasdaq falling over 3.65% in late trade, spurred heavy outright buying and short covering across the board in Treasuries.
- After the close, the Mar'25 10Y contract trades +22 at 109-05 vs. 109-12 high, just under initial technical resistance at 109-12.5 (50-day EMA), heavy volumes (TYH5 over 2.5M).
- Despite the rally, curves were mixed by the close, 2s10s -2.053 at 32.906, 5s30s +1.680 at 43.432. Nevertheless, projected rate cuts through mid-2025 regain traction vs. late Friday (*) levels as follows: Jan'25 at -0.7bp (-0.1bp), Mar'25 at -8.3bp (-6.9bp), May'25 at -15.9bp (-13.6bp), Jun'25 at -27.9bp (-24.7bp), Jul'25 at -33.7bp (-28.6bp).
- Focus remains on Wednesday's FOMC policy annc, no move expected, as well as a heavy slate of corporate earnings Tuesday: PACCAR, Sysco Corp, Synchrony Financial, Lockheed Martin Corp, Veradigm, Royal Caribbean, Polaris Inc., Boeing, NextEra Energy, JetBlue Airways, General Motors, Kimberly-Clark Corp, Invesco, Starbucks, Qorvo and Stryker Corp.
OVERNIGHT DATA
MNI US DATA: New Home Sales Pick Up, But Outlook Remains Subdued
December's pickup in new home sales was larger than expected, reaching 698k (675k expected) on an seasonally-adjusted annualized rate basis, up from 674k in November (revised up from 664k).
- That marked a 3-month high (and a 6.7% Y/Y gain), with inventories down to 8.5 months worth of sales (from 8.7 prior and a recent peak of 9.4). Median prices for single-family homes rose 2.1% Y/y ($427k, not seasonaly adjusted).
- As with the previous week's stronger-than-expected existing home sales report, this suggested a slight tightening in the housing market at end-year, albeit at subdued levels (especially for existing).
- Some of the improvement may have resulted from the pullback in mortgage rates in the summer, which started reversing in September/October.
- New home sales have been relatively less afftected than those of existing homes, in part because of homebuilder-provided incentives to offset high mortgage costs for buyers.
- With inventories remaining relatively high by historic standards and mortgage rates rebounding, it's unclear how much further homebuilding activity has to pick up in coming quarters: the NAHB's sentiment index, a leading indicator of building permits acitivity, has stabilized since plummeting in mid-2023 but remains below historic averages.
- December reading of the Chicago Fed National Activity Index is 0.15
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA up 217.65 points (0.49%) at 44640.43
S&P E-Mini Future down 97.5 points (-1.59%) at 6035.5
Nasdaq down 632.2 points (-3.2%) at 19321.31
US 10-Yr yield is down 9.5 bps at 4.5262%
US Mar 10-Yr futures are up 22/32 at 109-5
EURUSD down 0.0003 (-0.03%) at 1.0494
USDJPY down 1.32 (-0.85%) at 154.68
WTI Crude Oil (front-month) down $1.56 (-2.09%) at $73.10
Gold is down $28.75 (-1.04%) at $2741.95
European bourses closing levels:
EuroStoxx 50 down 30.92 points (-0.59%) at 5188.45
FTSE 100 up 1.36 points (0.02%) at 8503.71
German DAX down 112.75 points (-0.53%) at 21282.18
French CAC 40 down 21.04 points (-0.27%) at 7906.58
US TREASURY FUTURES CLOSE
3M10Y -8.176, 22.473 (L: 18.156 / H: 27.95)
2Y10Y -1.626, 33.333 (L: 31.541 / H: 34.522)
2Y30Y -0.111, 57.227 (L: 54.395 / H: 59.345)
5Y30Y +2.137, 43.889 (L: 40.483 / H: 45.415)
Current futures levels:
Mar 2-Yr futures up 4.875/32 at 102-29 (L: 102-24.25 / H: 102-30.5)
Mar 5-Yr futures up 13.5/32 at 106-18 (L: 106-05.25 / H: 106-22.25)
Mar 10-Yr futures up 22/32 at 109-5 (L: 108-16 / H: 109-12)
Mar 30-Yr futures up 40/32 at 114-14 (L: 113-07 / H: 114-25)
Mar Ultra futures up 49/32 at 119-14 (L: 117-28 / H: 119-27)
MNI US 10YR FUTURE TECHS: (H5) Approaching The 50-Day EMA
- RES 4: 110-25 High Dec 12
- RES 3: 110-19 76.4% retracement of the Dec 6 - Jan 13 bear leg.
- RES 2: 109-31 High Dec 18
- RES 1: 109-12+ 50-day EMA
- PRICE: 109-04 @ 1T Jan 27
- 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 down, however a bullish short-term cycle highlights an ongoing corrective phase and the contract is trading higher today. Attention is on 109-12+, the 50-day EMA. A clear break of this EMA is required to strengthen a bullish theme. This would open 109-31, the Dec 18 high. The bear trigger is unchanged at 107-06, the Jan 13 low. Initial support has been defined at 108-00, the Jan 16 low.
SOFR FUTURES CLOSE
Mar 25 +0.005 at 95.785
Jun 25 +0.045 at 95.960
Sep 25 +0.075 at 96.075
Dec 25 +0.10 at 96.135
Red Pack (Mar 26-Dec 26) +0.110 to +0.115
Green Pack (Mar 27-Dec 27) +0.105 to +0.110
Blue Pack (Mar 28-Dec 28) +0.110 to +0.120
Gold Pack (Mar 29-Dec 29) +0.110 to +0.115
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.00241 to 4.31300 (+0.01501 total last wk)
- 3M -0.00597 to 4.29687 (+0.00975 total last wk)
- 6M -0.01283 to 4.24623 (+0.00525 total last wk)
- 12M -0.01905 to 4.17975 (+0.00455 total last wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.34% (-0.01), volume: $2.289T
- Broad General Collateral Rate (BGCR): 4.33% (-0.01), volume: $912B
- Tri-Party General Collateral Rate (TGCR): 4.33% (-0.01), volume: $875B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $97B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $277B
FED Reverse Repo Operation
RRP usage falls back under $100B to a new low of $92.863B this afternoon from Friday's $104.877B. Today's low compares to $94.489B on Thursday Jan 16 - then the lowest level since mid-April 2021. The number of counterparties rises to 26 from 23 prior.
MNI BONDS: EGBs-GILTS CASH CLOSE: Yields Pull Back On Tech-Led Equity Weakness
European yields fell Monday though finished off session lows, mirroring intraday movements in equities.
- U.S. equity weakness (less pronounced in Europe), triggered by Chinese tech firm DeepSeek's AI advancements weighing on U.S. tech megacaps, saw bonds supported for most of the session.
- However, yields finished up from intraday lows as stocks recovered. 10Y Gilts closed 3bp up from the session lows, with Bunds bouncing 4bp.
- Even so, German curve bull steepened, with the UK's more mixed with belly outperformance. Periphery/semi-core EGB spreads to Bunds widened slightly; RAGBs slightly underperformed peers following an Austrian dual-tranche syndication mandate.
- In data, January German IFO came in a little stronger than expected, but Expectations unexpectedly fell. Market reaction was limited.
- Focus for the week remains on Thursday's ECB decision, as well as multiple data points including Eurozone country-level preliminary inflation data for January.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 4.1bps at 2.249%, 5-Yr is down 4bps at 2.341%, 10-Yr is down 3.8bps at 2.531%, and 30-Yr is down 3.4bps at 2.751%.
- UK: The 2-Yr yield is down 3.7bps at 4.288%, 5-Yr is down 5.4bps at 4.283%, 10-Yr is down 4.4bps at 4.585%, and 30-Yr is down 4.7bps at 5.143%.
- Italian BTP spread up 1.5bps at 110.2bps / French OAT up 0.2bps at 74bps
MNI FOREX: Safe Haven FX in Favour as Equities Consolidate Session Declines
- Broad risk-off trade dominated global markets on Monday, prompting notorious safe haven swithin G10 FX to outperform, while risk sensitive currencies bore the brunt of the waning sentiment.
- The assumption that US firms will remain market-leaders in artificial intelligence was challenged this weekend with the rise of China's Deepseek - a product demonstrating that not only can AI be rolled out extremely cheaply and effectively, but also that the US' targeted chips sanctions are failing to contain China's tech industry.
- The USDJPY (-1.10%) selloff picked up momentum following the clean trendline break, drawn from the September lows, bolstered by the breach of a cluster of lows just below the 155 handle.
- Barring a meaningful reversal, the pair looks set to close below its 50-day EMA, which intersects today at 155.15. This would represent the first close below this average since December 09 and is a meaningful bearish development technically. This paves the way for an extension towards 152.55, a Fibonacci retracement point, and 151.81, the Dec 12 low.
- AUD (-0.55%) and NZD (-0.47%) are among the poorest performers, with the effect compounded by Trump's tariff sabre-rattling toward Colombia over the weekend. The USD Index is near last week's lows, holding close to the lowest levels of 2025. The Fed decision mid-week looks key here - as Powell's messaging on rates across this year is set to steer price action.
- Emerging market currencies have been heavily impacted, with notable 2% declines for the likes of the Mexican peso and the South African rand against the dollar providing a key insight to the sensitivities surrounding global equity sentiment and tariff related developments.
- US durable goods and consumer confidence highlights Tuesday’s docket, before G10 central bank decisions kick off on Wednesday.
TUESDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 28/01/2025 | 0745/0845 | ** |  FR | Consumer Sentiment |
| 28/01/2025 | 0900/1000 | ** |  EU | ECB Bank Lending Survey |
| 28/01/2025 | 1000/1000 | * |  GB | Index Linked Gilt Outright Auction Result |
| 28/01/2025 | 1330/0830 | ** |  US | Durable Goods New Orders |
| 28/01/2025 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 28/01/2025 | 1400/0900 | ** | US | S&P Case-Shiller Home Price Index |
| 28/01/2025 | 1400/0900 | ** | US | FHFA Home Price Index |
| 28/01/2025 | 1400/0900 | ** | US | FHFA Home Price Index |
| 28/01/2025 | 1430/1530 | EU | ECB's Cipollone in panel on future of markets | |
| 28/01/2025 | 1500/1000 | *** | US | Conference Board Consumer Confidence |
| 28/01/2025 | 1500/1000 | ** | US | Richmond Fed Survey |
| 28/01/2025 | 1530/1030 | ** | US | Dallas Fed Services Survey |
| 28/01/2025 | 1630/1130 | ** | US | US Treasury Auction Result for 2 Year Floating Rate Note |
| 28/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 28/01/2025 | 1700/1800 | EU | ECB's Lagarde to mee t with Ursula von der Leyen | |
| 28/01/2025 | 1800/1300 | ** | US | US Treasury Auction Result for 7 Year Note |
| 29/01/2025 | 0030/1130 | *** |  AU | CPI Inflation Monthly |
| 29/01/2025 | 0030/1130 | *** | AU | CPI inflation |