EXECUTIVE SUMMARY
- MNI FED BRIEF: Fed Doesn’t Need To Be Preemptive, Says Daly
- MNI US TSYS/SUPPLY: Refunding Guidance: Mixed Expectations
- MNI BOE: MNI BoE Preview - February 2025: Agents Pay Survey in Focus
- MNI IRAN: Trump To Sign Memo Restoring 'Maximum Pressure' On Iran-US Off
- MNI US DATA: Vacancies To Unemployed And Quits Rate Continue Stabilization
US
MNI FED BRIEF: Fed Doesn’t Need To Be Preemptive, Says Daly
Federal Reserve officials can take their time considering further interest-rate cuts because inflation remaining above target requires ongoing attention, San Francisco President Mary Daly said Tuesday. "We can take our time to look at what's coming in, both on the economy and any policy changes and make decisions. We don't need to be preemptive. We have plenty of power in our tools to take time to judge,” Daly told a panel discussion in San Francisco. "We are in a good position to wait-and-see." Daly warned the central bank’s work is not done given that inflation remains firmly above the 2% target.
NEWS
MNI IRAN: Trump To Sign Memo Restoring 'Maximum Pressure' On Iran-US Off
Reuters reporting that US President Donald Trump is expected to sign a presidential memorandum restoring 'maximum' pressure on Iran according to a US official. The directive is reported to be aimed at denying Iran all paths to a nuclear weapon and countering Iran's "malign influence". The directive instructs the US Treasury Dept' to impose "maximum economic pressure" on Iran, including sanctions and enforcement mechanisms on those violating existing sanctions says a US official. The official also says Secretary of State Marco Rubio will modify or rescind existing sanctions waivers and cooperate with the Treasury Dep't to implement a campaign "aimed at driving Iran's oil exports to zero".
MNI SECURITY: Iran's Nuclear Program In Focus Ahead Of Trump-Netanyahu Meeting
Israeli Prime Minister Benjamin Netanyahu will meet President Donald Trump at the White House at 16:00 ET 21:00 GMT. Following a one-hour bilateral meeting, Trump and Netanyahu will deliver a joint press conference at 17:10 ET 22:10 GMT. Netanyahu is expected to stay in the US until at least Saturday for meetings with US officials and lawmakers. The meeting comes amid concerns about the implementation of phase two of the Gaza ceasefire agreement. Trump told reporters at the Oval Office yesterday that there are “no guarantees” the ceasefire will hold: “We'll see how it all turns out. It's complex".
MNI US-EU: VDL Says The EU Will Be Ready For 'Tough Negotiations' With Washington
European Commission President Ursula von der Leyen, speaking at the EU Ambassadors Conference in Brussels, has stated that the European Union, “might have to engage in tough negotiations, even with long-time partners.” Von der Leyen said that the threat of a North American trade war has shown "how quickly things can escalate,” conceding that, “there will be an increased use and threat of economic coercion tools such as tariffs”.
MNI BOE: MNI BoE Preview - February 2025: Agents Pay Survey in Focus
• It would be a huge surprise to the market if this week’s MPC meeting delivered anything other than a 25bp cut to bring Bank Rate to 4.50%. The bar is also high for forward guidance to be meaningfully tweaked. We would be surprised if the vote split wasn’t 8-1 (also the base case for 18/22 sellside previews we read), although there are risks around the vote, particularly from the Agents’ Pay Survey.
MNI FRANCE: Gov't To Survive 5 Feb Votes; Censure Motion Next Week Greater Threat
The gov't of PM Francois Bayrou will face two censure motions in the National Assembly from 1530CET (0930ET, 1430GMT) on Wednesday 5 Feb following its use of Art. 49.3 of the Constitution to push through its 2025 state budget (PLF) without a vote. The centre-left Socialist Party (PS) has said that it will not vote against the gov't on these measures in order to ensure a budget is passed while Jordan Bardella - leader of the far-right Rassemblement National (National Rally, RN) - has indicated that his party is unlikely to back censure. With PS support and RN abstention, this will avoid Bayrou's gov'ts ouster on 5 Feb.
MNI US TSYS: Yields Decline Ahead Midweek ADP, China Tariff Talk Ongoing
- Treasuries see-sawed off early session highs to finish near the top end of the session range Tuesday, concerns moderating over the Trump administration's trade policy, China tariff tit-for-tat notwithstanding.
- Treasury support surged after JOLTS data, job openings were lower than expected in Dec at 7.6m (cons 8.00m) after an upward revised 8.156m (initial 8.098m) in Nov.
- Focus turns to Wednesday morning's ADP private employment data ahead of Friday's headline NFP data for January, not to mention US Tsy quarterly refunding announcement, S&P Global US Services PMI and ISM Services data.
- After the bell, March'25 10Y futures trade 109-05.5 (+7) vs. 109-07.5 high, just off initial technical resistance at 109-10/15.5 (50-day EMA / High Feb 3). 10Y yield -.0404 at 4.5146%. Curves mildly mixed: 2s10s -.525 at 29.877, 5s30s +.327 at 43.155.
- Currency market volatility was relatively subdued on Tuesday, in contrast with the sharp swings seen throughout Monday’s session. However, the USD index spent the majority of the session on the backfoot, consistently edging lower and extending session declines from the overnight highs to around 1%.
MNI US TSYS/SUPPLY: Refunding Guidance: Mixed Expectations
The main question for February's Refunding announcement (Wednesday 0830ET) is whether Treasury changes its current guidance that it does not "anticipate needing to increase nominal coupon or FRN auction sizes for at least the next several quarters."
- With expectations on this being mixed, the risks run two ways: a softening or removal of this guidance would confirm that higher issuance is coming later this year (consensus is for sizes to be increased in August or November) amid expected fiscal loosening, while leaving it unchanged would likely see long-end Treasuries strengthen modestly in relief. Eliminating, or softening, that language could be negative for Treasury markets as it would signal that an increase in coupon sizes is fairly imminent.
- A majority of analysts whose Refunding previews we saw expect this guidance to be changed, with some risks of removal of the phrase altogether.
- However other analysts see the guidance changed only later in the year, once the fiscal picture is clearer and the new Treasury Secretary has had more than just a couple of weeks to assess the situation.
- “No change” would bring a mildly bullish relief rally for longer-end Treasuries in the very short run, we feel.
OVERNIGHT DATA
MNI US DATA: Vacancies To Unemployed And Quits Rate Continue Stabilization
JOLTS openings were lower than expected in December after an upward revised November, whilst quits rates were little changed but after an upward revised November. Both the vacancy to unemployed ratio and quits rates have broadly stabilized since June, with quits in particular on the lower side historically.
- JOLTS openings were lower than expected in Dec at 7.6m (cons 8.00m) after an upward revised 8.156m (initial 8.098m) in Nov.
- Ratio to unemployed: 1.10 after 1.15 (initial 1.14). It has averaged 1.1 since June, recently seeing a low of 1.07 in September. The ratio on the month was biased higher by the already known sharp -235k drop in unemployment back in Dec.
- It clearly remains low by recent standards, below the 1.19 seen in 2019 although is still elevated vs pre-pandemic years such as the 1.00 averaged in 2017-18.
- Quits rate at 2.00% after an upward revised 1.97% (initial 1.92). Just like the vacancy to unemployed ratio has stabilized since June, the quits rate has averaged 2.0% over that period.
- Its most recent high was 2.06% back in Oct after a rare rounded increase but these are still low levels historically, having averaged 2.33 in 2019 and 2.20 in 2017-18.
- The private quits rate sees a similar trend, at 2.21% after 2.17% (initial 2.12%).
MNI US DATA: Softer Durables Revisions Don't Dispel Positive End-2024 Momentum
Factory orders were slightly disappointing in December, contracting by 0.9% M/M (0.1pp more than expected), with November's revised down 0.4pp to -0.8%. The ex-transport orders figure was better however, showing growth of 0.3% vs 0.2% in Nov. The durable and capital goods components of the report were little changed from the advance release (overall durables orders -2.2% unch, ex-transport 0.3% unch, core cap goods orders up 0.4% vs 0.5% advance / core cap goods shipments up 0.5% vs 0.6% advance).
- While this was a 4th contraction in 5 months for factory orders, with momentum appearing to slip again (3M/3M SAAR at -3.1%, weakest since March 2024) and the level of orders below mid-2023 levels, overall we continue to see green shoots for manufacturing. That's evident in the ex-transport orders figure which remains heavily influenced by volatile components such as aircraft (-45.7% M/M, which looks largely due to poor Boeing net orders).
- It's also evident in the durable goods orders, even if the downward revisions show slightly less momentum than previously thought. Core capital goods rising 3.3% 3M/3M SAAR (3.8% pre-revision) with shipments up 2.4% (3.0% pre-revision) and both categories rising Y/Y suggests improving dynamics.
- Survey data, including this week's expansionary ISM for January (with strong New Orders), continue to point to a stabilizing manufacturing sector going into 2025, and the durable goods orders/shipments provide some of the initial "hard" data pointing in a similar direction.
- Of course there are countervailing risks, including on tariffs (which may actually have helped boost factory numbers in late 2025 amid front-running), but overall the data bode well for business capex going into 2025 amid signs the broader economy could be regaining some momentum.
MARKETS SNAPSHOT
US TREASURY FUTURES CLOSE
MNI US 10YR FUTURE TECHS: (H5) Trading Below Recent High
- 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: 109-10/15+ 50-day EMA / High Feb 3
- PRICE: 108-25+ @ 12:20 GMT Feb 4
- SUP 1: 108-24/21+ 20-day EMA / Low Feb 3
- 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
Treasury futures continue to trade below their recent highs. A corrective cycle remains in play and the contract is holding on to the bulk of its recent gains. Key resistance at 109-10, the 50-day EMA, has been pierced. A clear break of it would strengthen a bullish theme and open 109-31, the Dec 18 high. The medium-term trend condition remains bearish. The bear trigger is 107-06, the Jan 13 low. Initial firm support is 108-06, the Jan 23 low.
SOFR FUTURES CLOSE
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.00535 to 4.30733 (-0.00575/wk)
- 3M -0.00125 to 4.30188 (-0.00037/wk)
- 6M +0.01066 to 4.26173 (+0.01342/wk)
- 12M +0.02496 to 4.19270 (+0.03240/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.35% (-0.03), volume: $2.413T
- Broad General Collateral Rate (BGCR): 4.33% (-0.01), volume: $913B
- Tri-Party General Collateral Rate (TCR): 4.33% (-0.01), volume: $890B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $94B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $264B
FED Reverse Repo Operation
RRP usage falls to new low of $85.654B this afternoon from $97.781B Friday. Today's usage compares to previous low of $92.863B on Monday, January 27 - the lowest level since mid-April 2021. The number of counterparties falls to 34 from 39 prior.
MNI PIPELINE: Corporate Bond Issuance Update: $6.065B Foundry JV 5Pt Launched
- Date $MM Issuer (Priced *, Launch #)
- 02/04 $6.065B #Foundry JV $1B 6Y +120, $1.15B 8Y +150, $1.39B 11Y +160, $1.475B 12Y +170, $1.05B 14Y +180
- 02/04 $3B *EIB WNG 10Y +60
- 02/04 $2.5B #NextEra Capital Energy $1.5B 30.5NC5.25 6.375%, $1B 30.5NC10.25 6.5%
- 02/04 $2B *L-Bank $1B 2Y SOF+30, $1B 5Y SOFR+47
- 02/04 $1.5B #BNG Bank 3Y SOFR+37
- 02/04 $1.25B #BNY Mellon 6NC5 +62
- 02/04 $1.1B #National Rural Utilities $600M 3Y +52, $500M 5Y +67
- 02/04 $1B #Altria $500M 3Y +67, $500M 10Y +117
- 02/04 $1B #National Fuel Gas $00M 5Y +118, $500M 10Y +147
- 02/04 $800M #GATX $500M 10Y +102, $300M 2054 Tap +113
- 02/04 $650M #Valero Energy 5Y +87
- Expected to issue Wednesday:
- 02/05 $1B KFW 4% 2026 TAP SOFR+20
- 02/05 $Benchmark IDA 10Y SOFR+63a
MNI BONDS: EGBs-GILTS CASH CLOSE: Modest Yield Rise On US Tariff Relief
European yields rose modestly Tuesday, with Bunds slightly outperforming Gilts.
- After some initial risk-on pressure stemming from the US's delay imposing tariffs on Canada and Mexico, core EGBs/Gilts saw an afternoon bid as US job openings data were weaker than expected.
- MNI published a sources story noting that the ECB is likely to adjust its reference to policy restrictiveness in its next statement in March, but there would be resistance on the Governing Council to completely removing it (link). And on the US tariffs front, MNI reported that while the EU is likely to seek to deescalate any trade dispute with the U.S. via negotiation, it may also look to increase non-tariff barriers (link).
- Limited data included French budget balance (2024 deficit slightly smaller than foreseen in November's draft finance bill); Spain saw a smaller rise in January unemployment than expected.
- The German curve lightly bear flattened, with the UK's bear steepening.
- Periphery EGB spreads tightened marginally, led by BTPs. French OAT spreads were flat ahead of Wednesday's censure votes on the Bayrou government.
- Wednesday's schedule includes final Services/Composite PMIs (including the first and final readings for Italy and Spain) and Eurozone PPI, while ECB's Lane makes an appearance. Attention turns to the Bank of England decision Thursday - MNI's preview is here (PDF).
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 1.7bps at 2.051%, 5-Yr is up 1.5bps at 2.17%, 10-Yr is up 1.1bps at 2.396%, and 30-Yr is up 0.7bps at 2.646%.
- UK: The 2-Yr yield is up 1.6bps at 4.181%, 5-Yr is up 2.7bps at 4.188%, 10-Yr is up 3.5bps at 4.522%, and 30-Yr is up 3.5bps at 5.125%.
- Italian BTP spread down 1.7bps at 110bps / French OAT down 0.2bps at 72bps
MNI FOREX: USD Index Edges Further South, Now Lower on Week
- Currency market volatility was relatively subdued on Tuesday, in contrast with the sharp swings seen throughout Monday’s session. However, the USD index spent the majority of the session on the backfoot, consistently edging lower and extending session declines from the overnight highs to around 1%.
- Despite the significant greenback surge to start the week, the DXY is now lower on the week with multiple factors weighing throughout the session. Primarily, broader optimism surrounding trade/tariff negotiations has boosted equities, supporting risk sensitive currencies in tandem. Secondly, Trump's hardline approach on Iran has assisted the push lower in the front-end of the US yield curve and, in turn, has pressured the greenback.
- Aside from Scandies which lead G10 FX gains, the Canadian dollar and the Swiss Franc also moderately outperform. Broad dollar weakness however keeps the likes of EUR, AUD and CNH all on the front foot, registering gains of around 0.3% on the session.
- For now, EURUSD gains are considered corrective, however the powerful recovery from yesterday’s cycle lows has seen the pair breach initial resistance at 1.0350, the Jan 31 low and Monday’s high. A stronger recovery would place the focus on 1.0446, the 50-day EMA and then 1.0533, the Jan 27 high and a key resistance.
- There was also a notable turnaround for USDJPY, which after printing a 155.52 high, traded as low as 154.26, keeping a developing bear threat for the pair in play and focus on a cluster of daily lows just below the 154.00 handle.
- New Zealand unemployment headlines the APAC docket on Wednesday, before the focus turns to US ADP employment and ISM Services PMI.
WEDNESDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 05/02/2025 | 0745/0845 | * |  FR | Industrial Production |
| 05/02/2025 | 0815/0915 | ** |  ES | S&P Global Services PMI (f) |
| 05/02/2025 | 0815/0915 | ** | ES | S&P Global Composite PMI (final) |
| 05/02/2025 | 0845/0945 | ** |  IT | S&P Global Services PMI (f) |
| 05/02/2025 | 0845/0945 | ** | IT | S&P Global Composite PMI (final) |
| 05/02/2025 | 0850/0950 | ** | FR | S&P Global Services PMI (f) |
| 05/02/2025 | 0850/0950 | ** | FR | S&P Global Composite PMI (final) |
| 05/02/2025 | 0855/0955 | ** |  DE | S&P Global Services PMI (f) |
| 05/02/2025 | 0855/0955 | ** | DE | S&P Global Composite PMI (final) |
| 05/02/2025 | 0900/1000 | * | IT | Retail Sales |
| 05/02/2025 | 0900/1000 | ** |  EU | S&P Global Services PMI (f) |
| 05/02/2025 | 0900/1000 | ** | EU | S&P Global Composite PMI (final) |
| 05/02/2025 | 0930/0930 | ** |  GB | S&P Global Services PMI (Final) |
| 05/02/2025 | 0930/0930 | *** | GB | S&P Global/ CIPS UK Final Composite PMI |
| 05/02/2025 | 1000/1100 | ** | EU | PPI |
| 05/02/2025 | 1200/0700 | ** |  US | MBA Weekly Applications Index |
| 05/02/2025 | 1315/0815 | *** | US | ADP Employment Report |
| 05/02/2025 | 1330/0830 | ** |  CA | International Merchandise Trade (Trade Balance) |
| 05/02/2025 | 1330/0830 | ** | CA | International Merchandise Trade (Trade Balance) |
| 05/02/2025 | 1330/0830 | ** | US | Trade Balance |
| 05/02/2025 | 1330/0830 | *** | US | Treasury Quarterly Refunding |
| 05/02/2025 | 1400/1500 | EU | ECB's Lane at Euro area in 2025 event and Q&A | |
| 05/02/2025 | 1400/0900 | US | Richmond Fed's Tom Barkin | |
| 05/02/2025 | 1445/0945 | *** | US | S&P Global Services Index (final) |
| 05/02/2025 | 1445/0945 | *** | US | S&P Global US Final Composite PMI |
| 05/02/2025 | 1500/1000 | *** | US | ISM Non-Manufacturing Index |
| 05/02/2025 | 1500/1000 | ** | US | housing vacancies |
| 05/02/2025 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 05/02/2025 | 1800/1300 | US | Chicago Fed's Austan Goolsbee | |
| 05/02/2025 | 2000/1500 | US | Fed Governor Michelle Bowman | |
| 06/02/2025 | 0030/1130 | ** |  AU | Trade Balance |
| 05/02/2025 | 0030/1930 | US | Fed Vice Chair Philip Jefferson |