EXECUTIVE SUMMARY
- MNI US FISCAL: Trump Tax Priorities Takes Shape With House Leadership Meeting
- MNI FED: Chicago's Goolsbee Hints That PPI Could Gain Importance For Fed Watchers
- MNI US: Treasury Sec Bessent On A Strong Dollar, Tariffs, Issuance Outlook
- MNI US DATA: Softer-Than-Expected Hourly Compensation Restrains ULCs At End-24
- MNI US DATA: Jobless Claims Maintain Low Fire, Low Hire Profile
US
MNI FED: Chicago's Goolsbee Hints That PPI Could Gain Importance For Fed Watchers
Chicago Fed Pres Goolsbee (dove, 2025 FOMC voter) repeats his characterization of the end-level of Fed rates in this cycle as "a fair bit lower" - and hints that PPI reports could gain greater importance for Fed watchers in the year ahead amid tariff uncertainty:
- "The more dust in the air that makes it hard to calibrate what the conditions are, the more we have to wait and see," he told reporters on the sidelines of an automotive conference hosted by the Fed bank. "I still think ultimately where we’re going to land is a fair bit lower but the speed a little shallower."
- He noted that in determining how much tariffs are impacting the inflation trajectory, he said he's placing "special emphasis" on reading the details of the PPI report as well as talking to business and industry contacts, asking how fast tariffs would affect their costs and whether they would pass those costs on.
NEWS
MNI US FISCAL: Trump Tax Priorities Takes Shape With House Leadership Meeting
President Trump has laid out his tax priorities with Republican House Representatives, per multiple news outlets citing the White House press secretary. They are:
- Renewing the TCJA tax cuts
- Eliminating tax on tips, Social Security, and overtime pay
- Cutting taxes on products that are made in the US
- Adjusting the SALT (state and local tax) cap
- Eliminating tax breaks for sports team owners
- Closing the "carried interest" loophole
There are plenty of details yet to be seen about several of these propositions, but Trump's biggest tax cut proposals in the campaign had been the first three (TCJA, various tax eliminations, corporate tax cuts for domestic producers), which over 10 years would cost $6-7T ($3.4T making TCJA permanent plus potential $1T for estate/business tax cut permanence, $1.2T Soc Sec, $120B tipping income tax/$200B if also exempting payroll tax; $750B overtime tax; $360B lowering corporate rate for domestic producers to 15% - all estimates from the Tax Foundation). We assume that Trump is making the case for the TCJA cuts to be permanent though some fiscal hawks have pushed for them to be only temporary.
MNI MIDEAST: Trump On Gaza-US Would Develop Strip, But No Troops Needed
US President Donald Trump posts on the Truth Social platform regarding his Gaza comments: "The Gaza Strip would be turned over to the United States by Israel at the conclusion of fighting. The Palestinians, people like Chuck Schumer, would have already been resettled in far safer and more beautiful communities, with new and modern homes, in the region. They would actually have a chance to be happy, safe, and free. The U.S., working with great development teams from all over the World, would slowly and carefully begin the construction of what would become one of the greatest and most spectacular developments of its kind on Earth. No soldiers by the U.S. would be needed! Stability for the region would reign!!!"
MNI US: Treasury Sec Bessent On A Strong Dollar, Tariffs, Issuance Outlook
The US Treasury Department issued a statement confirming the first Trump administration sanctions on Iranian crude oil, targeting "an international network for facilitating the shipment of millions of barrels of Iranian crude oil worth hundreds of millions of dollars to the People’s Republic of China (PRC)." The statement notes the action, "also includes entities and individuals in multiple jurisdictions, including the PRC, India, and the United Arab Emirates (UAE), as well as several vessels."
MNI US: Energy Secretary Wright Outlines Priorities For Administration Policy
US President Donald Trump’s newly minted Energy Secretary, Chris Wright, has outlined his priorities for the administration’s energy policy. Wright noted in a memothat net zero policies have raised energy costs, threatened the reliability of the US energy system, and undermined national security, but doesn't specifically commit to unwinding all Biden-era green energy initiatives.
- He says the Department’s R&D efforts will “prioritize affordable, reliable, and secure energy technologies, including fossil fuels, advanced nuclear, geothermal, and hydropower.” Like Trump, Wright has been critical of solar and wind as viable alternatives to fossil fuels.
MNI US: Greer Says USTR Will Be Prepared To Enforce 'Phase 1' Trade Deal With China
US President Donald Trump’s nominee to serve as United States Trade Representative, Jamieson Greer, is delivering testimony at his first nomination hearing before the Senate Financial Services Committee. Asked about recent reports suggesting Trump may reduce the influence of the USTR, Greer says he will be involved in negotiating trade deals and enforcing Section 301 tariffs, noting that Trump expects all his Cabinet officials to work together on trade policy.
MNI UKRAINE: Daily Mail Reports Trump Peace Plan 'Leaked'
The Daily Mail reports that US President Donald Trump will look to push Ukrainian President Volodymyr Zelenskyy to accept an Easter ceasefire with Russia according to a 'leaked' plan. Daily Mail: "The unconfirmed plans[...] will include a ceasefire by April 20 that would freeze Russia's steady advance, a ban on Ukraine from joining NATO, and a demand for Kyiv to accept Russian sovereignty on annexed land." The leaked plan supposedly includes stipulations that Ukrainian troops leave Russia's Kursk oblast, that European (not US) troops would police a DMZ, and that the EU will be asked to contribute significantly to reconstruction cost for Ukraine.
- To start the process Zelenskyy and Russian President Vladimir Putin would hold a phone call early this month, followed by a meeting in late Feb/early March. A ceasefire would be declared by 20 April. Agreement on how to end the war would be published by 9 May.
- In exchange for Ukrainian concessions, the report claims the Trump plan has the US continuing support for Ukraine's armed forces and a pathway to EU membership by 2030. Ukraine has denied this plan's premise, with presidential spox Andriy Yermak saying it does not 'exist in reality'.
MNI US TSYS: Markets Cling to Narrow Ranges Ahead Friday January Employment Data
- Treasuries hold to lower, narrow ranges late Thursday, scaling back some of the midweek rally that saw Mar'25 10Y futures climb to the highest level since prior to the December 18 FOMC announcement. Markets held ranges amid moderate two-way position squaring heading into Friday's headline employment data for January that is expected to slow to 170-180k from December’s strong 256k.
- Little react to BOE cutting rates by expected 25bp but raising forward inflation guidance sharply. Initial jobless claims were higher than expected at 219k (sa, cons 213k) in the week to Feb 1 after an upward revised 208k (initial 207k). Unit labor costs rose by less than had been expected in Q4 2024, with the 3.0% Q/Q SA annualized rise (3.4% survey).
- After the bell, Mar'25 10Y futures trade -6 at 109-18 (109-14 low/109-25 high), well inside technicals: resistance above at 109-30 (61.8% retracement of the Dec 6 - Jan 13 bear leg); support below at 108-20.5 (Low Feb 4). 10Y yld at 4.4382% +.0201.
- The Greenback looks to finish near steady after climbing off yesterday's lows earlier, the BBG US$ index at 1297.58 at the bell vs. 1302.43 high. Post-BOE, the GBPUSD fell sharply back below the 1.24 handle.
OVERNIGHT DATA
MNI US DATA: Jobless Claims Maintain Low Fire, Low Hire Profile
Today’s jobless claims were slightly higher than expected for both initial and continuing claims although don’t notably change perceptions of a low fire low hire labor market. Partly offsetting these larger than expected figures was the downward revision to continuing claims back in the payrolls reference period ahead of tomorrow’s NFP release.
- Initial jobless claims were higher than expected at 219k (sa, cons 213k) in the week to Feb 1 after an upward revised 208k (initial 207k).
- The four-week average increased 4k to 217k, still low historically with an average 218k in 2019 for context.
- Continuing claims were also a little higher at 1886k (sa, cons 1870k) in the week to Jan 25 after a downward revised 1850k (initial 1858k).
- That prior continuing claims reading sees compare more favorably still to the 1897k seen in both December and November payrolls reference periods (although initial claims were higher at 223k vs 220k and 215k respectively).
MNI US DATA: Softer-Than-Expected Hourly Compensation Restrains ULCs At End-24
Unit labor costs were a little softer than expected at the end of last year, with the longer-term trend in productivity still broadly consistent with the Fed's general view expressed by Chair Powell in January: "the labor market is not a source of significant inflationary pressures".
- Unit labor costs rose by less than had been expected in Q4 2024, with the 3.0% Q/Q SA annualized rise (3.4% survey) showing stronger sequential unit cost pressures but from a lower base (Q3 rev down to 0.5% from 0.8%). That marks a 3-quarter high on both a Q/Q ann. and Y/Y (2.7%) basis. For 2024 as a whole, ULCs did pick up from 2.1% in the prior year, but this still represented disinflationary progress versus the figures printed in the pandemic (Q4 Y/Ys: 4.0% 2020, 3.7% 2021, 3.8% 2022).
- The nonfarm productivity reading for Q4 did not surprise, with a slowdown to 1.2% Q/Q ann., exactly as expected (2.3% prior rev up 0.1pp) which as a mirror image of ULCs was a 3-quarter low. Productivity growth has clearly slowed since a recent peak of 2.7-2.8% Y/Y in Q3 2023 through Q1 2024, to 2.1% in Q2 2024, 2.1% in Q3 2024 and now 1.6% (7-quarter low) in Q4 2024.
MNI US DATA: Small Business Worker Compensation Plans Fade In Mixed NFIB Jobs Report
The NFIB's Jobs Report for January was mixed but overall showed no reversal in the longer-term trend of moderating labor market conditions for small businesses. The biggest change in the major categories was in compensation plans, which dropped 4 points to a 5-month low 20% (net). That said, actual compensation changes were up 4pp to a -7-month high 33%, paring part of a long downtrend, so the signal was a little mixed here - but overall, compensation remains in a downtrend that started in early 2022.
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA down 131.35 points (-0.29%) at 44744.17
S&P E-Mini Future up 18.75 points (0.31%) at 6105.75
Nasdaq up 91.8 points (0.5%) at 19783.92
US 10-Yr yield is up 1.6 bps at 4.4342%
US Mar 10-Yr futures are down 5/32 at 109-19
EURUSD down 0.0016 (-0.15%) at 1.0387
USDJPY down 1.13 (-0.74%) at 151.49
WTI Crude Oil (front-month) down $0.49 (-0.69%) at $70.54
Gold is down $10.77 (-0.38%) at $2856.58
European bourses closing levels:
EuroStoxx 50 up 85.51 points (1.62%) at 5356.63
FTSE 100 up 103.99 points (1.21%) at 8727.28
German DAX up 316.49 points (1.47%) at 21902.42
French CAC 40 up 115.94 points (1.47%) at 8007.62
US TREASURY FUTURES CLOSE
3M10Y +1.658, 10.995 (L: 8.16 / H: 13.404)
2Y10Y -0.266, 22.448 (L: 20.652 / H: 24.497)
2Y30Y -1.18, 43.305 (L: 41.636 / H: 46.328)
5Y30Y -1.59, 37.008 (L: 36.251 / H: 39.399)
Current futures levels:
Mar 2-Yr futures down 1.5/32 at 102-27.375 (L: 102-26.625 / H: 102-28.875)
Mar 5-Yr futures down 4/32 at 106-23.5 (L: 106-20.75 / H: 106-27.5)
Mar 10-Yr futures down 5/32 at 109-19 (L: 109-14 / H: 109-25)
Mar 30-Yr futures steady at at 116-5 (L: 115-24 / H: 116-14)
Mar Ultra futures down 3/32 at 121-24 (L: 121-08 / H: 122-07)
MNI US 10YR FUTURE TECHS: (H5) Bull Cycle Remains In Play
- RES 4: 110-25 High Dec 12
- RES 3: 110-19 76.4% retracement of the Dec 6 - Jan 13 bear leg
- RES 2: 110-03+ High Dec 6
- RES 1: 109-30 61.8% retracement of the Dec 6 - Jan 13 bear leg
- PRICE: 109-18+ @ 11:10 GMT Feb 6
- SUP 1: 108-20+ Low Feb 4
- SUP 2: 108-06/107-06 Low Jan 23 / 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
A bull phase in Treasury futures remains in play and yesterday’s rally reinforces current conditions. Price has traded through the 50-day EMA of 109-10+. This highlights potential for a stronger reversal and sights are on 109.30, a Fibonacci retracement. On the downside, initial support to watch is 108-20+, Tuesday’s low. Clearance of it would signal a reversal and the end of a corrective cycle.
SOFR FUTURES CLOSE
Mar 25 steady00 at 95.745
Jun 25 -0.010 at 95.890
Sep 25 -0.020 at 96.005
Dec 25 -0.030 at 96.075
Red Pack (Mar 26-Dec 26) -0.045 to -0.04
Green Pack (Mar 27-Dec 27) -0.05 to -0.045
Blue Pack (Mar 28-Dec 28) -0.045 to -0.04
Gold Pack (Mar 29-Dec 29) -0.04 to -0.035
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M +0.00228 to 4.31014 (-0.00292/wk)
- 3M -0.00456 to 4.29735 (-0.00490/wk)
- 6M -0.01227 to 4.24683 (-0.00148/wk)
- 12M -0.02820 to 4.16057 (+0.00027/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.33% (+0.00), volume: $2.343T
- Broad General Collateral Rate (BGCR): 4.31% (+0.00), volume: $910B
- Tri-Party General Collateral Rate (TCR): 4.31% (+0.00), volume: $895B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $104B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $281B
FED Reverse Repo Operation
RRP usage inches up to $79.983B this afternoon from yesterday's new low of $78.788B - the lowest level since mid-April 2021. The number of counterparties bounces to 38 from 28 prior.
MNI PIPELINE: Corporate Bond Issuance Update: $2B Marathon, $1.9B Mizuho Debt Launch
- Date $MM Issuer (Priced *, Launch #)
- 02/06 $2.5B #Bank of America 11NC10 +132
- 02/06 $2B #Marathon Petroleum $1.1B 5Y +95, $900M 10Y +127
- 02/06 $1.9B #Mizuho $700M 6.25NC5.25 +82, $300M 6.25NC5.25 SOFR+108, $900M 11.25NC10.25 +98
- 02/06 $1.5B #Cargill $700M 3Y +42, $300M 3Y SOFR+61, $500M 10Y +73
- 02/06 $1.25B #Ma'aden Sukuk $750M 5Y +100, $500M 10Y +110
- 02/06 $1.2B #Oriental Rep of Uruguay 12Y +100
- 02/06 $1B *IFC 4.5Y SOFR+36
- 02/06 $650M #Embraer Netherlands 10Y +158
- 02/06 $500M BOAD 30NC5 8.5%
MNI BONDS: EGBs-GILTS CASH CLOSE: Gilts Underperform Alongside BoE Reappraisal
Core European curves bear steepened Thursday, reversing some of the prior session's flattening.
- Gilts outperformed core EGBs ahead of the Bank of England decision, with the space as a whole weighed down by supply pressure (French/Spanish bond auctions), a risk-on move in equities, and solid German factory order data.
- The BoE decision appeared to vindicate the move as it brought an immediate dovish reaction with MPC member Mann surprisingly dissenting in favour of a 50bp cut vs the 25bp delivered (joining dove Dhingra).
- However that proved temporary, with a bearish reversal following the decision \as the details were digested, including as closer inspection of the Bank's higher-than-expected inflation projections, while Gov Bailey noted uncertainty over future cuts.
- For the day, Gilts underperformed Bunds, with both curves bear steepening.
- Periphery EGB spreads tightened, benefiting from European equities reaching fresh record highs.
- Friday's calendar includes appearances by BOE's Pill and ECB's Guindos.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 0.2bps at 2.059%, 5-Yr is up 1.1bps at 2.166%, 10-Yr is up 1.3bps at 2.379%, and 30-Yr is up 1.3bps at 2.612%.
- UK: The 2-Yr yield is up 2.4bps at 4.174%, 5-Yr is up 5.1bps at 4.175%, 10-Yr is up 4.7bps at 4.484%, and 30-Yr is up 3.8bps at 5.061%.
- Italian BTP spread down 1.8bps at 106.7bps / French OAT unchanged at 71.6bps
MNI FOREX: GBPJPY Approaches December Lows Following BOE Decision
- Two things have weighed on GBP on Thursday, which is among the poorest performers in G10. A particularly soft UK Construction PMI set the initial tone (48.1 vs. Exp. 53.5), underpinning the sensitivity around growth and the near-term trajectory of the UK economy. Secondly, two dissenting votes for a bolder 50bp rate cut from the BoE’s MPC provided a moderately dovish surprise and spurred an extension of sterling weakness.
- This saw GBPUSD fall sharply back below the 1.24 handle, but given the recent focus on developing Yen strength, GBPJPY weakness was in the spotlight, having depreciated back below 190.00 and piercing the January lows at 189.34.
- Bearish momentum has been building for this cross since the start of the year, where fiscal worries prompted a clean break of trendline support around 195.00, a level we have not been back above since. The cross narrowed the gap to within 16 pips of the December low (188.09), before recovering amid some underlying hawkish details within the BOE minutes.
- Elsewhere, EURUSD’s firm rejection of the 50-day EMA on Wednesday keeps bearish momentum for EURJPY at the forefront of G10 FX sentiment, with the cross printing fresh recent lows of 157.24 on Thursday.
- A more hawkish BOJ narrative and ongoing growth concerns in the Eurozone have provided headwinds, and losses now tally around 3.2% on the year. 156.18, is a key support, the Dec 3 low. The USDJPY trend needle points firmly south, with spot currently residing below 152.00, down half a percent on the session.
- All focus turns to January’s US employment report, which will receive almost as much attention for comprehensive revisions as for the monthly nonfarm payroll gains, which are expected to slow to 170-180k from December’s strong 256k.
FRIDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 07/02/2025 | 0700/0800 | ** |  DE | Trade Balance |
| 07/02/2025 | 0700/0800 | ** | DE | Industrial Production |
| 07/02/2025 | 0745/0845 | * |  FR | Foreign Trade |
| 07/02/2025 | 0745/0845 | FR | Wages Data for Q4 | |
| 07/02/2025 | 0800/0900 | ** |  ES | Industrial Production |
| 07/02/2025 | 0845/0945 |  EU | ECB's De Guindos remarks in 'VI Encuentro Economico-Asegurador' conference | |
| 07/02/2025 | 1215/1215 |  GB | BOE's Pill at National MPC Agency briefing | |
| 07/02/2025 | - | EU | ECB to publish report on R* | |
| 07/02/2025 | 1330/0830 | *** |  CA | Labour Force Survey |
| 07/02/2025 | 1330/0830 | *** |  US | Employment Report |
| 07/02/2025 | 1425/0925 | US | Fed Governor Michelle Bowman | |
| 07/02/2025 | 1500/1000 | ** | US | Wholesale Trade |
| 07/02/2025 | 1500/1000 | ** | US | U. Mich. Survey of Consumers |
| 07/02/2025 | 1700/1200 | US | Fed Governor Adriana Kugler | |
| 07/02/2025 | 2000/1500 | * | US | Consumer Credit |