EXECUTIVE SUMMARY
- MNI BRIEF: Fed's Bostic Says Bumpy Inflation Calls For Caution
- MNI US: Two Key Meetings To Determine Republican Legislative Strategy
- MNI US: Spkr Johnson Confirms Intent To Raise Debt Limit In Reconciliation Package
- MNI US DATA: Jump In ISM Services Prices Paid Amid Tariff Concerns
- MNI US DATA: Strong Domestic Demand, Investment Underpin Wide Trade Deficit
- MNI US DATA: Surprisingly High Job Openings But Quit Rates Resume Decline
US
MNI BRIEF: Fed's Bostic Says Bumpy Inflation Calls For Caution
Federal Reserve Bank of Atlanta President Raphael Bostic sees "very gradual" disinflation in 2025 and said bumpiness in the data "will call for our policy approach to be more cautious," according to a podcast recorded Dec. 9 released Tuesday. "And if we’ve got to err, I would err on the upside. I would want to make sure — for sure — that inflation gets to 2 percent, which means we may have to keep our policy rate higher longer than people might expect, or we may have to be more deliberate in the pacing of reducing our policy," he said.
MNI FED: Bostic Echoes In Cautious Approach In Pre-Recorded Interview
A transcript from Atlanta Fed's Bostic's interview from back on Dec 9 (pre the Dec 17-18 FOMC meeting), a long while ago but he hasn't publicly spoken since then. He voted last year and the role isn't set to vote again until 2027.
He echoed a need for caution that other members have since expressed: “Given that kind of bumpiness in the measures, I think that will call for our policy approach to be more cautious. [...] "I want to make sure we get the right signal, and make sure that our policy is calibrated to that right signal. And if we’ve got to err, I would err on the upside. I would want to make sure—for sure—that inflation gets to 2 percent, which means we may have to keep our policy rate higher longer than people might expect, or we may have to be more deliberate in the pacing of reducing our policy. So on net it’ll be higher, even as we’re higher than an original baseline on what that movement of 2 percent might look like."
NEWS
MNI US: Two Key Meetings To Determine Republican Legislative Strategy
US President-elect Donald Trump will hold two key meetings with Republican lawmakers this week amid uncertainty over strategy to legislate Trump's agenda. On Wednesday, Trump will huddle with Senate Republicans in Washington. On the weekend, Trump will host a large, diverse group of House Republicans at his Mar-a-Lago resort. The Mar-a-Lago attendees are expected to include members of the conservative House Freedom Caucus, various committee chairs, and 'blue state' Republicans who are pushing to increase the State and Local Tax (SALT) deduction.
MNI US: Spkr Johnson Confirms Intent To Raise Debt Limit In Reconciliation Package
House Speaker Mike Johnson (R-LA) has told reporters, during the first Republican leadership presser since the opening of the 119th Congress, that his “intention” is to raise the federal debt limit as part of the budget reconciliation process. Johnson says because the GOP controls all three branches of government, the Republican Party is “in better stead” to deal with the debt limit via party-line reconciliation rather than as part of regular Congressional appropriations.
MNI US: Trump Announces DAMAC Investment, Pledges To Reverse Biden Offshore Oil Ban
US President-elect Donald Trump, speaking to the press for the first time since Congress certified his election win yesterday, has announced that Emirati firm DAMAC Properties will invest "at least USD$20 billion dollars over a very short period of time" to build "massive" new data centres in the Southwest and Sun Belt of the United States.
MNI US: Trump Says He Is Very Serious About Mexico/Canada Tariffs
US President-elect Donald Trump, speaking at his Mar-a-Lago presser, has stated he is "very serious" about imposing "substantial" tariffs on Canada and Mexico, noting that his incoming administration "wants to get along with everyone" but it "takes two to tango".
MNI SECURITY: Trump Envoy Says "A Lot Of Progress" Being Made On Gaza Ceasefire Deal
US President-elect Donald Trump's Middle East envoy Steven Witkoff has told reporters at Mar-a-Lago that "a lot of progress" is being made towards a Gaza hostage for ceasefire deal in ongoing negotiations in Qatar. Witkoff: "I think they're doing a really good job back in Doha, I'm leaving tomorrow back to go to Doha... We've had some really great progress and I'm hopeful we'll have some good things to announce by [Trump's inauguration on January 20]."
MNI US TSYS: Ylds Climb After Strong JOLTS Jobs, ISM Prices Paid Jump
- Treasuries have drifted sideways since establishing lows after this morning's data: JOLTS report saw surprisingly elevated job openings in November but the quits rate reversed a surprise increase from back in October. Job openings 8090k (cons 7740k) in Nov after an upward revised 7,839k (initial 7,744k) in Oct.
- Headline ISM index strengthened to 54.1, a little higher than the 53.5 expected (52.1 prior), with New Orders (54.2, 53.7 prior) and Employment (51.4, 51.5 prior) exactly matching survey expectations. But Prices Paid soared to 64.4 (57.5 expected, 58.2 prior), jumping by the most since January to the highest level in 22 months.
- The Mar'25 10Y contract slipped below Dec 26 low to 108-01.5 low (-15.5), 10Y yld climbing to 4.6972% high. Though Tsy curves climbed to new three year highs (2s10s 39.618), projected rate cuts for 2025 continued to recede with June 25 no longer fully pricing a 25bp rate cut. Current lvls this morning levels (*) as follows: Jan'25 at -1.2bp (-2.3bp), Mar'25 -10.2bp (-10.9bp), May'25 -14.7bp (-16.3bp), Jun'25 -23.2bp (-24.2bp).
- Reminder, much of Thursday's data has been moved to Wednesday (Wholesale Sales, Weekly Jobless Claims) as well as the 30Y Bond auction re-open to avoid conflicts with Thursday's Federal Holiday/day of Mourning for former President Carter. The CME Group FI trade closes at 1315ET Thursday. Thursday still includes Challenger Job cuts at 0730ET, Tsy 4- & 8W bill auctions at 1130ET, and several scheduled Fed speakers through the day.
OVERNIGHT DATA
MNI US DATA: Surprisingly High Job Openings But Quit Rates Resume Decline
The JOLTS report saw surprisingly elevated job openings in November but the quits rate reversed a surprise increase from back in October.
- Job openings 8090k (cons 7740k) in Nov after an upward revised 7,839k (initial 7,744k) in Oct.
- The ratio to unemployed 1.13 after an upward revised 1.12 (initial 1.11). It edges to what’s technically a fresh high since June, off a low of 1.08 in Jul and Sep, but has more broadly stabilized at 1.1 since July. These are levels last seen in mid-2021.
- It clearly remains low by recent standards having averaged 1.21 in Q2 for close to the 1.19 seen in 2019 although is still elevated compared to earlier pre-pandemic years such as the 1.00 averaged in 2017-18.
- The quits rate dropped back to 1.92% after a slightly downward revised 2.06% in Oct (initial 2.09).
- It’s an important reversal after October surprisingly saw its first monthly increase on a rounded basis since May 2023.
- It pokes through the 1.95 in Sep for its lowest since Jun 2020. 2019 av 2.33, 2017-18 av 2.20.
MNI US DATA: GDPNow Lifts To 2.7% Annualized For Q4 Tracking
- Atlanta Fed’s GDPNow tracker has been revised up to 2.7% annualized for Q4 from 2.4% in the Jan 3 update, picking up from what had been a relatively weak patch for the tracker after >3% readings.
- Intra-release details show that yesterday’s durable goods data had a greater impact but today’s ISM services and international trade reports also helped.
- Domestic demand contributions continue to look strong, pointing to 3.05pp after the 3.7pp in Q3 was the strongest since 1Q23.
- Within that, consumer spending is seen adding 2.2pp in Q4 after the 2.5pp in Q3.
- The Q4 advance release is set for Jan 30.
MNI US DATA: Jump In ISM Services Prices Paid Amid Tariff Concerns
December's ISM Services survey was largely in line with expectations, with one notable exception: a sharp rise in Prices Paid.
- The headline index strengthened to 54.1, a little higher than the 53.5 expected (52.1 prior), with New Orders (54.2, 53.7 prior) and Employment (51.4, 51.5 prior) exactly matching survey expectations. But Prices Paid soared to 64.4 (57.5 expected, 58.2 prior), jumping by the most since January to the highest level in 22 months. In contrast, the headline index, new orders, employment, and new export orders indices remain below their October levels.
- We should note that the reports around the turn of the year tend to be volatile and prone to reversals in the subsequent month. In Dec 2023 for example, the report was very poor with an employment reading consistent with recession - but then January's showed a strong rebound with the strongest monthly increase in prices paid since 2012. As such we would take the upside surprise there with a grain of salt.
- However the report contains several mentions of tariffs, as both a driver of uncertainty/price concerns, as well as higher activity: "Some of the increased business activity seems to have been driven by preparation for demand in the new year, or risk management for impacts from ports strikes and potential tariffs. There was general optimism expressed across many industries, but tariff concerns elicited the most panelist comments."
- Respondents cited "receiving orders for next cycle earlier than usual”; “More activity around possible higher tariffs impacting the supply chain"; “Getting in front of tariffs”; “Ocean freight is starting to have a backlog of container shipments.”
- Note the December ISM Manufacturing survey's Prices Paid index rose more than expected to 52.5 (50.3 prior, 51.8 survey), a 4-month high. Though this wasn't particularly elevated in the broader context, it could be interpreted as a further sign that inflation pressures have bottomed out - confirmation of the rise in ISM Services Prices Paid in future surveys would be concerning from this perspective.
MNI US DATA: Strong Domestic Demand, Investment Underpin Wide Trade Deficit
November's trade deficit - incorporating both goods and services - came in almost exactly in line with expectations at $78.2B (a little higher than October's, which was revised $0.2B lower at $73.6B).
- Imports rose sharply in nominal terms ($11.6B, biggest increase in 2.5 years), and on a broad-based basis with all categories of imports increasing - reflecting a rebound in a dip in October imports, but also potentially reflecting some front-running of possible Trump administration tariffs.
- We also note that "other" goods exports contracted sharply in November (around one-third), reflecting methodological issues with the Canadian customs authorities after a 75% jump in Oct, and which are likely to be revised out of the series with an annual benchmarking later this year.
- By our estimates, the deficit as a percent of GDP remains above 3.0%, where it has stood since April (after briefly dipping below that mark in 2023), with a roughly 1% of GDP services surplus offsetting a 4.1% goods deficit.
- While the wide trade deficit is to be expected given such robust domestic demand, so far, the external sector's impact on Q4 GDP growth is tracking to be relatively neutral vs Q3. Real goods trade continues to grow at a solid clip, with real exports up 4.9% Y/Y and imports 8.2%.
- Real goods exports momentum appears to be slowing though, falling by 2.5% in November on a quarterly annualized basis (weakest since Q2 2023), even as imports remain robust (rising 4.6% on that basis in November). Though again, the Canadian export figures may be distorting the picture.
- Within the latter we note that while both consumer and capital goods imports are growing at a solid clip (over 12% Y/Y each in November), capital goods have exceeded consumer goods for most of the last 2.5 years.
- As we have written many times, we see capital goods demand as being broadly positive for longer-term growth dynamics, but the degree to which tariff front-running is affecting the propensity to import is unclear.
MNI CANADA NOV TRADE BALANCE -CAD323 MLN VS PRIOR -CAD544 MLN
- CANADA NOV TRADE BALANCE -CAD323 MLN VS PRIOR -CAD544 MLN
- CANADA NOV EXPORTS +2.2% MOM; IMPORTS +1.8%
- CANADA TRADE BALANCE WITH U.S. +CAD8.2B VS PRIOR +CAD6.6B
- CANADA Oct trade balance revised TO -CAD544M from -CAD924M
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA down 282.77 points (-0.66%) at 42425.53
S&P E-Mini Future down 79.75 points (-1.32%) at 5941.5
Nasdaq down 424.9 points (-2.1%) at 19443.68
US 10-Yr yield is up 4.9 bps at 4.6789%
US Mar 10-Yr futures are down 10.5/32 at 108-6.5
EURUSD down 0.0044 (-0.42%) at 1.0346
USDJPY up 0.16 (0.1%) at 157.78
WTI Crude Oil (front-month) up $0.72 (0.98%) at $74.28
Gold is up $11.66 (0.44%) at $2648.22
European bourses closing levels:
EuroStoxx 50 up 25.18 points (0.5%) at 5011.82
FTSE 100 down 4.38 points (-0.05%) at 8245.28
German DAX up 124.38 points (0.62%) at 20340.57
French CAC 40 up 43.66 points (0.59%) at 7489.35
US TREASURY FUTURES CLOSE
3M10Y +3.548, 36.139 (L: 25.796 / H: 38.235)
2Y10Y +3.226, 38.36 (L: 34.146 / H: 39.618)
2Y30Y +3.874, 61.139 (L: 56.335 / H: 63.119)
5Y30Y +2.558, 44.351 (L: 41.201 / H: 45.375)
Current futures levels:
Mar 2-Yr futures down 1.5/32 at 102-22.875 (L: 102-21.25 / H: 102-25.25)
Mar 5-Yr futures down 5/32 at 106-0.5 (L: 105-29 / H: 106-07.5)
Mar 10-Yr futures down 11/32 at 108-6 (L: 108-01.5 / H: 108-20)
Mar 30-Yr futures down 30/32 at 112-6 (L: 111-31 / H: 113-09)
Mar Ultra futures down 44/32 at 116-17 (L: 116-08 / H: 118-03)
MNI US 10YR FUTURE TECHS: (H5) Bearish Trend Condition
- RES 4: 111-20+ High 6 and the bull trigger
- RES 3: 110-25 High Dec 12
- RES 2: 110-06+ 50-day EMA
- RES 1: 109-08 20-day EMA
- PRICE: 108-05 @ 1513 ET Jan 07
- SUP 1: 108-01+ Intraday low Jan 07
- SUP 2: 108-00 1.500 proj of the Oct 1 - 14 - 16 price swing
- SUP 3: 107-19+ 1.618 proj of the Oct 1 - 14 - 16 price swing
- SUP 4: 107-04 1.764 proj of the Oct 1 - 14 - 16 price swing
The trend condition in Treasury futures is unchanged and remains bearish. Recent weakness 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 108.00, a Fibonacci projection. Short-term gains are considered corrective below 109-08, the 20-day EMA.
SOFR FUTURES CLOSE
Mar 25 -0.015 at 95.790
Jun 25 -0.025 at 95.90
Sep 25 -0.020 at 95.970
Dec 25 -0.025 at 95.995
Red Pack (Mar 26-Dec 26) -0.035 to -0.025
Green Pack (Mar 27-Dec 27) -0.06 to -0.04
Blue Pack (Mar 28-Dec 28) -0.075 to -0.065
Gold Pack (Mar 29-Dec 29) -0.08 to -0.075
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.00896 to 4.29743 (-0.01800/ wk)
- 3M -0.00304 to 4.28516 (-0.00853/wk)
- 6M +0.00345 to 4.24557 (+0.00362/wk)
- 12M +0.00782 to 4.18552 (+0.02081/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.27% (-0.04), volume: $2.349T
- Broad General Collateral Rate (BGCR): 4.26% (-0.03), volume: $844B
- Tri-Party General Collateral Rate (TGCR): 4.26% (-0.03), volume: $829B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $98B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $280B
FED Reverse Repo Operation
RRP usage continues to recede, $208.296B this afternoon from $231.926 Monday. Compares to $98.356B on Friday, December 20 - the lowest level since mid-April 2021. The number of counterparties slips to 56 from 57.
MNI PIPELINE: Corporate Bond Issuance Update
At least $27B corporate bonds have either priced or launched so far today, less than half of Monday's near $60B record. Still waiting for Kexim, SMFG and Daimler Truck NA details.
- Date $MM Issuer (Priced *, Launch #)
- 01/07 $6B *European Investment Bank (EIB) 5Y SOFR+42
- 01/07 $5B *ADB 3Y SOFR+31
- 01/07 $3.55B #BPCE $1.25B 6NC5 +142, $1.5B 11NC10 +162, $800M 21NC20 +195
- 01/07 $2B #Santander $1B 5Y +110, $1B 10Y +135
- 01/07 $2B #Dai-Ichi Life PerpNC10 6.2%
- 01/07 $1.6B #Republic of Chile 12Y +105
- 01/07 $1.5B #CIBC 5Y SOFR+71
- 01/07 $1.25B #HPS Corp Lending $750M 3Y +135, $500M +7Y +165
- 01/07 $1B #GA Global Funding $500M 5Y +97, $500M 10Y +127
- 01/07 $1b #Kuwait Finance House (KFH) 5Y SOFR Sukuk +95
- 01/07 $850M #APA Corp $350M 10Y +150, $500M 30Y +185
- 01/07 $600M #Met Tower 3Y +48
- 01/07 $500M #Boston Gas WNG 10Y +115
- 01/07 $500M #Protective Life 7& +85
- 01/07 $500M DBJ WNG 10Y SOFR+73
- 01/07 $Benchmark World Bank 7Y +54
- 01/07 $Benchmark Kexim 3Y +55a, 3Y SOFR, 5Y +75a, 10Y +90a
- 01/07 $Benchmark SMFG 5.25Y +78, 5.25Y SOFR+105, 7Y +88, 10Y +95
- 01/07 $Benchmark Daimler Truck Fin NA 3Y +65, 3Y SOFR, 5Y +82, 7Y +92, 10Y +102
- Expected Wednesday:
- 01/08 $Benchmark Kommunalbanken 5Y +51
- 01/08 $Benchmark Cncl of Europe Dev Bank 5Y SOFR+45a
- 01/08 $Benchmark Inter-American Development Bank (IADB) 5Y SOFR+45a
MNI BONDS: EGBs-GILTS CASH CLOSE: US Data Exacerbates Long-End Selloff
Bunds outperformed Gilts Tuesday, with bear steepening evident across European curves.
- Core FI was under some pressure in European morning trade, with the long end under duress amid supply (including 30Y Gilt auction) and higher oil prices/equities.
- An in-line December flash Eurozone HICP report (on softer-than-expected Italian and French prints) had only a modest dovish impact.
- Stronger-than-expected US economic data (job openings, ISM Services prices) saw Bunds and Gilts head to session lows a couple of hours before the cash close.
- Yields closed near the session highs, and the UK and German curves bear steepened on the day. 10Y UK yields hit the highest in 15 months, with 30Y the highest since 1998. 10Y Bund yields saw their highest close since July 2024/
- Periphery EGB spreads widened despite the rise in equities, led by BTPs.
- Data Wednesday includes German factory orders and retail sales, with consumer confidence surveys from France and the Eurozone. ECB's Villeroy is also due to speak.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 0.2bps at 2.196%, 5-Yr is up 1.5bps at 2.278%, 10-Yr is up 3.6bps at 2.483%, and 30-Yr is up 5.4bps at 2.717%.
- UK: The 2-Yr yield is up 3.8bps at 4.471%, 5-Yr is up 4.8bps at 4.449%, 10-Yr is up 7.3bps at 4.683%, and 30-Yr is up 6.7bps at 5.246%.
- Italian BTP spread up 2.2bps at 114.7bps / French OAT up 1.2bps at 82.3bps
MNI FOREX: Greenback Receives Boost from Above-Estimate ISM/JOLTS Data
- The US dollar pared initial losses on Tuesday, as both US ISM Services data and Jolts Job opening beat consensus expectations. The USD Index is up 0.15% on the session, although notably the DXY still sits just below the levels before the release of the WaPo tariff article during Monday trade.
- EURUSD has echoed this sentiment with the early push back above 1.04 being met with solid resistance around Monday’s highs ~1.0435. Spot trades closer to 1.0370 as we approach the APAC crossover and will look to the old November low at 1.0335 as initial support.
- Despite being unchanged on the session, USDJPY has traded with significant volatility with multiple two-way intra-day swings. Overnight, the pair traded multi month highs of 158.42, before encountering comments from the Japanese Finance Minister around excessive FX moves which halted the yen’s decline and saw USDJPY print a session low of 157.38.
- The US data then took us back to exactly the match the highs, before the pessimistic price action in equities led the pair lower once more to current levels around 157.70.
- In similar vein, both AUD and NZD spent the European session outperforming before risk off sentiment drove both these currencies back to unchanged levels ahead of the close.
- The Swiss franc is a touch softer on the session following a lower-than-expected core inflation print, with EURCHF briefly trading up to a near 2-month high around 0.9440. USDCHF has risen 0.35%, and is reapproaching the 0.91 handle, with medium term targets of 0.9158 and 0.9250 well defined.
- Australia CPI highlights the APAC calendar on Wednesday, before focus will turn to US ADP employment, jobless claims and the release of the December Fed meeting minutes.
WEDNESDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 08/01/2025 | 0700/0800 |  SE | Flash CPI | |
| 08/01/2025 | 0700/0800 | ** |  DE | Retail Sales |
| 08/01/2025 | 0700/0800 | ** | DE | Manufacturing Orders |
| 08/01/2025 | 0745/0845 | ** |  FR | Consumer Sentiment |
| 08/01/2025 | 0745/0845 | * | FR | Foreign Trade |
| 08/01/2025 | 1000/1100 | ** |  EU | EZ Economic Sentiment Indicator |
| 08/01/2025 | 1000/1100 | * | EU | Consumer Confidence, Industrial Sentiment |
| 08/01/2025 | 1000/1100 | ** | EU | PPI |
| 08/01/2025 | 1000/1000 | ** |  GB | Gilt Outright Auction Result |
| 08/01/2025 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 08/01/2025 | 1005/1005 | GB | BOE's Woods Financial Services Regulation hearing | |
| 08/01/2025 | 1200/0700 | ** |  US | MBA Weekly Applications Index |
| 08/01/2025 | 1315/0815 | *** | US | ADP Employment Report |
| 08/01/2025 | 1330/0830 | *** | US | Jobless Claims |
| 08/01/2025 | 1330/0830 | US | Fed Gov Waller | |
| 08/01/2025 | 1500/1000 | ** | US | Wholesale Trade |
| 08/01/2025 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 08/01/2025 | 1700/1200 | ** | US | Natural Gas Stocks |
| 08/01/2025 | 1800/1300 | *** | US | US Treasury Auction Result for 30 Year Bond |
| 08/01/2025 | 1900/1400 | *** | US | FOMC Minutes |
| 08/01/2025 | 2000/1500 | * | US | Consumer Credit |
| 09/01/2025 | 2330/0830 | ** |  JP | average wages (p) |
| 09/01/2025 | 0001/0001 | ** | GB | KPMG/REC Jobs Report |
| 09/01/2025 | 0001/0001 | * | GB | BRC Monthly Shop Price Index |
| 09/01/2025 | 0030/1130 | ** |  AU | Retail Trade |
| 09/01/2025 | 0030/1130 | ** | AU | Trade Balance |
| 09/01/2025 | 0130/0930 | *** |  CN | CPI |
| 09/01/2025 | 0130/0930 | *** | CN | Producer Price Index |