EXECUTIVE SUMMARY
- MNI US TSYS/SUPPLY: Next Week's Auction Dates Moved Forward
- MNI US: Economists Warn That Trump's Agenda Will Spur Inflation, FT
- MNI US DATA: Final PMI Confirms Soft Manufacturing At Year-End
- MNI US DATA: Pullback In Jobless Claims Gives Fed Room To Be Patient
US
MNI US: Economists Warn That Trump's Agenda Will Spur Inflation, FT
A new report from the Financial Times found that: “Surveys of more than 220 economists in the US, UK and Eurozone on the economic impact of Trump’s return to the White House showed most respondents believed his protectionist shift would overshadow the benefits of other elements of what the president-elect has dubbed “Maganomics”.”
- FT adds: “Many economists in the US, who were polled jointly by the FT and the University of Chicago’s Booth School of Business, also believe a new Trump term will spur inflation and lead to more caution from the Federal Reserve on cutting interest rates.”
- Şebnem Kalemli-Özcan, a professor at Brown University who also sits on the New York Fed’s economic advisory panel, said: “Trump’s policies can bring some growth in the short term, but this will be at the expense of a global slowdown which then will come back and hurt the US later on. His policies are also inflationary, both in the US and the rest of the world, hence we will be moving to a stagflationary world.”
Figure 1: Economists’ Expectations of Trump Administration's Policies on Economic growth in the US, Eurozone and UK
Source: FT, Survey of 222 economists in the US, UK and Eurozone by the FT and the University of Chicago’s Booth School of Business
NEWS
MNI US TSYS/SUPPLY: Next Week's Auction Dates Moved Forward
Today's auction announcements show that Treasury has moved forward the dates of next week's coupon auctions by one day each compared with the tentative schedule released at the most recent quarterly Refunding. The new auction schedule: 3Y is now on Monday Jan 6 (was Tues), 10Y is now on Tuesday Jan 7 (was Weds), 30Y is now on Wednesday Jan 8 (was Thurs). All will take place at 1pm ET as normal.
- The rescheduling is almost certainly due to the federal holiday on Thursday Jan 9 (for ex-President Carter's day of mourning). Treasury may also reschedule the 4- / 8- week bills for Jan 9, perhaps also the 17-week for Jan 8 - but the announcement is only on Jan 7. Note that Treasury went ahead with the Dec 24 bill auctions despite it being a Federal Holiday.
MNI US-CHINA: House Rules Package To Extend China Select Cmte Through Next Congress
The rules package to govern the US House of Representatives through the next Congress includes language to extend the House Select Committee on “strategic competition” between the US and the Chinese Communist Party for an additional two years. The rules bill reads: “The investigative jurisdiction of the Select Committee shall consist of policy recommendations on countering the economic, technological, security, and ideological threats of the [CCP] to the [US] and allies and partners of the United States.”
(BBG) Citadel Offered to Let Clients Redeem Profits But Had Few Takers
Citadel invited clients to cash out profits after a roughly 15% gain in its flagship strategy last year, but the vast majority opted to keep their money in the multistrategy hedge fund.
(BBG) Apple Shares Slip on Report of Discounted IPhones in China
Apple shares slip as much as 2.5% on Thursday, their biggest intraday fall since Nov. 1, as Reuters reports that the iPhone maker is offering discounted smartphones in China as competition intensifies.
MNI US TSYS: Treasuries Retreat from Early 2025 Highs
- Treasuries look to finish the first session of 2025 near steady to mixed after retreating from early session highs, curves off early flatter levels: 2s10s at 32.321 vs. 29.794 low in the first half, 5s30s at 41.567 vs. 39.505 low.
- After the bell, the Mar'25 10Y contract trades +2.5 at 108-26, as technical trend conditions remain bearish despite the intraday rally earlier in the week w/ short-term gains considered corrective below the 110-03+ 20-day EMA. The contract has traded through key short-term support and the bear trigger at 109-02+, the Nov 15 low. The breach confirms a resumption of the downtrend and opens 108+12+, a Fibonacci projection.
- Limited reaction to data: Initial claims in the Dec 28 week fell to 211k from 220k, continuing claims, which had risen more sharply than expected in the previous week, pulled back in the Dec 21 week to a 13-week low 1,844k, from 1,896k. Final December S&P Global US manufacturing PMI reading showed less of a deterioration than implied by the flash estimate, coming in at 49.4 (49.7 prior, 48.3 prelim).
- Friday data: ISM mfg & prices paid at 1000ET. Fed speak: Richmond Fed Barkin, bankers assn address (text, Q&A) at 1100ET. On Saturday: SF Fed Daly & Fed Gov Kugler mon-pol panel event (no text, Q&A) at 1730ET.
OVERNIGHT DATA
MNI US DATA: Pullback In Jobless Claims Gives Fed Room To Be Patient
Jobless claims hit multi-month lows in the most recent weeks of data, in another sign of labor market resilience at the end of 2024.
- Initial claims in the Dec 28 week fell to 211k from 220k (rev from 219k; a rise to 221k had been expected), a 35-week low. And continuing claims, which had risen more sharply than expected in the previous week, pulled back in the Dec 21 week to a 13-week low 1,844k, from 1,896k (rev from 1,910k, a smaller decline to 1,890k had been expected).
- As per usual this time of year, non-seasonally adjusted claims are rising for both initial and continuing, but not quite as dramatically as in prior Decembers.
- In terms of state-by-state dynamics, the drop in California continuing claims stands out (-40.3k on an NSA basis), not unprecedented versus previous years which have been mixed. It's also worth noting that continuing claims in states that were hit by hurricanes Helene and Milton (Florida, Georgia, South Carolina, North Carolina, Tennessee and Virginia) dropped sharply in he Dec 21 week (14.5k, most since Dec 1 2023, and vs a slight rise in the same period last year), which looks to have contributed to a lower national seasonally-adjusted figure.
- Last week it looked from the claims data that the labor market was cooling but not unduly deteriorating, amid lower worker turnover.
- Beyond the week-to-week data, the overall dynamics look even more solid than that: the 4-week initial claims average of 223k is the lowest since June 1, not long before the Fed contemplated kicking off the easing cycle at its July meeting, and while continuing claims are a clearly higher (1,871k 4-week avg vs 1,795k in Jun 1 week), it is still not rising at a rate that suggests a sharp pickup in unemployment.
- In general the data should give the Fed further breathing room to be patient in deciding what to do next on rates. Next Friday's nonfarm payrolls reading will be the key test, however, ahead of the January 29 FOMC decision.
MNI US DATA: Final PMI Confirms Soft Manufacturing At Year-End
The final December S&P Global US manufacturing PMI reading showed less of a deterioration than implied by the flash estimate, coming in at 49.4 (49.7 prior, 48.3 prelim). Instead of a 3-month low, this marks a 2-month low, but still the 6th consecutive monthly reading below 50.0.
- Employment was the only real bright spot. From the report: "After having neared stabilization in the previous month, December saw a sharper reduction in new orders. The rate of decline in production also quickened, while firms scaled back purchasing activity and inventory holdings. Business confidence also waned, after having jumped higher in November. On a more positive note, employment increased modestly for a second month running. Manufacturers were faced with a much sharper rise in input costs, prompting them to increase their selling prices again."
- Friday brings the ISM manufacturing print which is expected to see a similar weakening at end-year (survey: 48.2, from 48.4 Nov). December's regional Fed surveys have been mixed, suggesting continued manufacturing softness at year-end despite some indications of optimism immediately after the November elections.
- The overall theme of the manufacturing sector remaining steady at a weak level remains intact. Also likely to be confirmed intact in Monday's final PMI prints is the divergence with the relatively buoyant services sector (58.5 in the PMI flash December print, though that's more optimistic than the ISM equivalent).
MNI: US MBA: MARKET COMPOSITE -21.9% SA THRU DEC 27 WK
MNI US MBA: REFIS -36% SA; PURCH INDEX -13% SA IN 2-WKS THRU DEC 27
- US MBA: UNADJ PURCHASE INDEX -17% VS YEAR-EARLIER LEVEL
- US MBA: 30-YR CONFORMING MORTGAGE RATE 6.97% VS 6.89% PREV
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA down 113.54 points (-0.27%) at 42431.94
S&P E-Mini Future down 19.75 points (-0.33%) at 5916
Nasdaq down 51.8 points (-0.3%) at 19260.91
US 10-Yr yield is down 0.2 bps at 4.567%
US Mar 10-Yr futures are up 3.5/32 at 108-27.5
EURUSD down 0.0094 (-0.91%) at 1.0262
USDJPY up 0.36 (0.23%) at 157.6
WTI Crude Oil (front-month) up $1.51 (2.11%) at $73.23
Gold is up $35.5 (1.35%) at $2659.98
European bourses closing levels:
EuroStoxx 50 up 21.9 points (0.45%) at 4917.88
FTSE 100 up 87.07 points (1.07%) at 8260.09
German DAX up 115.52 points (0.58%) at 20024.66
French CAC 40 up 13.02 points (0.18%) at 7393.76
US TREASURY FUTURES CLOSE
3M10Y +0.374, 24.538 (L: 18.477 / H: 27.306)
2Y10Y -0.601, 31.928 (L: 29.794 / H: 33.384)
2Y30Y +0.412, 54.169 (L: 51.567 / H: 55.922)
5Y30Y +1.701, 41.452 (L: 39.505 / H: 42.325)
Current futures levels:
Mar 2-Yr futures steady at at 102-25.75 (L: 102-24.5 / H: 102-28.5)
Mar 5-Yr futures up 2/32 at 106-11.75 (L: 106-07 / H: 106-18.25)
Mar 10-Yr futures up 3/32 at 108-27 (L: 108-18.5 / H: 109-05.5)
Mar 30-Yr futures down 1/32 at 113-26 (L: 113-11 / H: 114-19)
Mar Ultra futures down 5/32 at 118-24 (L: 118-04 / H: 119-27)
MNI US 10YR FUTURE TECHS: (H5) Trend Needle Points South
- RES 4: 112-02 Low Oct 14
- RES 3: 111-20+ High 6 and the bull trigger
- RES 2: 110-28 50-day EMA
- RES 1: 110-03+ 20-day EMA
- PRICE: 108-27 @ 1345 ET Jan 2
- SUP 1: 108-12 Low Dec 30
- SUP 2: 108-00 1.500 proj of the Oct 1 - 14 - 16 price swing
- SUP 3: 107-27+ 1.0% 10-dma envelope
- SUP 4: 107-19+ 1.618 proj of the Oct 1 - 14 - 16 price swing
The trend condition in Treasury futures remains bearish despite the intraday rally into the Monday close. These short-term gains are considered corrective below the 110-03+ 20-day EMA. Last week’s sell-off reinforces the current bear cycle. The contract has traded through key short-term support and the bear trigger at 109-02+, the Nov 15 low. The breach confirms a resumption of the downtrend and opens 108+12+, a Fibonacci projection.
SOFR FUTURES CLOSE
Mar 25 -0.005 at 95.820
Jun 25 -0.005 at 95.950
Sep 25 steady00 at 96.020
Dec 25 steady00 at 96.055
Red Pack (Mar 26-Dec 26) +0.005 to +0.015
Green Pack (Mar 27-Dec 27) +0.015 to +0.020
Blue Pack (Mar 28-Dec 28) +0.020 to +0.020
Gold Pack (Mar 29-Dec 29) +0.015 to +0.015
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.00693 to 4.32556 (-0.02939/wk)
- 3M -0.00905 to 4.29605 (-0.03273/wk)
- 6M -0.01221 to 4.23780 (-0.04713/wk)
- 12M -0.01259 to 4.16241 (-0.07690/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.49% (+0.12), volume: $2.474T
- Broad General Collateral Rate (BGCR): 4.45% (+0.10), volume: $812B
- Tri-Party General Collateral Rate (TGCR): 4.45% (+0.10), volume: $778B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $53B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $111B
FED Reverse Repo Operation
RRP usage retreats to $239.858B this afternoon after surging to $473.460B on Tuesday's year end (highest level since June 28). Compares to $98.356B on Friday, December 20 - the lowest level since mid-April 2021. The number of counterparties retreats to 64 from 80 prior.
MNI PIPELINE: $3.5B Credit Agricole Leads Multiple US$ Debt Issuers
- 01/02 $3.5B #Credit Agricole $1.25B 4NC3 +95, $500M 4NC3 SOFR+113, $1.75B 11NC10 +130
- 01/02 $2.5B #GM Financial $1.2B 5Y +100, $300M 5Y SOFR+129, $1B 10Y +135
- 01/02 $2.5B #Ford Motor Cr $1.25B -5Y +150, $1.25B 10Y +193
- 01/02 $2.25B #Athene Global $1.1B 2Y +70, $400M 2Y SOFR+83, $750M 5Y +100
- 01/02 $1.1B #Duke Energy $400M 5Y +50, $700M 10Y +72
- 01/02 $750M #Entergy Louisiana 30Y +103
- 01/02 $500M #Principle Life Global 3Y +55
- 01/02 $500M #MetLife Global 5Y +57
- 01/02 $1B #Ares Capital +7Y +150
MNI EMERGING MARKETS: USD Rally Prevalent Against G10 Counterparts, MXN Outperforms
- The US dollar continued its impressive rally to start 2025, with the ICE dollar index rising around 0.7% on Thursday. This took the index to the highest level in two years, above the 109 handle. News flow remained limited as markets remain in holiday mode, as the path of least resistance remains clearly tilted towards the upside for the greenback.
- The broad dollar strength prompted a couple of major pairs to break significant levels, most notably EURUSD sliding to a fresh cycle low. The move was kickstarted by the pair cleanly breaking support at the bear trigger of the Nov 22 low at 1.0335. The low print so far according to Bloomberg was 1.0226 in relatively thin trade, a level that matches closely with the 1.0223 low on Nov 21, 2022.
- As noted, today's price action keeps moving average studies in a bear-mode position, highlighting a dominant downtrend to begin the year. While there are small supports noted at 1.0198, and 1.0181 (the 2.0% 10-dma envelope), chart levels remain scant between here and parity.
- Underperforming on the session has been GBPUSD (-1.16%), which has plunged below the 1.24 handle, the lowest level for the pair since April. Below here, market participants will focus on the 2024 lows at 1.2300. Standing out is the 1.37% decline for GBPAUD, erasing the past two-week rally in short order. This cross has edged back below the psychological 2.00 mark and is now trading below its 20-day EMA for the first time since late November. Mid-December lows at 1.9799 provide the initial target for the move.
- In emerging markets, the Mexican peso is notably outperforming, with USDMXN tracking 0.85% lower on the session to 20.65. This further reverses the strong move higher earlier in the week, which saw the pair print a fresh cycle high above 20.90.
- US ISM Manufacturing PMI headlines the data docket on Friday.
FRIDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 03/01/2025 | 0700/0200 | * |  TR | Turkey CPI |
| 03/01/2025 | 0855/0955 | ** |  DE | Unemployment |
| 03/01/2025 | 0930/0930 | ** |  GB | BOE M4 |
| 03/01/2025 | 0930/0930 | ** | GB | BOE Lending to Individuals |
| 03/01/2025 | - | *** |  US | Domestic-Made Vehicle Sales |
| 03/01/2025 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 03/01/2025 | 1500/1000 | *** | US | ISM Manufacturing Index |
| 03/01/2025 | 1530/1030 | ** | US | Natural Gas Stocks |
| 03/01/2025 | 1600/1100 | US | Richmond Fed's Tom Barkin |