EXECUTIVE SUMMARY
- MNI FED: Longer-Run Yield Rise Attribution Eyed
- MNI US: Democrats Vow To Fight Trump's Federal Spending Freeze
- MNI US DATA: Regional Fed Mfg Surveys Point To Sizeable ISM Mfg Upside Risk
- MNI US DATA: Consumer Sentiment Slips In January With Softer Jobs Perceptions
- MNI US DATA: Core Durable Goods Gains Point To Improving Capex, Economic Momentum
US
MNI FED: Longer-Run Yield Rise Attribution Eyed
That list of comments seems to encompass a wide variety of opinions, and the overall tone from speakers seems to be slightly more hawkish than the December minutes’ commentary (and implied by Powell’s press conference comment) that "a substantial majority" saw the policy stance as "still meaningfully restrictive".
- In a press conference that is likely to be thin on details, any shift in Powell’s tone on perceived neutral or how restrictive policy is will be closely eyed.
- Powell noted at the December press conference that the reason to slow down cuts is because having cut by 100bp, “we are significantly closer to neutral” though “at 4.3% and change, we believe policy is still meaningfully restrictive…we are closer to the neutral rate which is … reason to be cautious about further moves
- In December, the “longer-run” dot in the Dot Plot rose from 2.875% to 3.00% - the 4th consecutive quarterly rise. While this isn’t considered to be the short-run “neutral rate”, it is the clearest manifestation of Committee members’ view that rates aren’t going back to pandemic lows.
- Also eyed will be any more insight on how the Fed regards the backup in longer-end rates: at least one FOMC member (Bowman) has highlighted the increase in long-end market-implied inflation expectations as a reason to be cautious in cutting further, though a large part of the nominal increase has been in real yields and – overall – term premia.
- Last time, Powell noted longer-run rates “are affected to some extent by Fed policy, but they’re also affected by many other things”.
NEWS
MNI US: Democrats Vow To Fight Trump's Federal Spending Freeze
Senate Minority Leader Chuck Schumer (D-NY) has pledged to fight a federal spending freeze requested by the White House Office of Management and Budget that is set to go into effect at 17:00 ET 22:00 GMT today. Acting OMB director, Mattew Vaeth, issued a memo yesterday ordering federal agencies to “temporarily pause all activities related to obligations or disbursement of all Federal financial assistance,” while they carry out a review of federal spending by February 10. The order could impact trillions of dollars of federal financial assistance, halt foreign aid, and freeze implementation of Biden-era legislation like the Inflation Reduction Act and the bipartisan infrastructure bill.
MNI UK: PM Claims Economy 'Turning Around' Ahead Of Chancellor's High-Profile Speech
Speaking to Bloomberg TV, PM Sir Keir Starmer has claimed that the British economy is showing signs of a positive turn-around. Starmer's comments come a day ahead of a major speech from Chancellor of the Exchequer Rachel Reeves, who is expected to back major planning reforms and infrastructure projects as part of the gov'ts 'strategy for growth'.
MNI ITALY: Meloni Under Investigation Over Release Of Libyan Judicial Police Head
Prime Minister Giorgia Meloni has released a video on social media confirming that public prosecutor Francesco Lovoi has confirmed that she, as well as Justice Minister Carlo Nordio, Interior Minister Matteo Piantedosim and Secretary of the Council of Ministers Alfredo Mantovano, have been placed under investigation in a case relating to the repatriation of a Libyan police officer. Reuters notes Meloni "is under no obligation to resign, and being placed under investigation in Italy does not imply guilt, nor mean that formal charges will necessarily follow."
MNI DENMARK: PM Urges European Unity Amid Trump Push For Greenland
Speaking alongside German Chancellor Olaf Scholz in Berlin, PM Mette Frederiksen calls for "an even more united Europe and for more cooperation" in the face of US President Donald Trump's call for Denmark to sell Greenland to the United States. Frederiksen did not mention Greenland by name, instead raising the threat to European security posed by Russia's hybrid attacks. Frederiksen: "We need a stronger and a more resolute Europe standing increasingly in its own right, [...[ I think we have to take more responsibility for our own security…Europe, our continent, is based on the idea of that cooperation rather than confrontation will lead to peace, to progress, to prosperity, "
(BBG) Trump Renews Universal Tariff Threat to ‘Protect Our Country’
President Donald Trump said he wants to impose across-the-board tariffs that are “much bigger” than 2.5%, the latest in a string of signals that he’s preparing widespread levies to reshape US supply chains. “I have it in my mind what it’s going to be but I won’t be setting it yet, but it’ll be enough to protect our country,” Trump told reporters Monday night.
MNI US TSYS: Broader Market Recovery Ahead Wednesday's FOMC Announcement
- Treasury look to finish weaker, unwinding a portion of Monday's risk-off rally tied to China's AI startup DeepSeek. Broader markets also likely recovered as accounts squared positions/covered risk ahead of Wednesday's FOMC policy announcement.
- Treasuries pared losses slightly after lower than expected Durable Goods Orders and down-revision to prior, while Capital Goods were higher than expected. December's advance durable goods report was solid overall, despite a large miss in the headline orders figure (-2.2% M/M vs +0.6% expected, prior rev -2.0% from -1.2%).
- The Conference Board consumer survey saw confidence disappoint in January at 104.1 (cons 105.9) after an upward revised 109.5 (initial 104.7) for its lowest since September. Declines were seen in both main categories, also to their lowest since September, but were most pronounced for the present situation.
- Currently, the Mar'25 10Y contract trades -3 at 109-02, off late overnight low of 108-25.5. Futures remain inside technical ranges: support well below at 108-00/107-06 (Low Jan 16 / 13 and the bear trigger), nearly breached yesterday - resistance above at 109-12+ (50-day EMA).
- Stocks also rebounded, semiconductors outperforming software & hardware makers as markets had more time to contemplate the new competition for US AI developers. Currently, the DJIA trades up 123.63 points (0.28%) at 44836.52, S&P E-Minis up 54.5 points (0.9%) at 6101.5, Nasdaq up 409.7 points (2.1%) at 19753.18.
- Cross-asset moves: Overall, G10 FX markets traded in a more stable manner following Monday's sharp volatility, Bloomberg US$ index gained 3.52 at 1300.32. Gold +22.34 at 2763.15; WTI crude (+.71 at 73.88) likely supported by comments from the White House Press Secretary that the Feb 1 deadline for applying tariffs on Mexico and Canada still stands.
OVERNIGHT DATA
MNI US DATA: Core Durable Goods Gains Point To Improving Capex, Economic Momentum
December's advance durable goods report was solid overall, despite a large miss in the headline orders figure (-2.2% M/M vs +0.6% expected, prior rev -2.0% from -1.2%).
- That's because the miss was driven by a further drop in new orders in the extremely volatile nondefense aircraft and parts category (-45.7% M/M, after -20.1% in November), for the lowest level of orders in the category since December 2020 when excluding the one-off net negative figure in June 2024 due to Boeing order cancellations. Industry reports suggest that Boeing net orders were weak in December as well.
- Indeed the core figures were stronger than expected: ex-transportation durables orders were in line at +0.3% (-0.2% prior), but the capital goods orders growth of 0.5% (0.3% expected) especially impressed on a big upward revision to prior (0.9% vs 0.4% initially reported). Core shipments rose 0.6% (0.2% expected), up from 0.4% prior (upwardly rev from 0.3%).
- Ignoring aircraft orders for a moment, the report suggests rising momentum in capital equipment spending. It's been the most solid 2-month period for core capital goods orders since late 2022/early 2023, with the 3M/3M SAAR pickup to 3.8% a 27-month high and the 5th consecutive monthly acceleration.
- Core shipments were the strongest in 11 months, with the Y/Y (+0.7%) a 10-month high and momentum picking up to 3.0% (3M/3M SAAR, a 22-month best).
- The "soft" data (including improving ISM and S&P Manufacturing PMIs, and regional Fed manufacturing surveys) have been pointing to a stabilizing manufacturing sector for a few months now (albeit from soft levels), and the durable goods orders data appear to be "hard" data pointing in a similar direction.
- That bodes well for business capex going into 2025, and suggests that the broader economy may be regaining some momentum.
MNI US DATA: Consumer Sentiment Slips In January With Softer Jobs Perceptions
- The Conference Board consumer survey saw confidence disappoint in January at 104.1 (cons 105.9) after an upward revised 109.5 (initial 104.7) for its lowest since September
- Declines were seen in both main categories, also to their lowest since September, but were most pronounced for the present situation.
- Present situation: 134.3 after an upward revised 144.0 (initial 140.2).
- Expectations: 83.9 after an upward revised 86.5 (initial 81.1).
- Within the details, the closely watched labor market differential gave back some of its recent gains as it fell from 22.2 (highest since May) to 16.2 (technically lowest since Sept).
- The perception of jobs plentiful fell from 37% to 33% vs the 46% averaged in 2019 or 40% through 2017-19.
- By rising again, the differential points to some further trend increases in the unemployment rate although it shouldn’t be used as a month-to-month guide.
MNI US DATA: Regional Fed Mfg Surveys Point To Sizeable ISM Mfg Upside Risk
- The Richmond Fed manufacturing survey rounded out the five regional Fed reports for January, with the five on balance seeing a sequential improvement.
- The Richmond mfg index beat expectations as it increased to -4 in Jan (cons -10) from -10 in Dec for a further improvement away from the low of -21 in September. It’s now the least negative since May.
- New orders painted a broadly similar story, at -4 after -11 although that was its least negative since Oct 2023.
- Looking more broadly, three of the five regional Fed indices saw improvements in January, whilst Kansas held steady for roughly a fourth consecutive month and Empire gave back some of its prior gains.
- Philly clearly stood out though, surging from -10.9 to 44.3 for the highest since the 44.4 in Apr 2021 and before that 1984.
- That biased the unweighted average of the five series firmly higher, rising from -3.9 to +7.4 for its first positive reading since May 2022.
- Taken directly, it points to an ISM manufacturing reading comfortably in the 50s at would be a sizeable beat, currently expected at 48.9 in Jan after 49.2 (released next Monday). However, the localized nature of regional strength suggests caution is needed.
MNI US DATA: GDPNow Revised Up To 3.2% In Penultimate Q4 Release
- The Atlanta Fed’s GDPNow for Q4 has been pushed higher to 3.2% annualized for Q4 from 3.0% in the Jan 17 update, following already robust real GDP growth of 3.1% in Q3 and 3.0% in Q2.
- The upward revision came as real gross private domestic investment growth is now seen at 0.1% vs -0.9% previously, although it was driven by expectations of a smaller than previously tracked drag from inventories rather than stronger investment.
- Domestic demand contributions continue to look strong, pointing to 3.4pp after the 3.7pp in Q3 was the strongest since 1Q23.
- Within that, consumer spending is still seen adding 2.5pp in Q4 to match the strong 2.5pp in Q3.
- Tomorrow sees the final estimate before the official Q4 advance release on Thursday.
- MNI: US REDBOOK: JAN STORE SALES +4.5% V YR AGO MO
- US REDBOOK: STORE SALES +4.9% WK ENDED JAN 25 V YR AGO WK
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA up 161.51 points (0.36%) at 44874.33
S&P E-Mini Future up 52 points (0.86%) at 6098
Nasdaq up 375.9 points (1.9%) at 19713.38
US 10-Yr yield is up 0.2 bps at 4.5364%
US Mar 10-Yr futures are down 1.5/32 at 109-3.5
EURUSD down 0.0059 (-0.56%) at 1.0433
USDJPY up 1.01 (0.65%) at 155.51
WTI Crude Oil (front-month) up $0.76 (1.04%) at $73.93
Gold is up $24.04 (0.88%) at $2764.90
European bourses closing levels:
EuroStoxx 50 up 7.26 points (0.14%) at 5195.71
FTSE 100 up 30.16 points (0.35%) at 8533.87
German DAX up 148.4 points (0.7%) at 21430.58
French CAC 40 down 9.21 points (-0.12%) at 7897.37
US TREASURY FUTURES CLOSE
3M10Y +1.198, 24.22 (L: 19.32 / H: 28.01)
2Y10Y +0.455, 33.528 (L: 32.877 / H: 35.534)
2Y30Y +1.268, 57.937 (L: 56.084 / H: 59.265)
5Y30Y +1.294, 44.449 (L: 42.332 / H: 44.682)
Current futures levels:
Mar 2-Yr futures down 0.375/32 at 102-28.625 (L: 102-26.75 / H: 102-28.75)
Mar 5-Yr futures down 0.75/32 at 106-17.25 (L: 106-11.25 / H: 106-17.75)
Mar 10-Yr futures down 1.5/32 at 109-3.5 (L: 108-25.5 / H: 109-04)
Mar 30-Yr futures down 5/32 at 114-7 (L: 113-23 / H: 114-11)
Mar Ultra futures down 7/32 at 119-4 (L: 118-15 / H: 119-10)
MNI US 10YR FUTURE TECHS: (H5) Monitoring Resistance At 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: 108-29+ @ 10:35 GMT Jan 28
- 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 a corrective phase and the contract is holding on to its recent gains. Attention is on 109-12+, the 50-day EMA - a level tested on Monday. A clear break of this EMA would strengthen a bullish theme and open 109-31, the Dec 18 high. The bear trigger is 107-06, the Jan 13 low. Initial support has been defined at 108-00, the Jan 16 low.
SOFR FUTURES CLOSE
Mar 25 -0.010 at 95.780
Jun 25 -0.015 at 95.945
Sep 25 -0.020 at 96.055
Dec 25 -0.020 at 96.115
Red Pack (Mar 26-Dec 26) -0.02 to -0.015
Green Pack (Mar 27-Dec 27) -0.01 to -0.005
Blue Pack (Mar 28-Dec 28) -0.01 to -0.01
Gold Pack (Mar 29-Dec 29) -0.015 to -0.01
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.00268 to 4.31032 (-0.00509/wk)
- 3M -0.00698 to 4.28689 (-0.01295/wk)
- 6M -0.01660 to 4.22963 (-0.02943/wk)
- 12M -0.04071 to 4.13904 (-0.05976/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.34% (+0.00), volume: $2.338T
- Broad General Collateral Rate (BGCR): 4.32% (-0.01), volume: $899B
- Tri-Party General Collateral Rate (TGCR): 4.32% (-0.01), volume: $868B
- (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: $276B
FED Reverse Repo Operation
RRP usage rebounds to $112.760B this afternoon after falling to $92.863B yesterday - the lowest level since mid-April 2021. The number of counterparties rises to 28 from 26 prior.
MNI PIPELINE: Corporate Bond Issuance Update: $3B JPMorgan Launched
- Date $MM Issuer (Priced *, Launch #)
- 01/28 $3B #JPMorgan PerpNC5 6.5%
- 01/28 $3B #American Express $1.45B 6NC5 +75, $300M 6NC5 SOFR+102, $$1.25B 11NC10 +90
- 01/28 $2.5B #Toronto-Dominion Bank $1.25B 3Y +62, $500M 3Y SOFR+82, $750M 7Y +87
- 01/28 $2B Carnival Corp 8NC3
- 01/28 $2B #Arab Republic of Egypt $1.25B 5Y 8.625%a, $750M 8Y 9.45%
- 01/28 $1.75B #Capital One 11NC10 +162
- 01/28 $750M *Ziraat Bank 5Y 7.375%
- 01/28 $500M *Aircastle 5Y +108
- 01/28 $Benchmark ForteBank 5Y 8%a
MNI BONDS: EGBs-GILTS CASH CLOSE: Bear Steeper Ahead Of Slew Of Cenbank Decisions
European curves bear steepened Tuesday, ahead of a heavy slate of central bank decisions.
- Core bonds performed well overnight, after further concerns over US tariffs emerged. But a risk-on tone returned to markets with equities rallying in European morning trade, ultimately applying pressure on both Bunds and Gilts.
- Implied ECB policy rates ticked slightly higher ahead of Thursday's decision, for which a 25bp cut remains nearly 100% priced (MNI's preview was out today, see here)
- The German belly outperformed its UK counterpart, but underperformed throughout most of the rest of the curve.
- Periphery/semi-core EGB spreads closed tighter. However, BTP spreads reversed most of the session's earlier tightening on news that Italy PM Meloni was under investigation in a case relating to the repatriation of a Libyan police officer.
- Wednesday's calendar includes a policy address by UK Chancellor Reeves and Spanish GDP, with attention on global central bank decisions (BOC, Riksbank, Federal Reserve) ahead of the ECB Thursday.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 2.3bps at 2.272%, 5-Yr is up 2.4bps at 2.365%, 10-Yr is up 3.4bps at 2.565%, and 30-Yr is up 2.9bps at 2.78%.
- UK: The 2-Yr yield is up 2.2bps at 4.31%, 5-Yr is up 2.7bps at 4.31%, 10-Yr is up 2.9bps at 4.614%, and 30-Yr is up 3.1bps at 5.174%.
- Italian BTP spread down 0.7bps at 109.5bps / French OAT down 1.9bps at 72.1bps
MNI FOREX: Currency Markets Stabilise Ahead of CB Decisions, Greenback Recovers
- Overall, G10 FX markets have traded in a more stable manner on Tuesday following the sharp volatility exhibited during Monday’s session. Following a brief bout of greenback strength during APAC hours on tariff related headlines, currency ranges have since held contained ranges as major central bank decisions are awaited across Wednesday/Thursday.
- Both AUD and NZD are among the poorest performers, with AUDUSD extending its pullback this week to around 1.2% from last Friday’s close. Recent gains stalled at resistance around the 50-day EMA (intersecting at 0.6325), and the subsequent reversal lower suggests the possible end of the correction between Jan 13 - 24.
- Key quarterly inflation data from Australia is scheduled on Wednesday, that may prompt the RBA to consider rate cuts. Q4 CPI is expected to show a drop to 2.5% from 2.8% y/y prior. A continuation lower for AUDUSD would bring the focus back on 0.6131, the Jan 13 low and the bear trigger. On the upside, a clear breach of the 50-day average is required to signal scope for a stronger recovery.
- In similar vein, EUR and GBP have tracked around 0.5% lower on the session. Significantly, cable tested resistance at the 50-day EMA on Monday (intersecting today at 1.2520), and with this level holding, medium-term signals remain bearish for the pair. Fiscal matters remain in the spotlight this week with Chancellor of the Exchequer Rachel Reeves due to deliver a speech on Wednesday regarding how the government intends to boost economic growth.
- Headlining the central bank docket tomorrow will be the Fed decision, with the press conference seen key in determining the FOMC’s stance on policy easing through 2025. Elsewhere, the Riksbank and the Bank of Canada decisions are scheduled, ahead of the ECB on Thursday.
WEDNESDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 29/01/2025 | 0700/0800 | * |  DE | GFK Consumer Climate |
| 29/01/2025 | 0700/0800 | ** |  SE | Private Sector Production m/m |
| 29/01/2025 | 0700/0800 | SE | Flash Quarterly GDP Indicator | |
| 29/01/2025 | 0800/0900 | *** |  ES | GDP (p) |
| 29/01/2025 | 0830/0930 | *** | SE | Riksbank Interest Rate Decison |
| 29/01/2025 | 0900/1000 | ** |  EU | M3 |
| 29/01/2025 | 0900/1000 | ** |  IT | ISTAT Consumer Confidence |
| 29/01/2025 | 0900/1000 | ** | IT | ISTAT Business Confidence |
| 29/01/2025 | 1200/0700 | ** |  US | MBA Weekly Applications Index |
| 29/01/2025 | 1330/0830 | ** | US | Advance Trade, Advance Business Inventories |
| 29/01/2025 | 1415/1415 |  GB | BOE's Bailey at Treasury Select Committee | |
| 29/01/2025 | 1445/0945 | *** |  CA | Bank of Canada Policy Decision |
| 29/01/2025 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 29/01/2025 | 1900/1400 | *** | US | FOMC Statement |
| 30/01/2025 | - | EU | European Central Bank Meeting | |
| 30/01/2025 | 0030/1130 | ** |  AU | Trade price indexes |