EXECUTIVE SUMMARY
- MNI FED: Powell Says Labor Market Is "Very Strong"
- MNI FED: Powell Repeats That FOMC "Not In A Hurry" To Adjust Policy
- MNI: Fed's Hammack Wants To Hold Rates Steady For Some Time
- MNI US DATA: NFIB Business Confidence Dips As Uncertainty Spikes Again
- MNI US OUTLOOK/OPINION: January Sampling And New Weights Watched For CPI Rents
US
MNI FED: Powell Says Labor Market Is "Very Strong"
Not many revelations in the Powell testimony, though his characterization about the labor market and neutral rates in the Q&A seemed noteworthy from a hawkish perspective. Asked whether he sees evidence of a higher neutral rate emerging, Powell says: "Yes. I mean, let me say there was a lot of reason to be concerned about downside risk in the labor market toward the middle of [last] year, but really that concern has diminished significantly. The labor market is very strong.
MNI FED: Powell Repeats That FOMC "Not In A Hurry" To Adjust Policy
Key Powell quotes from the congressional testimony (link), all of which are almost entirely verbatim from the January FOMC press conference: "With our policy stance now significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance." (Identical to the January FOMC prepared press conference statement).
MNI: Fed's Hammack Wants To Hold Rates Steady For Some Time
Federal Reserve Bank of Cleveland President Beth Hammack is the latest U.S. central banker to endorse patience in cutting interest rates further after the FOMC voted last month to maintain the fed funds rate target at 4.25%-4.5%, citing the risk of sticky inflation and uncertainty over new government policies. Several Fed officials last week warned the Trump administration's plans to impose tariffs on the U.S.'s largest trading partners could add to upside risks for inflation and said they were in wait-and-see mode on interest rates.
NEWS
MNI SECURITY: Netanyahu Warns Of Return To Intense Fighting In Gaza
Israeli Prime Minister Benjamin Netanyahu has warned of a "return to intense fighting" if Hamas does not return Israeli hostages by Saturday. The Jerusalem Post reports that the decision was reached unanimously by the Israeli Security Cabinet. Netanyahu: "I have just concluded an in-depth four-hour discussion in the Security Cabinet... If Hamas does not return our hostages by Saturday noon, the ceasefire will end, and the military will return to intense fighting until Hamas is finally defeated.”
MNI US-EU: VdL Pledges 'Firm & Proportionate Countermeasures" To Trump Metal Tariffs
Senior EU officials have been responding to US President Donald Trump's imposition of 25% tariffs on steel and aluminium imports into the US. In a short statement, Commission President Ursula von der Leyen says she "deeply regrets" Trump's decision. Says "Unjustified tariffs on the EU will not go unanswered - they will trigger firm and proportionate countermeasures."
- The EU has the option of utilising its 'Anti-Coercion Instrument' (ACI). This 'bazooka' includes options of response such as "the imposition of tariffs, restrictions on trade in services and trade-related aspects of intellectual property rights, and restrictions on access to foreign direct investment and public procurement."
- To date, tit-for-tat measures have focuses on trade in goods, but widening this to include trade in services could prove a significant escalation, and one that EU economies highly reliant on cross-border services may prove reluctant to utilise.
MNI US-EU: VP Vance Meeting With Commission's Von Der Leyen
US Vice President JD Vance is currently meeting with European Commission President Ursula von der Leyen on the sidelines of the AI Action Summit in Paris. The meeting is the highest-profile talks between US dministration officials and those from the EU since President Donald Trump returned to office in January. Ahead of the meeting, Vance said "The Trump administration has been very clear that we care a lot about Europe. We see a lot of economic relationship to build upon with Europe. We also want to make sure that we're actually engaged in a security partnership that's good for both Europe and the United States."
MNI US TSYS: Holding Narrow, Lower Range Ahead Key CPI Data
- Treasuries look to finish weaker Tuesday, see-sawing in a narrow, lower range since the open, March'25 10Y futures -8.5 at 108-30.5 vs. 108-28 low, above initial technical support at 108-20.5 (Low Feb 4).
- Curves bear steepened, bonds underperforming (2s10s +2.786 at 24.568, 5s30s +1.231 at 37.923) weakness partially tied to cross asset selling tied to record-sized 10Y Gilt syndication and orderbook.
- Many listened from the sidelines as Fed Chairman Powell repeated his January FOMC press conference at his Senate Banking Committee testimony today. Expect similar at Wednesday's testimony to the House.
- Treasury futures bounced briefly but remain weaker after $58B 3Y note auction (91282CMN8) 1.2bp stop, drawing 4.300% high yield vs. 4.312% WI.
- US$ Gapped lower/extended lows in late trade, trading desks citing a rehash of earlier headlines that Ukraine is prepared to offer territory swap with Russia - US$ recovered half the move. Earlier pressure on core fixed income and the associated higher yields on Tuesday have supported a recovery for Cross/JPY, with USDJPY briefly rising to a high of 152.60 roughly 1% off the Monday lows.
- Focus on key CPI inflation data tomorrow at 0830ET.
OVERNIGHT DATA
MNI US DATA: NFIB Business Confidence Dips As Uncertainty Spikes Again
- The NFIB small business barometer surprisingly eased to 102.8 (cons 104.7) in January as it pulled back from 105.1 at what had been its highest since 2018.
- It’s still elevated though, having been at 93.7 prior to the November presidential election and consistently printed in the low 90s in the two years before that.
- Uncertainty remains extremely high, with its indicator (which compares with levels from three months ago) jumping by 14pts for its largest single monthly increase since the data started in 1986. At 100.00, it matches the third-highest level of record even if it remains below the record high of 110 seen in the month before the election.
- From the press release: "fewer plan capital investments as they prepare for the months ahead."
- Price components show little by way of new developments, with 26% expecting to increase prices over the next three months. It’s down from two months at 28% but progress has stalled having broadly plateaued since 2Q24 at a level that’s consistent with median inflation not fully returning to target – see charts.
MNI US OUTLOOK/OPINION: January Sampling And New Weights Watched For CPI Rents
- The key CPI rent series are expected to broadly maintain their moderating trend with 0.3% M/M seasonally adjusted increases in January.
- It still has a little way to go though, with December’s weighted average of 0.31% M/M an acceleration from the 0.23% in Nov after what had been the first time since Apr 2021 that monthly rental inflation was below the 0.27/0.28% M/M averaged pre-pandemic.
- Recall that last year’s January update (also with updated weights) saw a surprise one-off lurch higher for OER with 0.56% M/M in what turned out to be down to sample rotation. Any surprises here, especially ones not matched by the primary rents, would likely draw similar suspicion again.
- More broadly, alternative indicators continue to suggest that the trend direction remains lower for rents as new leases feed into the CPI series; whilst we caution that the BLS’s new tenants rent index has recently had a habit of being revised higher, it is starting from a very low base of -2.4% Y/Y as of Q4.
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA up 126.1 points (0.28%) at 44596.58
S&P E-Mini Future up 0.75 points (0.01%) at 6089.75
Nasdaq down 69.5 points (-0.4%) at 19643.65
US 10-Yr yield is up 3.8 bps at 4.5352%
US Mar 10-Yr futures are down 8.5/32 at 108-30.5
EURUSD up 0.0056 (0.54%) at 1.0363
USDJPY up 0.58 (0.38%) at 152.58
WTI Crude Oil (front-month) up $0.95 (1.31%) at $73.26
Gold is down $11.83 (-0.41%) at $2896.42
European bourses closing levels:
EuroStoxx 50 up 32.61 points (0.61%) at 5390.91
FTSE 100 up 9.59 points (0.11%) at 8777.39
German DAX up 126.09 points (0.58%) at 22037.83
French CAC 40 up 22.68 points (0.28%) at 8028.9
US TREASURY FUTURES CLOSE
3M10Y +4.317, 20.222 (L: 15.922 / H: 20.976)
2Y10Y +2.577, 24.359 (L: 22.161 / H: 24.778)
2Y30Y +3.072, 45.841 (L: 43.543 / H: 46.254)
5Y30Y +1.155, 37.847 (L: 36.327 / H: 38.529)
Current futures levels:
Mar 2-Yr futures down 1.25/32 at 102-22.375 (L: 102-21.75 / H: 102-24)
Mar 5-Yr futures down 5/32 at 106-10.25 (L: 106-08.75 / H: 106-16.5)
Mar 10-Yr futures down 9/32 at 108-30 (L: 108-28 / H: 109-09.5)
Mar 30-Yr futures down 21/32 at 114-24 (L: 114-22 / H: 115-18)
Mar Ultra futures down 24/32 at 119-21 (L: 119-16 / H: 120-24)
MNI US 10YR FUTURE TECHS: (H5) Bias Remains Higher
- 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: 110-00 High Feb 7
- PRICE: 108-28.5 @ 1530 ET Feb 11
- 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 despite the run lower off recent highs. This leaves the contract holding the bulk of its latest gains. Price has traded through the 50-day EMA of 109-10+. This highlights potential for a stronger reversal and sights are on a climb above the 110-00 handle. On the downside, initial firm support to watch is unchanged at 108-20+, the Feb 4 low. Clearance of it would signal a reversal and the end of the corrective cycle.
SOFR FUTURES CLOSE
Mar 25 -0.005 at 95.705
Jun 25 -0.020 at 95.810
Sep 25 -0.030 at 95.905
Dec 25 -0.030 at 95.975
Red Pack (Mar 26-Dec 26) -0.035 to -0.03
Green Pack (Mar 27-Dec 27) -0.04 to -0.035
Blue Pack (Mar 28-Dec 28) -0.05 to -0.045
Gold Pack (Mar 29-Dec 29) -0.05 to -0.05
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): 4.35% (+0.00), volume: $2.316T
- Broad General Collateral Rate (BGCR): 4.33% (-0.01), volume: $916B
- Tri-Party General Collateral Rate (TCR): 4.33% (-0.01), volume: $899B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $96B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $273B
FED Reverse Repo Operation
RRP usage falls to new low at $76.446B this afternoon from Monday's $99.653B - compares to prior low of $78.788B last week Wednesday, the lowest level since mid-April 2021. The number of counterparties falls to 36 from 41 prior.
MNI PIPELINE: Corporate Bond Issuance Update $1.75B Zimmer Biomet 3Pt Launched
- Date $MM Issuer (Priced *, Launch #)
- 02/11 $5B #Israel $2.5B 5Y +120, $2.5B 10Y +135
- 02/11 $1.75B #Zimmer Biomet $600M 2Y +45, $550M 5Y +72, $600M 10Y +97
- 02/11 $1.25B #Tennessee Valley Authority 30Y +60
- 02/11 $1B Snap Inc 8NC3 7%
- 02/11 $800M #Flowers Food 10Y +125, 30Y +150
MNI BONDS: EGBs-GILTS CASH CLOSE: Gilts Outperform As Supply, Energy Weigh On EGBs
Gilts outperformed Bunds Tuesday, with curves leaning bear steeper.
- Multiple factors weighed on European instruments starting in early trade. They included lingering US tariff concerns, higher oil and gas prices, and heavy sovereign supply (Italy the EU, the Netherlands, and Germany.)
- Not to be outdone on the latter, the UK saw a record-sized 10Y Gilt syndication and orderbook.
- BoE's Mann set a hawkish tone in the UK rates space by noting that her vote for a 50bp cut in February doesn't necessarily mean that she will vote for a 50bp cut in the upcoming meetings.
- The German curve bear steepened, with the UK's seeing underperformance in the 5-10Y segment.
- Periphery EGB spreads widened slightly in defiance of stronger equities, with BTPs underperforming.
- Wednesday's calendar includes Italian industrial production data, with appearances by BOE's Greene and ECB's Nagel - reminder that ECB's Elderson participates in an MNI Webcast. Global attention will be on US inflation data released in the European afternoon.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 5.8bps at 2.084%, 5-Yr is up 7bps at 2.212%, 10-Yr is up 6.8bps at 2.43%, and 30-Yr is up 7.7bps at 2.692%.
- UK: The 2-Yr yield is up 3.8bps at 4.184%, 5-Yr is up 5.1bps at 4.198%, 10-Yr is up 5.1bps at 4.508%, and 30-Yr is up 4.3bps at 5.099%.
- Italian BTP spread up 1.2bps at 110bps / French OAT up 0.6bps at 77.8bps
MNI FOREX: EURJPY Extends Recovery Amid Higher Core Yields
- Pressure on core fixed income and the associated higher yields on Tuesday have supported a recovery for Cross/JPY, with USDJPY briefly rising to a high of 152.60 roughly 1% off the Monday lows. Spot has since moderated to ~152.30 amid a broader dollar offer, but is consolidating 0.3% gains as we approach the APAC crossover
- Plenty of room for USDJPY to correct further to the topside, given the powerful move lower last week and additional profit taking dynamics potentially in play ahead of tomorrow’s US CPI release. 152.89 (Jan 6 high) and 153.72 (Jan 27 low) are levels to watch on the topside.
- In similar vein, EURJPY has traded on the front foot following last week’s near 3% plunge. We have noted that the short-term trend is oversold, and today’s 0.6% advance is allowing this condition to unwind. Initial resistances are located at 157.97 (Feb 3 low) and 158.86 (Feb 6 high), however firm resistance is not seen until the 20-day EMA and the significant pivot level of 160.00.
- Firmer equity indices have weighed broadly on the US dollar, allowing the DXY to erode the moderate rally seen Monday - as markets shrug off the most recent announcement of US tariffs on steel and aluminium.
- Both the EUR and GBP are outperforming, rising roughly 0.4% against the dollar. Sterling has been buoyed by comments from BOE’s Mann whose relatively hawkish lean may have assisted GBP at the margin. More constructive AUD price action is seeing AUDUSD flirt with resistance at 0.6302, the 50-day EMA, of which a break would be a bullish development and place the immediate focus on 0.6331, the Jan 24 high and a key resistance.
- All attention turns to US CPI on Wednesday, where consensus sees core CPI inflation accelerating to a seasonally adjusted 0.3% M/M (unrounded 0.29%) in January.
WEDNESDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 12/02/2025 | 0900/1000 | * |  IT | Industrial Production |
| 12/02/2025 | 1000/1000 | * |  GB | Index Linked Gilt Outright Auction Result |
| 12/02/2025 | 1000/1100 |  EU | ECB's Elderson in roundtable at the MNI Connect event | |
| 12/02/2025 | 1200/0700 | ** |  US | MBA Weekly Applications Index |
| 12/02/2025 | - | *** |  CN | Money Supply |
| 12/02/2025 | - | *** | CN | New Loans |
| 12/02/2025 | - | *** | CN | Social Financing |
| 12/02/2025 | 1330/0830 | *** | US | CPI |
| 12/02/2025 | 1330/0830 | ** | US | US CPI Annual Revised |
| 12/02/2025 | 1500/1000 | US | Fed Chair Jerome Powell | |
| 12/02/2025 | 1500/1500 | GB | BOE's Greene speech at Institute of Directors | |
| 12/02/2025 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 12/02/2025 | 1700/1200 | US | Atlanta Fed's Raphael Bostic | |
| 12/02/2025 | 1800/1300 | ** | US | US Note 10 Year Treasury Auction Result |
| 12/02/2025 | 1830/1330 |  CA | BOC Meeting Minutes | |
| 12/02/2025 | 1900/1400 | ** | US | Treasury Budget |
| 12/02/2025 | 2205/1705 | US | Fed Governor Christopher Waller |