Highlights:
- Treasuries tread water ahead of Fed, market still sees 50bps Fed cuts this year
- UK Chancellor Reeves fails to reassure markets on pro-growth agenda
- BoC seen trimming a further 25bps off the benchmark rate
- Treasuries have pared minor gains seen in Asia hours to leave them almost exactly unchanged overnight ahead of today’s FOMC decision.
- Today’s data should be very much secondary, perhaps tweaking GDP tracking at the margin in the final updates ahead of tomorrow’s GDP Q4 advance, with focus firmly be on the Fed and any headlines alluding to Trump administration policy.
- There are also some important tech names due to report after the close, including Tesla, Microsoft, IBM and Meta Platforms.
- Cash yields sit between 0.3bp higher (7s) to 0.1bp lower (long end).
- 2s10s at 33.9bp (+0.0bp) remains within recent ranges.
- TYH5 sits at 109-04 (+ 03+) having inched back from an earlier high of 109-09, on modest cumulative volumes of 275k.
- It’s at the high end of the week’s range, with Monday’s high of 109-12 having stopped just short of resistance at 109-12+ (50-day EMA). Clearance is required to strengthen a bullish theme working against a medium-term bearish trend condition, whilst support is seen at 108-00 (Jan 16 low).
- Data: MBA mortgages (0700ET), Advance goods trade Dec (0830ET), Wholesale/retail inventories Dec P/Dec (0830ET)
- Feds: FOMC decision (1400ET), Powell press conference (1430ET)
STIR: Fed Rates Unchanged Overnight, 50bp Of Cuts For 2025
- Fed Funds implied rates have firmed a touch recently to sit unchanged from yesterday’s close, fading a modest rally in European rates as markets eye today’s FOMC decision.
- The 50bp of cuts for 2025 is exactly in line with the median dot from last month’s SEP, having at one point in mid-Jan briefly priced less than 25bp for the year on spillover from a strong payrolls report.
- Cumulative cuts from 4.33% effective: 0.5bp for today, 8bp Mar, 15.5bp May, 27.5bp Jun, 32.5bp Jul and 50bp Dec.
- MNI Fed Preview: https://media.marketnews.com/Fed_Prev_Jan2025_With_Analysts_c155c1a3c6.pdf
US TSY FUTURES: Mix Of Short Setting & Long Cover Seen Tuesday
OI data points to a mix of net short setting (TU. FV. TY & UXY) and long cover (US & WN) during yesterday’s downtick in Tsy futures.
- The net short setting seen through UXY futures was more prominent in net DV01 terms.
- This bought an end to two consecutive days of fairly meaningful net long setting across most contracts.
| 28-Jan-25 | 27-Jan-25 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 4,220,016 | 4,196,161 | +23,855 | +896,759 |
FV | 6,324,506 | 6,268,576 | +55,930 | +2,327,429 |
TY | 4,864,892 | 4,864,058 | +834 | +53,589 |
UXY | 2,274,024 | 2,273,540 | +484 | +42,414 |
US | 1,950,890 | 1,962,761 | -11,871 | -1,491,074 |
WN | 1,779,494 | 1,782,629 | -3,135 | -594,492 |
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| Total | +66,097 | +1,234,625 |
STIR: Mix Of Short Setting & Long Cover Seen In SOFR Futures On Tuesday
OI data indicates a mix of net short setting and long cover during Tuesday’s downtick in SOFR futures.
- There was a fairly balanced round of net long setting and short cover when assessing the strip-wide adjustments.
- Net short setting was most concentrated in the whites and blues, while net long cover was seen in the reds.
- Contracts were nowhere near unwinding Monday’s dovish move that followed DeepSeek’s AI advances.
| 28-Jan-25 | 27-Jan-25 | Daily OI Change |
| Daily OI Change In Packs |
SFRZ4 | 1,055,871 | 1,050,808 | +5,063 | Whites | +17,028 |
SFRH5 | 1,200,610 | 1,201,641 | -1,031 | Reds | -26,197 |
SFRM5 | 1,038,095 | 1,035,110 | +2,985 | Greens | +83 |
SFRU5 | 762,009 | 751,998 | +10,011 | Blues | +7,594 |
SFRZ5 | 980,818 | 998,040 | -17,222 |
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SFRH6 | 684,602 | 691,295 | -6,693 |
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SFRM6 | 641,413 | 645,903 | -4,490 |
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SFRU6 | 605,342 | 603,134 | +2,208 |
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SFRZ6 | 708,091 | 713,344 | -5,253 |
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SFRH7 | 485,489 | 481,562 | +3,927 |
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SFRM7 | 405,204 | 401,420 | +3,784 |
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SFRU7 | 286,913 | 289,288 | -2,375 |
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SFRZ7 | 265,639 | 265,400 | +239 |
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SFRH8 | 214,934 | 212,492 | +2,442 |
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SFRM8 | 184,101 | 181,731 | +2,370 |
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SFRU8 | 119,284 | 116,741 | +2,543 |
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EUROPE ISSUANCE UPDATE:
Gilt syndication announcement
- The DMO has announced that the upcoming 10-year syndication (new issue maturing 7 March 2035 with ISIN GB00BT7J0027 and long first coupong) will launch in the W/C 7 March.
- This is in line with our expectations - we had pencilled in 11 February for the launch date since the FQ4 calendar was announced (the DMO had previously announced it would be a 10-year gilt to be held in February and the W/C 10 February was the obvious choice).
- There is GBP8.5bln in the DMO's medium-dated gilt syndication bucket, but we see potential to upside the deal to as much as GBP10.0bln (so pencil in a GBP8.5-10.0bln range).
UK auction results
- Minor moves from another disappointing 8-year green auction
- As seen in recent auctions of the 0.875% Jul-33 Green Gilt, the lowest accepted price (LAP) is below the pre-auction mid-price.
- The price of the gilt fell to the LAP of 74.744 following the auction result but has moved but up to the average price of 74.873 at the time of writing.
- GBP3bln of the 0.875% Jul-33 Green Gilt. Avg yield 4.473% (bid-to-cover 3.10x, tail 0.7bp).
Germany auction results
- E4.5bln (E3.439bln allotted) of the 2.50% Feb-35 Bund. Avg yield 2.54% (bid-to-offer 2.17x; bid-to-cover 2.84x).
UK: Chancellor-'Productive Capacity Of UK Has Become Far Too Weak'
Delivering a speech on growth, Chancellor of the Exchequer Rachel Reeves says "Productive capacity of the UK has become far too weak." Reeves: "The solution is government systematically removing barriers...The strategy that I have consistently set out is to drive the supply side of the economy."
- Reeves says her growth strategy has three prongs: Stability, Reform and investment
- Reeves acknowledges her increase in National Insurance on business has consequences on business and beyond- 'I accept there are costs to responsibly. But the costs of irresponsibility are far higher. Those who opposed my Budget know that too'
- On trade and international relations
- Reeves: "We will work with the US to deepen our economic relationship in the months and years ahead."
- Reeves: "We will prioritise proposals with the EU that are consistent with our manifesto."
- Reeves: "The business and trade minister will travel to India to restart talks on a new trade deal.
- Reeves: "We will protect the important role of pensions in the gilt market while giving additional flexibility." Says that after talking with regulators, an action plan will be published in March that seeks to aid being more agile to help businesses.
FOREX: AUD Pierces Support as Inflation Softens
- JPY is trading somewhat firmer early Wednesday, with markets eyeing reports overnight that the Japanese finance minister had held talks with his newly-minted US counterpart Bessent, at which the two discussed FX policy on top of financial and geopolitical issues. Given the Trump administration's sensitivity to weaker currencies for trading partners, markets have bid the JPY slightly higher to keep USD/JPY pinned to the Y155.00 pivot level for now.
- Australian inflation data overnight came in modestly softer than expected, leading to AUD weakness headed into the Wednesday open. AUD/USD plumbed a pullback low at 0.6227 - piercing the 50% retracement for the upleg posted off the cycle low in mid-January in the process. As a result, AUD and NZD are the poorest performers in G10 FX so far.
- The Fed decision ahead is the market focus, with markets likely to look through an unchanged decision on rates policy to narrow in on any fresh market pricing for the Fed's terminal rate. Markets are priced for ~50bps of further easing into year-end, and the USD will be sensitive to any direct messaging from Powell on pricing, particularly any suggestion that the Fed could go further with easing in the face of growth and tariff risks this year.
- Equity sensitivity will come into further focus later today, with a raft of earnings set for after-market. AI-adjacent stocks including Tesla, Microsoft, IBM and Meta Platforms are due - within which any reference to the rapid rise of China's DeepSeek will be carefully watched.
OPTIONS: Expiries for Jan29 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0400(E918mln), $1.0420-30(E1.2bln), $1.0450(E668mln), $1.0500(E1.3bln)
- USD/JPY: Y154.00($627mln), Y154.75($700mln), Y155.00($1.4bln), Y156.00($544mln)
- USD/CAD: C$1.4500($1.1bln)
- USD/CNY: Cny7.2800($600mln)
EQUITIES: Eurostoxx 50 Futures Extend Recovery from Monday's Low
- A bull cycle in the Eurostoxx 50 futures contract remains intact and the move lower from last Friday’s high, appears to have been a correction. A deeper retracement would allow an overbought trend condition to unwind. Moving average studies are in a bull-mode set-up highlighting a dominant uptrend. The first important support to watch is 5108.69, the 20-day EMA. A resumption of the uptrend would open 5298.50, a Fibonacci projection.
- The S&P E-Minis contract remains above Monday’s low. Key short-term support to watch lies at 5961.75, the Jan 16 low (pierced). For now, the recent sharp pullback appears corrective, however, a clear breach of 5961.75 would strengthen a bearish threat and signal scope for a deeper retracement, towards 5943.94, a Fibonacci retracement. Key resistance is 6178.75, the Dec 6 high.
COMMODITIES: Gold Continues to Trade Close to Recent Highs
- Monday’s move lower in WTI futures marks an extension of the current corrective cycle. The 20-day EMA has been breached and attention turns to support around the 50-day EMA, at $72.22. A clear break of the 50-day average would suggest scope for a deeper retracement. On the upside, a reversal higher would focus attention on $79.48, the Apr 12 ‘24 high and a key resistance.
- Gold is trading closer to its recent highs. A bull cycle is in play and the recent breach of resistance at $2726.2, the Dec 12 high, reinforces current conditions. Sights are on $2790.1, the Oct 31 all-time high. A break of this hurdle would confirm a resumption of the primary uptrend. On the downside, the first key support to watch is $2675.2, the 50-day EMA. A reversal lower and a breach of this average would reinstate a bearish threat.
| Date | GMT/Local | Impact | Country | Event |
| 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 |
| 30/01/2025 | 0630/0730 | ** |  FR | Consumer Spending |
| 30/01/2025 | 0630/0730 | *** | FR | GDP (p) |
| 30/01/2025 | 0700/0800 | ** |  SE | Retail Sales |
| 30/01/2025 | 0700/0800 | ** |  DE | Import/Export Prices |
| 30/01/2025 | 0800/0900 | ** | SE | Economic Tendency Indicator |
| 30/01/2025 | 0800/0900 | *** |  ES | HICP (p) |
| 30/01/2025 | 0800/0900 | ** |  CH | KOF Economic Barometer |
| 30/01/2025 | 0900/1000 | *** |  IT | GDP (p) |
| 30/01/2025 | 0900/1000 | *** | DE | GDP (p) |
| 30/01/2025 | 0930/0930 | ** | GB | BOE M4 |
| 30/01/2025 | 0930/0930 | ** | GB | BOE Lending to Individuals |
| 30/01/2025 | 1000/1100 | ** | EU | Unemployment |
| 30/01/2025 | 1000/1100 | * | EU | Consumer Confidence, Industrial Sentiment |
| 30/01/2025 | 1000/1100 | *** | EU | EMU Preliminary Flash GDP Q/Q |
| 30/01/2025 | 1000/1100 | *** | EU | EMU Preliminary Flash GDP Y/Y |
| 30/01/2025 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 30/01/2025 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 30/01/2025 | 1315/1415 | *** | EU | ECB Deposit Rate |
| 30/01/2025 | 1315/1415 | *** | EU | ECB Main Refi Rate |
| 30/01/2025 | 1315/1415 | *** | EU | ECB Marginal Lending Rate |
| 30/01/2025 | 1330/0830 | * | CA | Payroll employment |
| 30/01/2025 | 1330/0830 | *** | US | Jobless Claims |
| 30/01/2025 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 30/01/2025 | 1330/0830 | *** | US | GDP |
| 30/01/2025 | 1345/1445 | EU | ECB Governing Council Meeting press conference | |
| 30/01/2025 | 1500/1000 | ** | US | NAR Pending Home Sales |
| 30/01/2025 | 1530/1030 | ** | US | Natural Gas Stocks |
| 30/01/2025 | 1630/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 30/01/2025 | 1630/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 31/01/2025 | 2330/0830 | * |  JP | Labor Force Survey |
| 31/01/2025 | 2330/0830 | ** | JP | Tokyo CPI |
| 31/01/2025 | 2350/0850 | ** | JP | Industrial Production |
| 31/01/2025 | 2350/0850 | * | JP | Retail Sales (p) |
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