EXECUTIVE SUMMARY
- MNI Fed Speakers Adopt "Gradual" Approach Since December FOMC
- MNI US: Trump: I'll "Demand" Lower Interest Rates Alongside Oil Prices
- MNI US-CHINA: Trump: We Want A Level Playing Field With China
- MNI US DATA: Continuing Claims Just About Hit Fresh Three Year High
US
MNI Fed Speakers Adopt "Gradual" Approach Since December FOMC
Fed speakers since the December FOMC meeting (see document here for full commentary) have unanimously backed a more patient approach to rate cuts than foreseen just a few months earlier.
- Several FOMC participants from across the Hawk-Dove spectrum called December’s decision to cut a “close call”, echoing what Chair Powell dubbed a “closer call” but ultimately the “right call” to cut rates by 25bp.
- No FOMC member expressed a preference for another rate cut in January, given an apparent reduction in downside risks to the labor market and some signs of stalling disinflation - with few to no signals of future cut timing.
NEWS
MNI US: Trump: I'll "Demand" Lower Interest Rates Alongside Oil Prices
Trump on interest rates: "With oil prices going down I'll demand that interest rates drop immediately, and likewise they should be dropping all over the world. Interest rates should follow us." His exact meaning is a little unclear - he's said previously that supply-side improvements and lower oil prices would help bring down inflation and allow interest rates to fall, but this is a more forceful way of putting it.
MNI US: Trump: Make Your Product In America Or Pay A Tariff
US President Donald Trump, speaking via video link to the World Economic Forum in Davos, says that since he has taken office he has taken “rapid action” to reverse “radical left policies” from the Biden administration, which he claims caused high inflation and ballooned the deficit. Trump namechecks the executive orders he signed on Day 1, tacking closely to his inaugural speech on January 20. Trump says his energy policies will reduce the cost of “just about everything” and make the US a “manufacturing superpower,” and the “world capital of AI and crypto.”
MNI US-CHINA: Trump: We Want A Level Playing Field With China
US President Donald Trump, speaking at Davos, describes how he sees the US relationship with China in the next four years. Trump notes that Chinese President Xi Jinping called him shortly after his inauguration. Trump says "I see [the relationship as] very good. I think we're going to have a very good relationship. All we want is fairness. We just want a level playing field, we don't want to take advantage. We've been having massive deficits with China. Biden allowed it to get out of hand..."
MNI US-RUSSIA: Trump-I Would Like To Be Able To Meet Putin Soon
Speaking at the WEF, US President Donald Trump says that he "Would really like to be able to meet [Russian President Vladimir] Putin soon", adding that "We should get that war stopped". Says that 'Ukraine is ready to make a deal to end the war' and that it depends on Putin. Trump “I really would like to be able to meet Putin soon and get war ended...that’s not from the standpoint of economy or something else. It’s from the standpoint of millions of lives being wasted. Beautiful young people being shot in the battlefield”
MNI US: Ratcliffe On Track For Confirmation Today, Bessent Vote Likely On Sun/Mon
The Senate will vote at around 13:00 ET 18:00 GMT to confirm John Ratcliffe as President Donald Trump’s CIA Director. Ratcliffe will be the second confirmed Trump Cabinet official after Secretary of State Marco Rubio. The Senate is also expected to advance the nomination of Pete Hegseth for Defense Secretary, teeing up a confirmation vote later in the week. Despite scrutiny from Democrats, Hegseth may be confirmed as soon as Friday.
MNI RUSSIA: Kremlin-No 'New Elements' In Trump Tariff & Sanctions Threat
Reuters reporting comments from Kremlin spox Dmitry Peskov. Says on US President Donald Trump's threat of sanctions and tariffs on Russia "We don't see any particularly new elements here", adding "Trump in his first term was a president who often resorted to sanctions." Peskov referring to Trump's post on his Truth Social platform on 22 Jan promising "Taxes, Tariffs, and Sanctions on anything being sold by Russia to the United States" if the war in Ukraine continues. On the prospect of talks with Trump Peskov says "We remain ready for equal and mutually respectful dialogue."
MNI MIDEAST: Focus On Israeli Forces As Lebanon Withdrawal Deadline Looms
Lebanese Hezbollah has issued a statement saying that Israel must comply with the stipulations of the 60-day ceasefire agreed in Nov 2024, and that the Lebanese state should push for guarantees that Israel will completely withdraw as agreed. Hezbollah: "Any breach of the 60-day deadline constitutes a blatant violation of the agreement, an infringement on Lebanese sovereignty, and an escalation of the occupation into a new phase."
(FT) Record number of US companies weigh China exit as Trump tensions rise
MNI US TSYS: Curves Twist Steeper, Trump Demands Lower Rates, Oil Prices
- Treasuries look to finish Thursday's session mostly weaker, curves twist steeper after demanding that "interest rates drop immediately" when he spoke remotely to the World Economic Forum meeting in Davos, Switzerland earlier.
- Tsy 2s10s climbed to 36.088 high, 5s30s to 43.580 highs on the day, Mar'25 2Y futures +.78 at 102-23.25 while 10Y futures traded -6.5 at 108-11.5 vs. 108-06 low, still above initial technical support at 108-00/107-06 (Low Jan 16 / 13 and the bear trigger).
- Trump comments saw sudden spike higher for the Greenback that was met with an immediate reversal, highlighting the ongoing sensitivity across FX markets to any comments from the President. Following this, the greenback drifted lower, and the USD index sits around 0.15% in the red as we approach the APAC crossover.
- Stocks traded mostly higher: DJIA trades up 329.87 points (0.75%) at 44485.06, S&P E-Minis up 14.5 points (0.24%) at 6134.5, Nasdaq down 41.8 points (-0.2%) at 19966.92. Earnings expected from Texas Instruments, CSX Corp and Intuitive Surgical after the close.
OVERIGHT DATA
MNI US DATA: Continuing Claims Just About Hit Fresh Three Year High
Continuing claims provided the main bearish surprise in the data, just above exceeding recent highs, but the broad report doesn’t materially change the story of firms dampening down on re-hiring rather than turning to layoffs to manage headcount.
- Initial jobless claims were a touch higher than expected at 223k (sa, cons 220k) in the week to Jan 18, covering the payrolls reference period, after an unrevised 217k.
- The four-week average only increased 1k to 214k, still low historically and below the 218k averaged in 2019 for context.
- Continuing claims were more notable, surprisingly increasing to 1899k (sa, cons 1866k) in the week to Jan 11 after a downward revised 1853k (initial 1859k).
- This just about pokes above highs of 1898/1897k in mid-Nov and mid-Dec for fresh highs since late 2021.
- The non-seasonally adjusted continuing claims data show a modest decline this week compared to some years although there can be quirks from week to week, especially at the turn of the year - see charts.
MNI CANADA DATA: Reliability Of Retail Sales Advance
- We have had some questions on the reliability of StatCan’s advance retail sales estimate after it showed a strong 1.6% M/M bounce in December (at what would be the strongest M/M increase since Jan 2023 if realized).
- It follows a flat November, with the two monthly profile potentially driven by consumers postponing late-in-the-month discretionary spending ahead of the temporary GST/HST holiday that was effective from Dec 14 but was announced Nov 21.
- As for the advance release reliability itself, over the past two years it has seen an average error to the M/M reading for the subsequent full month’s release of 0.1pp (i.e. it has on average undershot) or an absolute average error of 0.2pp. That does however include some large errors in the earlier days of the advance, with an average error of 0.02pp or absolute error of 0.08pp over the latest six months.
- The response rate for December was on the low side however, with 48.3% the lowest since May’24 and before that Sep’23, which could see scope for larger revisions ahead.
- There can be larger errors when it comes to comparing the latest iteration of data compared to the original advance but that can take longer to show up.
- For now, whilst it seems likely there could be some revisions worth at least 0.1-0.2pps, the rough profile should still show a sizeable bounce in December.
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA up 337.83 points (0.77%) at 44493.94
S&P E-Mini Future up 22 points (0.36%) at 6142.5
Nasdaq up 3.8 points (0%) at 20010.89
US 10-Yr yield is up 3.1 bps at 4.6415%
US Mar 10-Yr futures are down 7.5/32 at 108-10.5
EURUSD up 0.0007 (0.07%) at 1.0416
USDJPY down 0.57 (-0.36%) at 155.96
WTI Crude Oil (front-month) down $1.19 (-1.58%) at $74.25
Gold is down $3.45 (-0.13%) at $2752.99
European bourses closing levels:
EuroStoxx 50 up 11.67 points (0.22%) at 5217.5
FTSE 100 up 20.07 points (0.23%) at 8565.2
German DAX up 157.26 points (0.74%) at 21411.53
French CAC 40 up 55.21 points (0.7%) at 7892.61
US TREASURY FUTURES CLOSE
3M10Y +3.63, 31.99 (L: 24.723 / H: 33.513)
2Y10Y +4.336, 35.255 (L: 30.513 / H: 36.088)
2Y30Y +5.945, 58.228 (L: 51.973 / H: 59.685)
5Y30Y +3.243, 42.031 (L: 38.526 / H: 43.58)
Current futures levels:
Mar 2-Yr futures up 0.625/32 at 102-23 (L: 102-21.625 / H: 102-23.625)
Mar 5-Yr futures down 2.25/32 at 106-1.25 (L: 105-30 / H: 106-04.75)
Mar 10-Yr futures down 7.5/32 at 108-10.5 (L: 108-06 / H: 108-19.5)
Mar 30-Yr futures down 19/32 at 112-27 (L: 112-17 / H: 113-16)
Mar Ultra futures down 1-02/32 at 117-14 (L: 117-00 / H: 118-17)
MNI US 10YR FUTURE TECHS: (H5) Bear Threat Remains Present
- RES 4: 110-25 High Dec 12
- RES 3: 109-31 High Dec 18
- RES 2: 109-15 50-day EMA
- RES 1: 109-04/109-06 High Jan 21 / High Dec 31
- PRICE: 108-08.5 @ 1105 ET Jan 23
- 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 remains bearish. The recovery that started Jan 13, appears to be a correction. The contract has traded through the 20-day EMA, at 108-17+. This exposes 109-06, the Dec 31 high, and 109-15, 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 +0.015 at 95.765
Jun 25 +0.010 at 95.895
Sep 25 +0.015 at 95.980
Dec 25 +0.015 at 96.015
Red Pack (Mar 26-Dec 26) +0.005 to +0.010
Green Pack (Mar 27-Dec 27) -0.02 to -0.005
Blue Pack (Mar 28-Dec 28) -0.04 to -0.025
Gold Pack (Mar 29-Dec 29) -0.05 to -0.04
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M +0.00581 to 4.31064 (+0.01024/wk)
- 3M +0.00343 to 4.30007 (+0.00998/wk)
- 6M +0.00102 to 4.26323 (+0.00942/wk)
- 12M +0.00115 to 4.20606 (+0.01181/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.30% (+0.01), volume: $2.269T
- Broad General Collateral Rate (BGCR): 4.28% (+0.01), volume: $883B
- Tri-Party General Collateral Rate (TGCR): 4.28% (+0.01), volume: $865B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $101B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $307B
FED Reverse Repo Operation
RRP usage climbs to $132.031B this afternoon from yesterday's $123.981B. Compares to Thursday Jan 16 low of $94.489B, the lowest level since mid-April 2021. The number of counterparties falls to 34 from 44 prior.
MNI PIPELINE: Corporate Bond Issuance Update: 1B Fifth Third 2Pt Launched
- 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 #Fifth Third Bank $700M 3NC2 +68, $300M 3NCc SOFR+81
- 01/23 $750M #National Bank of Canada 3NC2 +67
- 01/23 $Benchmark Bank of Nova Scotia 60NC5 7.35%
- 01/23 $Benchmark American National Global 5Y +115
MNI BONDS: EGBs-GILTS CASH CLOSE: UK Short End Outperforms Amid Broader Softness
EGB yields rose modestly Thursday, with short-end Gilts outperforming across the space.
- Global core FI was soft in European morning trade, amid French OAT supply and higher energy prices.
- Later, US developments were constructive: weaker US continuing jobless claims data helped EGB futures away from session lows, while a late dip in oil (US Pres Trump called on OPEC to lower prices) saw a renewed bid toward the bond cash close (which ultimately faded).
- The UK curve twist steepned, with notable outperformance at the short end as Chancellor Reeves announced some relaxation to proposed non-dom tax regime changes, while the German curve lightly bear steepened.
- Periphery spreads widened early and failed to regain lost ground by the close, despite steady tightening throughout the session as equities rallied. BTPs underperformed.
- Confidence readings were roughly in line (France business/manufacturing, Eurozone consumer confidence -14.2 vs -14.1 expected), with UK GfK due after the cash close.
- Flash January PMIs are Friday's scheduled highlight, with ECB's Lagarde appearing at Davos.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 0.9bps at 2.245%, 5-Yr is up 1.5bps at 2.35%, 10-Yr is up 2bps at 2.55%, and 30-Yr is up 2.4bps at 2.778%.
- UK: The 2-Yr yield is down 2.9bps at 4.325%, 5-Yr is down 1.5bps at 4.336%, 10-Yr is up 0.3bps at 4.636%, and 30-Yr is up 1.1bps at 5.193%.
- Italian BTP spread up 2.6bps at 109.7bps / Greek up 2.2bps at 87.7bps
MNI FOREX: USD Weakness Prevails After Contained Session, BOJ Up Next
- Overall, currency markets traded in relatively contained ranges on Thursday as they awaited remarks from President Trump, participating online at the World Economic Forum. As comments started to filter through, a very sudden spike higher for the dollar was met with an immediate reversal, highlighting the ongoing sensitivity across FX markets to any comments from the President. Following this, the greenback drifted lower, and the USD index sits around 0.15% in the red as we approach the APAC crossover.
- Most notable weakness in G10 is seen for USDJPY, down 0.37%. However, given Wednesday’s punchy recovery, the pair resides just above mid-range for the week around the 156.00 handle. The decline is noteworthy given the close proximity to the Bank of Japan decision, due overnight. Expectations are that the BOJ will move further along its policy normalisation path, with both market consensus and MNI analysis suggesting a 25bps rate hike as the most likely outcome. In the January Outlook Report, we expect the BoJ to maintain its economic growth forecast but slightly raise its inflation outlook.
- GBP also showed some outperformance as cable rose back above 1.2350 amid with related strength at the short end of the UK curve as Chancellor Reeves announced some relaxation to proposed non-dom tax regime changes. A clear break of the tested 20-day EMA would highlight a stronger corrective phase for GBPUSD and signal scope for an extension, possibly towards the 50-day EMA, at 1.2529.
- In emerging markets, both the Brazilian real and the Mexican peso rallied strongly again, with the former extending a clean break below the 6.00 handle during Wednesday's session.
- Alongside the BOJ, the Eurozone data calendar is headlined by the January flash PMIs on Friday. Data will help set the tone for sentiment heading into 2025, with questions still remaining around the likely pace and magnitude of ECB rate cuts later this year.
FRIDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 24/01/2025 | 0700/0800 | ** |  SE | PPI |
| 24/01/2025 | 0700/0800 | ** | SE | Unemployment |
| 24/01/2025 | 0800/0900 | ** |  ES | PPI |
| 24/01/2025 | 0815/0915 | ** |  FR | S&P Global Services PMI (p) |
| 24/01/2025 | 0815/0915 | ** | FR | S&P Global Manufacturing PMI (p) |
| 24/01/2025 | 0830/0930 | ** |  DE | S&P Global Services PMI (p) |
| 24/01/2025 | 0830/0930 | ** | DE | S&P Global Manufacturing PMI (p) |
| 24/01/2025 | 0900/1000 | ** |  EU | S&P Global Services PMI (p) |
| 24/01/2025 | 0900/1000 | ** | EU | S&P Global Manufacturing PMI (p) |
| 24/01/2025 | 0900/1000 | ** | EU | S&P Global Composite PMI (p) |
| 24/01/2025 | 0930/0930 | *** |  GB | S&P Global Manufacturing PMI flash |
| 24/01/2025 | 0930/0930 | *** | GB | S&P Global Services PMI flash |
| 24/01/2025 | 0930/0930 | *** | GB | S&P Global Composite PMI flash |
| 24/01/2025 | 1000/1100 | EU | ECB's Lagarde in dialogue on the global economic outlook | |
| 24/01/2025 | 1100/1100 | ** | GB | CBI Distributive Trades |
| 24/01/2025 | 1100/1200 | EU | ECB's Cipollone in panel discussion on the effects of CB digital currencies | |
| 24/01/2025 | 1330/0830 | ** |  US | WASDE Weekly Import/Export |
| 24/01/2025 | 1330/0830 |  CA | StatsCan Labour Force Survey: Revisions, 1987 to 2024 | |
| 24/01/2025 | 1445/0945 | *** | US | S&P Global Manufacturing Index (Flash) |
| 24/01/2025 | 1445/0945 | *** | US | S&P Global Services Index (flash) |
| 24/01/2025 | 1500/1000 | *** | US | NAR existing home sales |
| 24/01/2025 | 1500/1000 | ** | US | U. Mich. Survey of Consumers |
| 24/01/2025 | 1800/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |