Highlights:
- JPY rips through technical trigger, TWI rises to best level of the year
- Treasuries stick to recent range, but hold post-FOMC minutes rally
- Weekly claims, Fedspeak on the docket, Trump sees light schedule
US TSYS: Off Highs But 10s Still Hold FOMC Minutes Initial Gains
- Treasuries are off overnight highs seen in early London trade (with the pullback aided by WTI futures off lows) but 10s hold most of the rally seen on yesterday’s FOMC minutes with its surprising amount of balance sheet discussion.
- Today’s macro focus is on jobless claims, covering the February payrolls reference period for initial, before Fedspeak.
- Cash yields are 0.5bp lower (front end to belly) to 2.5bp higher (20s), with the latter underperforming after yesterday’s 20Y auction tailed by 1bp along with soft peripheral stats.
- TYH5 has eased to 109-00 for back to just 1+ higher on the day after an earlier high of 109-04+, on light volumes of 250k.
- Moving average studies point to a downtrend, with initial support at 108-04 (Feb 12 low) before 108-00 (Jan 16 low), whilst resistance is seen at the bull trigger of 110-00 (Feb 7 high).
- Data: Weekly jobless claims (0830ET), Philly Fed mfg Feb (0830ET), Leading index Jan (1000ET)
- Fedspeak: Goolsbee Q&A (0935ET), Musalem speaks to Economic Club of NY (1205ET, text + Q&A), Barr on supervision (1430ET, text + Q&A), Kugler on inflation and Phillips Curve (1700ET, text + Q&A).
- Coupon issuance: US Tsy to sell $9bn 30Y TIPS - 912810UH9 (1300ET)
- Bill issuance: US Tsy to sell $85bn 4-wk bills, $80bn 8-wk bills (1130ET)
STIR: Fed Rate Path Modestly Lower Post Minutes, Musalem Leads Speak
- Fed Funds implied rates are 0-1.5bp lower on the day, after little initial reaction to yesterday’s FOMC minutes which matched the tone from Powell’s press conference re not being in a hurry to cut rates again.
- Maybe most notable for monetary policy, the "vast majority" saw policy as "still-restrictive", despite it being "significantly less restrictive" after the previous 100bp of cuts. Treasuries were supported more significantly on ending QT considerations though, which could be feeding back into the broader FI rally.
- Cumulative cuts from 4.33% effective: 0.5bp Mar, 4bp May, 13.5bp Jun, 20bp Jul, 28bp Sep and 39bp Dec.
- Jobless claims headline today’s data whilst Fedspeak comes from four FOMC members who vote this year. From a mon pol angle, we put greatest focus on St Louis Fed’s Musalem, one of the most hawkish members on the committee.
- 0935 - Goolsbee (’25 voter, dove) in moderated Q&A. He has spoken various times recently, noting post-CPI that the latest reading was “sobering” but he still saw rates settling a “fair bit below” today’s levels. He then added yesterday that once inflation comes down, rates can come down more.
- 1205 - Musalem (’25 voter, hawk) speaks to Economic Club of NY (text + Q&A). He last spoke Jan 10, saying more caution is needed for further cuts whilst noting a need to be both “patient and careful”. That was prior to the end-Jan FOMC meeting and subsequent strength seen in payrolls and CPI, although the latter’s seasonality concerns have been mentioned by multiple FOMC members since then.
- 1430 - Outgoing VC Supervision Barr (perm. voter) on supervision and regulation (text + Q&A)
- 1700 - Kugler (perm. voter, center) on inflation and the Phillips Curve (text + Q&A). Kugler spoke on Feb 7, i.e. post payrolls and pre-CPI/PPI, arguing to keep rates on hold for “some time”.
G20: Foreign Ministers' Meeting Set To Start With US' Rubio A Notable Absence
The first foreign ministers' meeting of South Africa's presidency of the G20 is set to get underway at the top of the hour with an opening address to the plenary session from President Cyril Ramaphosa. Livestream can be found here. Attendees at the meeting include Chinese Foreign Minister Wang Li, Russia's Sergey Lavrov, India's S. Jaishankar, the UK's David Lammy and France's Jean-Noel Barrot. However, the meeting has made headlines with a notable absence coming in the form of US Secretary of State Marco Rubio.
- As Time notes, the US will instead be represented by acting Ambassador to South Africa Dana Brown "after an executive order by U.S. President Donald Trump stopped foreign aid to the country over a law that the White House said amounts to discrimination against the country’s white minority. The U.S. is also displeased with South Africa’s case against Israel at the International Court of Justice." In a statement on X confirming his absence, Rubio accused South Africa of "anti-Americanism".
- A less engaged US at the G20 level, and its deteriorating relations with erstwhile allies in Europe and North America, could see countries such as China and Russia seek to take an even more active role in filling the diplomatic gap. This is especially the case among nations of the so-called 'global south' represented in the G20 such as South Africa, Indonesia, and Mexico.
ECB: Simkus Provides Support For 3 More Cuts This Year
Headlines crossing on BBG from ECB Simkus' interview with Econostream:
- "*ECB'S SIMKUS: AGREE WITH EXPECTATIONS FOR 3 MORE CUTS IN 2025"
- "*ECB'S SIMKUS: DIRECTION OF TRAVEL IS CLEAR, NEXT MOVE CLEAR"
- "*ECB'S SIMKUS: DONT SEE ANY GOOD REASON NOT TO CUT IN MARCH"
A 25bp cut in March is very well embedded into consensus and market pricing. However, comments around the trajectory of rates comes in contrast to Schnabel's hawkish interview with the FT yesterday ("for me, the direction of travel is not so clear anymore").
- We view Simkus as a centrist/hawkish leaning member of the Governing Council, so his comments supporting further rate cuts expose Schnabel (alongside Holzmann) as a clear hawkish outlier within the ECB.
- On February 3, Simkus said that "I don’t think the March cut should be the last one but decisions will depend on data available at the time,”...“Going forward, we can allow ourselves a looser policy.”
EUROPE ISSUANCE UPDATE:
Spain auction results
- Top of the E4.5-5.5bln range sold at that auction (E5.483bln), with E2.182bln allocated to the on-the-run 2.70% Jan-30 Bono.
- Lowest accepted prices were in excess of the pre-auction mid prices across the three lines on offer.
- All three lines saw higher bid-to-cover ratios than the previous re-openings.
- Overall, a decent set of results. The 5-year SPGB/Bund spread has tightened ~0.5bps within the first 20 minutes after the 0930GMT bidding deadline.
- E1.825bln of the 2.40% May-28 Bono. Avg yield 2.487% (bid-to-cover 1.99x).
- E2.182bln of the 2.70% Jan-30 Bono. Avg yield 2.682% (bid-to-cover 1.90x).
- E1.476bln of the 3.55% Oct-33 Obli. Avg yield 3.062% (bid-to-cover 2.57x).
France MT auction results
- E13.489bln of MT OATs sold, the top of the E11.5-13.5bln target range.
- 31% of the total auction was allocated to the new long 3-year 2.40% Sep-28 OAT (E4.195bln). The 3.48x bid-to-cover ratio was much higher than the 2.05x attracted at the launch of the previous on-the-run 2.50% Sep-27 OAT in January 2024.
- E7.498bln of the 2.75% Feb-30 OAT was sold, a little below last month’s E7.674bln. The bid-to-cover of 2.90x was higher than last month’s 2.60x, while the lowest accepted price of 100.01 was in excess of the 99.939 pre-auction mid.
- Overall, it’s another decent MT OAT auction. OAT futures have moved ~10 ticks higher within the first 20 minutes after the 0950GMT bidding deadline.
- E4.195bln of the 2.40% Sep-28 OAT. Avg yield 2.57% (bid-to-cover 3.48x).
- E1.796bln of the 0% Nov-29 OAT. Avg yield 2.7% (bid-to-cover 5.42x).
- E7.498bln of the 2.75% Feb-30 OAT. Avg yield 2.75% (bid-to-cover 2.90x).
France I/L auction results
- E524mln of the 0.10% Jul-31 OATei. Avg yield 0.83% (bid-to-cover 3.22x).
- E316mln of the 0.10% Jul-36 OATei. Avg yield 1.2% (bid-to-cover 3.73x).
- E465mln of the 0.95% Jul-43 OATei. Avg yield 1.41% (bid-to-cover 3.54x).
- E926mln of the 0.10% Mar-32 OATi. Avg yield 1.15% (bid-to-cover 2.68x).
FOREX: JPY Trade-Weighted Index Pierces a New High, BoJ Pricing Supports
- JPY strength again stands out once again as USD/JPY and CHF/JPY are pressed to new YTD pullback lows. Market pricing for BoJ monetary policy this year is again largely responsible, as markets continue to price out easing as a response to the recent run higher in both nominal Japanese GDP and wages data that remain supportive of tightening.
- Evidence of heavy selling volumes, a break of the bear trigger in USD/JPY at 150.93 and a generally softer USD all added extra weight, prompting a sharp move lower in the 3m USD/JPY risk reversal - which spilled to 1.5 points in favour of puts, and closer to the February low. The JPY trade-weighted index probes a new YTD high.
- Despite the sharper market moves in JPY, EUR/USD trades with more poise, recovering gradually off yesterday's lows just ahead of the $1.0400 handle. This keeps the pair within range of a series of really sizeable option strikes - with notional set to expire today across the $1.0400-1.0450 strikes amounting to more than $10bln. Certainly the largest size of the year so far.
- The dip in the USD Index has tipped prices back below the 107.00 handle, but serious support won't cross until the mid-February pullback low of 106.566.
- Weekly jobless claims and the Philly Fed Business Outlook mark the US data highlights Thursday, shortly followed by the preliminary Eurozone consumer confidence release for February. Fed's Goolsbee, Musalem, Barr and Kugler are set to make appearances, while ECB's Nagel makes a panel appearance in Germany.
OPTIONS: Expiries for Feb20 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0315(E916mln), $1.0350(E895mln), $1.0370(E590mln), $1.0400-10(E2.9bln), $1.0425-40(E4.4bln), $1.0450(E1.4bln), $1.0520-25(E1.5bln)
- USD/JPY: Y151.00($514mln), Y151.80-00($1.1bln), Y152.45($515mln), Y154.00($3.0bln)
- GBP/USD: $1.2520(Gbp932mln)AUD/USD: $0.6325(A$549mln), $0.6350(A$685mln), $0.6375(A$858mln), $0.6400(A$424mln)
- USD/CAD: C$1.4100($655mln)l C$1.4175($716mln)
- USD/CNY: Cny7.2000($1.9bln), Cny7.2500($1.9bln), Cny7.3700($1.3bln)
INR: Lower Offshore Borrowing Rates Evidence of Caution Over Liquidity Issues
As a likely consequence of the RBI’s heavy rounds of intervention last week, short-end offshore borrowing rates spiked higher, highlighting a shortfall in rupee liquidity/excess dollar liquidity. But the RBI’s attentiveness to liquidity issues has since seen USD/INR 1-month forward premiums decline for 5 consecutive sessions.
- Bloomberg reported late last week that the RBI would aim to support the rupee without draining liquidity from banks by dialling down bets in the NDF market and instead conducting more forward operations in the local market. Meanwhile a survey of market participants released today shows that investors expect the central bank to ramp up their purchases of bonds to enhance INR liquidity.
- A confluence of negative factors (RBI easing, US tariff threats, local equity outflows) have weighed on rupee sentiment in recent weeks, prompting authorities to intervene heavily to avoid steeper losses, despite expectations that the RBI under the new leadership of Governor Malhotra would be more tolerant of a weaker rupee.
- Nonetheless, on an intraday basis, the onshore rupee ended the session as one of the top performers across the Asia-ex Japan space, with a slightly softer greenback providing a tailwind for regional currencies. For the rupee in particular, Reuters note that strong dollar sales from foreign banks aided gains throughout Thursday’s session.
EQUITIES: Eurostoxx 50 Futures Remain Close to All-Time Highs
- The trend condition in Eurostoxx 50 futures remains bullish, with prices edging to a new alltime high on the continuation contract this week. The move higher last week confirmed once again, a resumption of the uptrend that started on Nov 21 ‘24. Moving average studies are in a bull mode set-up too, highlighting a dominant uptrend. Support to watch is 5325.83, the 20-day EMA.
- S&P E-Minis have faded off intraday highs yesterday, but remain firm and hold the bulk of the recent phase of strength. Attention remains on resistance at 6162.25, the Jan 24 high. Clearance of this level would expose the key resistance at 6178.75, the Dec 6 ‘24 high. A move above this hurdle would resume the primary uptrend. On the downside, initial key support has been defined at 6014.00, the Feb 10 low. A break would highlight a bearish development.
COMMODITIES: Fade in WTI Futures Wednesday Confirms Presence of Bear Threat
- WTI futures traded firmer Wednesday, before fading into the close and confirming the still-present bear threat. Earlier this week, price pulled back from the recent high and has again traded below the 50-day EMA - at $71.62. Attention is on $70.20 (pierced), the Feb 6 low. A clear break of it would undermine a bullish theme and confirm a breach of the 50-day EMA. This would strengthen a bearish threat and open $67.75, the Dec 20 ‘24 low. Key S/T resistance has been defined at $74.06, the Feb 3 high. A move above this level would reinstate a bull theme.
- A bull cycle in Gold remains in play and the yellow metal continues to hold on to the bulk of its recent gains. Fresh highs once again confirm a resumption of the uptrend and maintain the bullish price sequence of higher highs and higher lows. Moving average studies are in a bull mode position too, highlighting a dominant uptrend. Sights are on the $2962.2, a Fibonacci projection. The first key support to watch is $2833.2, the 20-day EMA.
| Date | GMT/Local | Impact | Country | Event |
| 20/02/2025 | 1330/0830 | * |  CA | Industrial Product and Raw Material Price Index |
| 20/02/2025 | 1330/0830 | *** |  US | Jobless Claims |
| 20/02/2025 | 1330/0830 | ** | US | Philadelphia Fed Manufacturing Index |
| 20/02/2025 | 1435/0935 | US | Chicago Fed's Austan Goolsbee | |
| 20/02/2025 | 1500/1600 | ** |  EU | Consumer Confidence Indicator (p) |
| 20/02/2025 | 1530/1030 | ** | US | Natural Gas Stocks |
| 20/02/2025 | 1600/1100 | ** | US | DOE Weekly Crude Oil Stocks |
| 20/02/2025 | 1630/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 20/02/2025 | 1630/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 20/02/2025 | 1705/1205 | US | St. Louis Fed's Alberto Musalem | |
| 20/02/2025 | 1800/1300 | ** | US | US Treasury Auction Result for TIPS 30 Year Bond |
| 20/02/2025 | 1930/1430 | US | Fed Governor Michael Barr | |
| 21/02/2025 | 2200/0900 | *** |  AU | Judo Bank Flash Australia PMI |
| 20/02/2025 | 2200/1700 | US | Fed Governor Adriana Kugler | |
| 21/02/2025 | 2330/0830 | *** |  JP | CPI |
| 21/02/2025 | 0001/0001 | ** |  GB | Gfk Monthly Consumer Confidence |
| 21/02/2025 | 0030/0930 | ** | JP | Jibun Bank Flash Japan PMI |
| 21/02/2025 | 0700/0700 | *** | GB | Public Sector Finances |
| 21/02/2025 | 0700/0700 | *** | GB | Retail Sales |
| 21/02/2025 | 0745/0845 | ** |  FR | Manufacturing Sentiment |
| 21/02/2025 | 0815/0915 | ** | FR | S&P Global Services PMI (p) |
| 21/02/2025 | 0815/0915 | ** | FR | S&P Global Manufacturing PMI (p) |
| 21/02/2025 | 0830/0930 | ** |  DE | S&P Global Services PMI (p) |
| 21/02/2025 | 0830/0930 | ** | DE | S&P Global Manufacturing PMI (p) |
| 21/02/2025 | 0900/1000 | *** |  IT | HICP (f) |
| 21/02/2025 | 0900/1000 | ** | EU | S&P Global Services PMI (p) |
| 21/02/2025 | 0900/1000 | ** | EU | S&P Global Manufacturing PMI (p) |
| 21/02/2025 | 0900/1000 | ** | EU | S&P Global Composite PMI (p) |
| 21/02/2025 | 0930/0930 | *** | GB | S&P Global Manufacturing PMI flash |
| 21/02/2025 | 0930/0930 | *** | GB | S&P Global Services PMI flash |
| 21/02/2025 | 0930/0930 | *** | GB | S&P Global Composite PMI flash |
| 21/02/2025 | 1330/0830 | ** | CA | Retail Trade |
| 21/02/2025 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 21/02/2025 | 1330/0830 | ** | CA | Retail Trade |
| 21/02/2025 | 1430/1530 | EU | ECB's Lane Speech at FIW-Research Conference | |
| 21/02/2025 | 1445/0945 | *** | US | S&P Global Manufacturing Index (Flash) |
| 21/02/2025 | 1445/0945 | *** | US | S&P Global Services Index (flash) |
| 21/02/2025 | 1500/1000 | *** | US | NAR existing home sales |
| 21/02/2025 | 1500/1000 | * | US | Services Revenues |
| 21/02/2025 | 1500/1000 | ** | US | U. Mich. Survey of Consumers |
| 21/02/2025 | 1630/1130 | US | Fed Vice Chair Philip Jefferson | |
| 21/02/2025 | 1630/1130 | US | San Francisco Fed's Mary Daly | |
| 21/02/2025 | 1730/1230 | CA | BOC Governor speech/press conference. |
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