EXECUTIVE SUMMARY
- MNI FED: Powell: Don't Get Excited About January CPI, Watch PPI Thursday
- MNI FED: Chicago's Goolsbee Still Sees Rates "Fair Bit" Lower Despite "Sobering" CPI
- MNI US-RUSSIA: Trump Confirms Putin Call, Ukraine Talks To Start 'Immediately'
- MNI US DATA: Booming Supercore CPI, Core Downward Revisions Limited To Core Goods
- MNI US DATA: All Core CPI Categories Come In Higher Than Expected
US
MNI FED: Powell: Don't Get Excited About January CPI, Watch PPI Thursday
Fed chair Powell cautions against getting "excited" about today's CPI report ahead of PPI (Thursday 0830ET), reminding us that the latter report carries potentially different implications for the Fed's preferred PCE gauge: "The CPI reading was above almost every forecast. But I would just offer ... two notes of caution. One is, we don't get excited about one or two good readings, and we don't get excited about one or two bad readings. The second thing, though, is we target PCE inflation because we think it's simply a better measure of inflation."
MNI FED: Powell Addresses Policy Regrets; Neutral On Possible Tariff Response
Perhaps with the strong January CPI report in mind, Fed Chair Powell received several questions by House Financial Services Committee members on the framework review and the recent history of rate policy amid rising inflation: Powell asked whether the existing framework restrained the Fed from responding to rising inflation beings up the dreaded "transitory" term: "No, I'll tell you why we didn't raise rates. We thought the inflation was transitory, I can show you forecast from the end of 2021 by us, by staff, by the Blue Chip [consensus]. Everybody thought it was going to be transitory - that's why we didn't raise rates."
MNI FED: Chicago's Goolsbee Still Sees Rates "Fair Bit" Lower Despite "Sobering" CPI
Chicago Fed President Goolsbee (dove, 2025 FOMC voter) tells the NY Times that the January CPI report was "sobering". While he told the NYT that seasonal effects may have been at play as usual in January, and echoed Fed Chair Powell's post-CPI comments by saying that he would not read too much into a single inflation report, he also said “there’s no question, if we got multiple months like this, then the job is clearly not done."
MNI FED: Atlanta's Bostic: Cuts Base Case But Uncertainty Could Mean Later Action
Atlanta Fed President Bostic (slight hawkish leaning, non-2025 voter) says in a Q&A following Wednesday's surprisingly strong January CPI print that the Fed isn't "in a hurry" to cut rates, echoing some of his colleagues' comments in the past couple of weeks. Importantly, his rate cut outlook appears to be roughly in line with the overall FOMC median voter's.
NEWS
MNI US-RUSSIA: Trump Confirms Putin Call, Ukraine Talks To Start 'Immediately'
US President Donald Trump has confirmed on the Truth Social platform his call this morning with Russian President Vladimir Putin. Link here. Trump confirms that "We agreed to work together, very closely, including visiting each other’s Nations." Trump: "We have also agreed to have our respective teams start negotiations immediately, and we will begin by calling President Zelenskyy, of Ukraine, to inform him of the conversation, something which I will be doing right now."
- Such talks would mark the most concrete move towards an eventual conclusion of the war in Ukraine since the short-lived peace talks that took place in Feb-Mar 2022 in the immediate aftermath of the outbreak of the war. There has been significant speculation regarding the prospect of Trump's 'peace plan' for Ukraine being presented, or at least outlined by Trump's envoy Keith Kellogg at the Munich Security Conference starting 14 Feb.
MNI US: Speaker Johnson Eyes USD1.5 Trillion In Spending Cuts - Punchbowl
Jake Sherman at Punchbowl reports that House Speaker Mike Johnson’s (R-LA) budget resolution could target USD$1.5 trillion in spending cuts. Sherman notes on Xthat the yet-to-be-finalised resolution could cover USD$4.5 trillion for tax cuts, USD$300 billion increase in mandatory spending, and assumes 2.8% in economic growth. Johnson intends to mark up the resolution in the House Budget Committee on Thursday, ahead of a one-week recess. Johnson is targeting the last week of February for a full House vote.
MNI SECURITY: Return To Ukraine's Pre-2014 Borders "Unrealistic" - Hegseth
US Defense Secretary Pete Hegseth has stated at the first Ukraine Contact Group meeting since President Donald Trump returned to the White House, that although the US wants to see a "sovereign Ukraine," returning to Ukraine's pre-2014 borders is "unrealistic". Hegseth says Trump "intends to end the war through diplomacy". Adds that Ukraine's NATO membership should not be part of a peace plan and says "lower energy prices will help bring Russia to the table."
MNI RUSSIA: Kremlin Spox-Prisoner Exchange w/US 'Unlikely To Be Turning Point'
Kremlin spox Dmitry Peskov has spoken to reporters following the release of US citizen Marc Fogel as part of a prisoner exchange on 11 Feb. Peskov confirms that one Russian citizen was released from a US jail as part of the deal. After meeting Fogel at the White House US President Donald Trump claimed, “I think this … could be a big, important part in getting the war over.”. However, Peskov pushed back saying "Such agreements are unlikely to be a turning point...These are gradual steps to increase mutual trust, which is now at a low point."
MNI INDIA: Steel Minister-Gov't Considering Temporary Levy On Chinese Steel
Speaking to Reuters, Steel Minister HD Kumaraswamy says that India is considering the imposition of temporary 15-25% tariffs (a 'safeguard duty') on the import of Chinese steel in the next six months to address what he calls "a serious challenge to Indian manufacturers,". According to the minister, the gov't began an investigation into the prospect of tariffs being imposed in Dec 2024, with the prospect of the duties remaining in place for up to two years.
MNI US TSYS: Rise in Core/Supercore CPI, But Wait Until Thursday's PPI: Powell
- Treasuries gapped lower after unexpected rise in January Core/Supercore CPI inflation data Wednesday, 10Y yield climbing to 4.6576% high on heavy volumes.
- Fed chair Powell cautions against getting "excited" about today's CPI report ahead of PPI (Thursday 0830ET), reminding that the latter report carries potentially different implications for the Fed's preferred PCE gauge: "The CPI reading was above almost every forecast.
- Treasury Mar'25 10Y futures trade 108-09 (-21.5) after the bell, above initial technical support at 108-00 (Low Jan 16); curves mixed: 2s10s +2.413 at 26.981, 5s30s -1.858 at 35.507. Tsy 10Y auction didn't help matters as the new supply tailed: drawing 4.632% high yield vs. 4.622% WI; 2.48x bid-to-cover vs. 2.53x prior.
- Nevertheless, projected rate cuts through mid-2025 continue to recede vs. this morning's pre-CPI levels (*) as follows: Mar'25 at -0.5bp (-0.7bp), May'25 at -3.2bp (-6.3bp), Jun'25 at -9.1bp (-13.9bp), Jul'25 at -12.6bp (-18.9bp).
- Weaker yen, with EURJPY’s 1.85% rally particularly standing out. Price dynamics kickstarted across the APAC session but were then bolstered by a hotter-than-expected US CPI report.
OVERNIGHT DATA
MNI US DATA: All Core CPI Categories Come In Higher Than Expected
The higher-than-expected M/M core / supercore CPI readings reflected stronger pressures in all major sub-categories in January.
- Notably: Supercore (0.76% vs 0.20% prior) did not reflect the relatively tame OER and rents (0.31% and 0.35% respectively): instead it was well above expected hotels, airfares, and auto insurance in the services categories, with core goods jumping (used vehicles playing a role).
- Also note that there were revisions across categories, as shown in the table below (housing categories in December were basically unaffected, as were the main aggregates; core goods were "actually" sequentially weaker in December than previously estimated).
MNI US DATA: Booming Supercore CPI, Core Downward Revisions Limited To Core Goods
- The extremely strong supercore (core services ex OER & primary rents) print of 0.76% M/M sa in January followed zero revisions (to 2.d.p) for both Nov and Dec and a limited -0.04pp for Oct. We had seen analyst estimates between 0.38-0.45% M/M for January.
- Being its strongest since Jan 2024, when it printed 0.84% M/M, it will likely elicit further questions on residual seasonality.
- It leaves a 3-month run rate at 5.4% annualized after a downward revised 3.3% (initially 3.5%) for its strongest since April, whilst the 6-month accelerated to 4.7% from 3.60% (initially 3.66).
- As for the broader revisions to core CPI in Q4 noted earlier, they were driven by core goods with a notable -0.09pp to -0.04% M/M in Dec and -0.10pp to 0.21% M/M in Nov ahead of tariffs.
- See the below table for a survey of core goods & services SA revisions:
MNI US DATA: Core CPI Q4 Downward Revisions Only Partly Offset Booming January
- Core CPI was clearly far stronger than expected in Jan at 0.446% M/M sa (MNI unrounded median 0.30, av 0.29) which was only partially offset by recent downward revisions in Q4 with 0.210% M/M in Dec (from 0.225), 0.29% in Nov (from 0.31) and 0.266% in Oct (from 0.28%).
- The main upward revisions to SA core CPI M/Ms came in June/July.
- The three-month rate accelerated to 3.9% from a downward revised 3.1 (from 3.3) in Dec, its highest since April.
- The six-month rate accelerated to 3.7% from a hardly revised 3.14% (from 3.19%) in Dec, its highest since May.
- The Y/Y, which is based on NSA (and therefore unrevised) data surprisingly inched up from 3.24% Y/Y to 3.26% Y/Y (we’d seen an average estimate of 3.15%).
MNI US DATA: Revisions Only Partly Explain Above-Consensus CPI Readings
The January inflation readings exceeded all analyst expectations, and this looks like a legitimate miss to the upside as opposed to purely idiosyncratic factors at play.
- The highest M/M core CPI estimate seen by MNI was 0.37% (by Morgan Stanley - the actual reading was 0.45%), with the highest headline expectation of 0.35% also greatly exceeded (0.38% by Barclays, 0.47% actual).
- As noted ("Core CPI Q4 Downward Revisions Only Partly Offset Booming January") , we could potentially pin these "misses" on slight downside revisions to the SA figures for December making for a lower base of comparison, amid slightly softer inflation momentum in Q4 than previously estimated, though the the sequential momentum was still stronger than expected across the board even accounting for this.
MNI: US MBA: MARKET COMPOSITE +2.3% SA THRU FEB 07 WK
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA down 280.62 points (-0.63%) at 44314.8
S&P E-Mini Future down 24.25 points (-0.4%) at 6068
Nasdaq down 5.9 points (0%) at 19635.87
US 10-Yr yield is up 9.6 bps at 4.631%
US Mar 10-Yr futures are down 21.5/32 at 108-9
EURUSD up 0.0032 (0.31%) at 1.0393
USDJPY up 1.91 (1.25%) at 154.4
WTI Crude Oil (front-month) down $1.98 (-2.7%) at $71.34
Gold is up $2.41 (0.08%) at $2900.31
European bourses closing levels:
EuroStoxx 50 up 14.74 points (0.27%) at 5405.65
FTSE 100 up 30.05 points (0.34%) at 8807.44
German DAX up 110.2 points (0.5%) at 22148.03
French CAC 40 up 13.29 points (0.17%) at 8042.19
US TREASURY FUTURES CLOSE
3M10Y +9.11, 29.332 (L: 17.736 / H: 31.476)
2Y10Y +2.208, 26.776 (L: 22.037 / H: 29.234)
2Y30Y +1.344, 47.09 (L: 39.763 / H: 49.373)
5Y30Y -1.783, 35.582 (L: 30.283 / H: 38.125)
Current futures levels:
Mar 2-Yr futures down 4.375/32 at 102-18 (L: 102-16.5 / H: 102-24.25)
Mar 5-Yr futures down 14/32 at 105-28.5 (L: 105-26 / H: 106-15.25)
Mar 10-Yr futures down 21/32 at 108-9.5 (L: 108-04 / H: 109-05)
Mar 30-Yr futures down 1-11/32 at 113-14 (L: 113-04 / H: 115-06)
Mar Ultra futures down 1-19/32 at 118-3 (L: 117-17 / H: 120-10)
MNI US 10YR FUTURE TECHS: (H5) Sell-Off Results In A Breach Of Support
- RES 4: 110-25 High Dec 12
- RES 3: 110-19 76.4% retracement of the Dec 6 - Jan 13 bear leg
- RES 2: 110-14 High Dec 14
- RES 1: 109-10/110-00 50-day EMA / High Feb 7 and the bull trigger
- PRICE: 108-08 @ 1415 ET Feb 12
- SUP 1: 108-00 Low Jan 16
- SUP 2: 107-06 Low Jan 13 and the bear trigger
- SUP 3: 107-04 Low Apr 25 ‘24 and a key support
- SUP 4: 106-11 2.00 proj of the Oct 1 - 14 - 16 price swing
Treasury futures have traded sharply lower today and this has resulted in a break of support at 108-20+, the Feb 4 low. The breach of this support highlights a stronger reversal and most likely, the end of the corrective cycle between Jan 13 - Feb 7. A continuation lower would open 108-00, the Jan 16 low, and expose 107-06, the Jan 13 low and bear trigger. Key resistance and the bull trigger is 110-00, the Feb 7 high.
SOFR FUTURES CLOSE
Mar 25 -0.020 at 95.685
Jun 25 -0.060 at 95.750
Sep 25 -0.080 at 95.825
Dec 25 -0.090 at 95.885
Red Pack (Mar 26-Dec 26) -0.12 to -0.10
Green Pack (Mar 27-Dec 27) -0.135 to -0.125
Blue Pack (Mar 28-Dec 28) -0.14 to -0.14
Gold Pack (Mar 29-Dec 29) -0.14 to -0.13
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.00109 to 4.31738 (+0.00219/wk)
- 3M +0.00035 to 4.31504 (+0.01114/wk)
- 6M +0.00412 to 4.28305 (+0.02533/wk)
- 12M +0.00468 to 4.22440 (+0.04529/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.34% (-0.01), volume: $2.321T
- Broad General Collateral Rate (BGCR): 4.32% (-0.01), volume: $911B
- Tri-Party General Collateral Rate (TCR): 4.32% (-0.01), volume: $894B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $92B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $278B
FED Reverse Repo Operation
RRP usage falls to the lowest level since mid-April 2021 this afternoon: $67.670B vs. $76.446B on Tuesday. The number of counterparties falls to 27 from 36 prior.
MNI PIPELINE: Corporate Issuance Roundup: $2.25B Bell Canada Launched
- Date $MM Issuer (Priced *, Launch #)
- 02/12 $2.25B #Bell Canada $1B 30.5NC5.5 6.875%, $1.25B 30.5NC10.5 7%
MNI BONDS: EGBs-GILTS CASH CLOSE: US Inflation Rise Pushes European Yields Higher
European yields rose Wednesday with mixed dynamics across curves following a stronger-than-expected US inflation report.
- Supply weighed early on the space (30Y Oat syndication and Greek, German, Portuguese auctions), with weak Italian industrial production data not really having an impact. The biggest catalyst of the session was the US January CPI release that showed significant upside surprises in almost all important categories.
- Cumulative global central bank rate cut pricing for end-2025 was pared (ECB 77bp vs 83bp prior; BOE 59bp vs 61bp prior)
- BOE MPC member Greene made comments that seem to move her away from her former hawkish tilt, even if she's still considered unlikely to vote for a March cut.
- The relative performance in STIR meant the German curve bear flattened, with the UK's bear steepening.
- Periphery EGB spreads tightened however, with European equities bouncing toward the end of the session.
- Thursday's scheduled highlight is UK economic activity data, including Q4 GDP, while we also get some final Eurozone January inflation data and Eurozone aggregate industrial production. ECB's Cipollone and Nagel make appearances, with the ECB also publishing its economic bulletin.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 5.3bps at 2.137%, 5-Yr is up 5.5bps at 2.267%, 10-Yr is up 4.7bps at 2.477%, and 30-Yr is up 3.2bps at 2.724%.
- UK: The 2-Yr yield is up 1.4bps at 4.198%, 5-Yr is up 2.4bps at 4.222%, 10-Yr is up 3.5bps at 4.543%, and 30-Yr is up 3.6bps at 5.135%.
- Italian BTP spread down 1.6bps at 108.4bps / Spanish down 1bps at 62.2bps
MNI FOREX: EURJPY Soars Amid Higher Core Yields, Russia/Ukraine Optimism
- Wednesday’s session in FX has been characterised by a weaker yen, with EURJPY’s 1.85% rally particularly standing out. Price dynamics kickstarted across the APAC session but were then bolstered by a hotter-than-expected US CPI report, assisting the hawkish repricing across core fixed income markets.
- The single currency received an additional boost in late trade, as the positive tone of the Trump/Putin discussions fuels optimism towards what Trump describes as a ‘successful conclusion’ to the Russia/Ukraine conflict
- EURUSD had a brief flurry down to 1.0317 on the US CPI release, however, the pair has reversed back above 1.04 and is now testing the 50-day EMA, intersecting today a 1.0427. This marks a key resistance, and a clear break of it would be a bullish development.
- For EURJPY, session highs just below 161.00 display an intra-day range greater than 300 pips. The cross has extended the recovery from Monday’s lows to an impressive 3.5%. While we have noted that the move higher is allowing a recent oversold condition to unwind, the significant reversal and fundamental developments places the short-term focus on an even stronger reversal. Key short-term resistance is at 161.09, the 50-day EMA.
- Overall, the USD index is 0.3% lower on the session as markets shrugged off the inflation readings and focused more on the recovering equities and ongoing developments surrounding the US administration. Alongside the Trump/Putin call, economic adviser Hassett stated that reciprocal tariffs are a ‘work in progress’, potentially hinting of room for negotiation and further fostering a more optimistic tone for risk. Indeed, AUDUSD and NZDUSD have bounced back well from near 1% losses on the session to trade back in positive territory ahead of the APAC crossover.
- NZ inflation expectations data is due overnight, before UK GDP and Swiss CPI headline the European data docket. In the US, PPI figures are scheduled.
THURSDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 13/02/2025 | 0700/0700 | ** |  GB | UK Monthly GDP |
| 13/02/2025 | 0700/0700 | ** | GB | Trade Balance |
| 13/02/2025 | 0700/0700 | ** | GB | Index of Services |
| 13/02/2025 | 0700/0700 | *** | GB | Index of Production |
| 13/02/2025 | 0700/0800 | *** |  DE | HICP (f) |
| 13/02/2025 | 0700/0700 | ** | GB | Output in the Construction Industry |
| 13/02/2025 | 0700/0700 | *** | GB | GDP First Estimate |
| 13/02/2025 | 0730/0830 | *** |  CH | CPI |
| 13/02/2025 | 0840/0940 |  EU | ECB's Cipollone pre-recorded interview at Frankfurt Digital Finance conference | |
| 13/02/2025 | 1000/1100 | ** | EU | Industrial Production |
| 13/02/2025 | 1330/0830 | *** |  US | Jobless Claims |
| 13/02/2025 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 13/02/2025 | 1330/0830 | *** | US | PPI |
| 13/02/2025 | 1530/1030 | ** | US | Natural Gas Stocks |
| 13/02/2025 | 1630/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 13/02/2025 | 1630/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 13/02/2025 | 1800/1300 | *** | US | US Treasury Auction Result for 30 Year Bond |