Highlights:
- Powell appearance likely to see Fed chair scrutinised on policy
- EU pledges counter-tariff activities after Trump levies against steel, aluminium imports
- EGBs volatile as heavy supply, syndication slate weighs on activity
US TSYS: Twist Steeper With Long End Lower In EGB Supply Spillover
- Treasuries sit twist steeper on the day. The front-end is little changed ahead of Powell’s Senate Banking Committee appearance at 1000ET today whilst the longer end has steadily sold off through London hours after a Japan holiday as it’s dragged lower by EGBs digesting heavy supply.
- Cash yields are 0.5-3.5bp higher on the day, with 10Y yields at 4.527% (+3.0bps) having now climbed almost 10bps since pre-NFP levels.
- 2s10s has lifted to 24.5bps (+2bp) but remains on the low side for the ytd range.
- TYH5 sits at 109-01+ (- 05+) off lows of 109-00+ on particularly light cumulative volumes of 225k.
- It takes a step closer to support at 108-20+ (Feb 4 low) whilst the short-term trend needle points north with resistance at 110-00 (Feb 7 high).
- Data: NFIB business barometer (1100ET – already released)
- Fedspeak: Hammack (0850ET), Powell (1000ET), Williams (1530ET), Bowman (1530ET)
- Coupon issuance: US Tsy $58B 3Y Note auction - 91282CMN8 (1300ET)
- Bill issuance: US Tsy $85B 42D CMB bill auction (1130ET)
STIR: Powell Senate Testimony To Headline Docket – 1000ET
- Fed Funds implied rates have been little changed by Trump’s overnight upping of steel and aluminum tariffs to 25% from the previously touted 10%.
- Cumulative cuts from 4.33% effective: 1.5bp Mar, 7bp May, 15.5bp Jun, 21bp Jul and 37.5bp Dec.
- Today’s Fedspeak is firmly headlined by Fed Chair Powell at 1000ET where he’s expected to reiterate that there’s no rush to cut rates. See our previous preview bullet here and some analyst expectations on it here.
- As for other speakers, Hammack is watched for a hawkish take after her surprise dissent to the December cut and then saying Jan 17 that the Fed can be very patient on further cuts with mon pol “only moderately restrictive”. Williams meanwhile last spoke Jan 15, saying the Fed can take its time analyzing incoming data with the US economy once again proving resilient whilst the disinflation process remains “in train”. He saw signs of stabilization in the labor market, a view that was likely bolstered after last Friday’s payrolls report.
- 0850ET – Hammack (non-voter) on economic outlook (text + Q&A)
- 1000ET – Powell (voter) testimony to Senate Banking Committee (text + Q&A - no official confirmation but expecting text release at 1000ET)
- 1530ET – Williams (voter) keynote remarks (text + Q&A)
- 1530ET – Bowman (voter) on bank regulation (just text)
US TSY FUTURES: Modest Positioning Swings On Monday
OI data points to a mix of net long setting (TU & FV), net long cover (TY) and net short setting (UXY, US & WN) during Monday's twist steepening of the futures curve.
- The positioning swings were relatively limited with only TY topping $1mln in DV01 equivalent terms.
| 10-Feb-25 | 07-Feb-25 | Daily OI Change | OI DV01 Equivalent Change ($) | |
| TU | 4,098,848 | 4,097,189 | +1,659 | +61,118 |
| FV | 6,396,674 | 6,392,250 | +4,424 | +182,357 |
| TY | 4,887,581 | 4,911,751 | -24,170 | -1,544,221 |
| UXY | 2,272,576 | 2,266,406 | +6,170 | +539,443 |
| US | 2,004,248 | 2,001,799 | +2,449 | +309,039 |
| WN | 1,798,515 | 1,794,493 | +4,022 | +767,197 |
| Total | -5,446 | +314,932 |
STIR: OI Points To Mix Of Long Cover & Setting Across Much Of SOFR Strip On Mon
OI data points to net long cover in SFRZ4 and H5 on Monday, before net long setting became more dominant from SFRZ5 to further out the strip.
| 10-Feb-25 | 07-Feb-25 | Daily OI Change | Daily OI Change In Packs | ||
| SFRZ4 | 1,026,346 | 1,051,462 | -25,116 | Whites | -37,300 |
| SFRH5 | 1,210,344 | 1,216,015 | -5,671 | Reds | +22,564 |
| SFRM5 | 1,079,885 | 1,080,243 | -358 | Greens | +16,823 |
| SFRU5 | 794,850 | 801,005 | -6,155 | Blues | +8,263 |
| SFRZ5 | 987,000 | 972,436 | +14,564 | ||
| SFRH6 | 668,859 | 670,517 | -1,658 | ||
| SFRM6 | 643,269 | 632,918 | +10,351 | ||
| SFRU6 | 594,591 | 595,284 | -693 | ||
| SFRZ6 | 698,826 | 680,811 | +18,015 | ||
| SFRH7 | 472,683 | 477,841 | -5,158 | ||
| SFRM7 | 427,493 | 417,532 | +9,961 | ||
| SFRU7 | 288,705 | 294,700 | -5,995 | ||
| SFRZ7 | 293,677 | 283,878 | +9,799 | ||
| SFRH8 | 218,741 | 217,352 | +1,389 | ||
| SFRM8 | 183,660 | 185,956 | -2,296 | ||
| SFRU8 | 118,967 | 119,596 | -629 |
BOE: What have we learnt from Mann today? Rounding up our thoughts
Rounding up some of our earlier observations:
- Ahead of today we had questioned if Mann would only be a temporary dove - and she said today that being an activist does not mean "cut, cut, cut".
- She noted that just because she voted for 50bp in February doesn't necessarily mean that she will vote for a 50bp cut in the upcoming meetings - and that it was partly a signalling device.
- Both in her speech and in the Q&A she made reference to the MaPS (BOE's survey of market participants) estimated neutral rate of 3.0-3.5% - and made no reference to the model-based estimates that were included in the MPR. We therefore think that 3.0-3.5% is likely to be more representative of Mann's own view of the neutral rate.
- Mann also reiterated that she thinks Bank Rate needs to remain restrictive - just not as restrictive as it currently is. With Bank Rate now at 4.50%, there is only 100bp before we reach the 3.50% top estimate of neutral from the MaPS. So as we noted in our BOE Review, we think that she will vote for sequential cuts at least at the next two meetings (March and May) but we aren't convinced of the magnitude of the move that she will vote for.
- She laid out a number of things she is watching to determine her future votes - and noted that risks of second-round effects cannot be ruled out, she just doesn't consider them the most likely outcome "yet". She points to distributions in the wage data (wage growth in non-consumer facing firms is target consistent), weak demand and non-linearities in the labour market, firms reducing employment due to employer NIC increases, firms having weak pricing power and soft sales volumes as reasons she isn't too concerned for now.
- So she is probably a temporary dove - although that partly depends on how quickly the wider MPC returns Bank Rate towards neutral - and partly how the incoming data come in over the next few months - particularly on the labour market and firms' pricing power.
EUROPE ISSUANCE UPDATE:
Gilt syndication: Priced
- GBP13bln sold at 99.706 to yield 4.5363) of the new Mar-35 gilt. The spread was set at 4.25% Jul-34 gilt + 5.5bp (guidance was + 5.5/6.0bps).
- It's the largest ever gilt syndication at GBP13bln. Thiis was higher than the GBP8.5-10.0bln we expected,
- The previous largest was GBP12.0bln in May 2020 (10-year). And larger than the GBP11.0bln sold in June 2024 (the previous 10-year).
- It's also a record book size for a gilt syndication - the record being the GBP119.3bln for the 15-year syndication last month.
EU dual-tranche syndication: Final terns
- E6bln WNG (MNI expected E4-6bln) tap of the 2.50% Dec-31 EU-bond. Books in excess of E75bln, Spread set at MS+37bps (guidance was: MS + 39bps area).
- E5bln WNG (MNI expected E4-6bln) tap of the 3.25% Feb-50 Green EU-bond. Books in excess of E80bln, Spread set at MS+108bps (guidance was: MS+110bps area)
Italy syndication: Final terms
- E13bln (another large syndication after MNI expected E8-10bln) of the new Oct-40 BTP. Books in excess of E133bln, spread set at 4.15% Oct-39 BTP +7bps (guidance was +9bps area).
- The E13bln size of the Italian syndication today is not quite a record for the size of an Italian syndication (we have seen E14bln for a 10-year BTP in 2020 and E13bln for a 10-year BTP last month.
- But it is the record for a non-10-year issue - where the largest size previously has been E10bln (the top of our expected range today).
- The books of E133bln are also the second largest on record (if they close here) with the record E144.6bln last month.
France syndication: Mandate
France has sent out a mandate "on an upcoming new 30 year OAT benchmark, due 25 May 2056. The transaction will be launched by syndication in the near future, subject to market conditions."
- We had noted that we thought this 30-year OAT syndication would come in the W/C 24 February, but there was a big risk it could come as soon as this week.
- We pencil in a E8-10bln transaction size, with the transaction likely tomorrow.
Netherlands auction results
- E1.995bln of the 2.75% Jan-47 DSL. Avg yield 2.773%.
Germany auction results
- E5bln (E3.777bln allotted) of the 2.40% Apr-30 Bobl. Avg yield 2.17% (bid-to-offer 1.48x; bid-to-cover 1.96x).
FOREX: Powell in Focus, Republican Scrutiny Likely
- A brief phase of JPY buying has dissipated into the US open, with USD/JPY back above, and anchored to, the Y152.00 level. The general stability of the pair so far today is a decent signal that markets are well-priced for fractious trade tensions ahead, particularly as the EU outlined in detail that they'd respond in unison against the trade levies waged on steel and aluminium exported to the US.
- EUR is faring well alongside local equity markets, helping EUR/GBP progress back to 0.8350, but the consolidative move is yet to make any headway on last week's highs. This leaves EUR/AUD just above the pullback low, after the cross tested but failed break the 200-dma overnight at 1.6388. Regardless, the cross has printed six consecutive sessions of lower lows and a positive close today would be the first in seven sessions.
- Powell's appearance in front of the Senate Banking Committee later today, while bipartisan in nature, will be a focus for any Republican scrutiny on the Fed chair, with markets and lawmakers looking to gauge the Fed's potential responses to tariffs, tax actions and the impacts of immigration on US labour market gains.
- Powell's appearance is set for 1500GMT/1000ET, at which a release of text is expected. For monetary policy specifically, markets will be sensitive around wording for future rate adjustments, particularly if Powell drops a reference to "cautious" on policy ahead.
- Powell isn't the only central banker set to speak today, with BoE's Bailey, Fed's Hammack, Williams & Bowman and ECB's Schnabel all set to speak.
INDIA: RBI Intervenes in FX Market to Curb Build-Up of Speculation Postitions
The Reserve Bank of India intervened in the foreign exchange market this week to curb speculation in the rupee, Bloomberg report citing a person familiar with the central bank’s thinking, adding to widespread reports of intervention during the APAC session.
- The RBI decided to intervene on Monday and Tuesday after spotting an unusual buildup of speculative positions, which put added pressure on the local currency, the person said. The central bank won’t hesitate to intervene significantly and suddenly to prevent an accumulation in speculative bets, they added.
- According to the head of treasury at Finrex Treasury Advisors who was cited by Bloomberg, it is estimated intervention could have amounted to as much as $11bln over the past two days, which are levels not previously seen from the authority.
EQUITIES: Eurostoxx 50 Futures Holding Onto Gains, Bull Cycle Remains in Play
- Eurostoxx 50 futures are holding on to their recent gains and a bull cycle remains in play. Last week’s gains marked 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. The focus is on 5381.13 next, a Fibonacci projection. Initial firm support to watch lies at 5211.11, the 20-day EMA. The 50-day EMA is at 5094.95.
- The initial sell-off on Feb 3 in the S&P E-Minis contract and the breach of support at 5948.00, Jan 27 low, continues to highlight a possible S/T reversal threat. If correct, it suggests that the latest bounce is a correction. A resumption of weakness would open 5892.37, a Fibonacci retracement point. On the upside, a stronger rally would expose key resistance at 6178.75, the Dec 6 ‘24 high. Clearance of this hurdle would resume the primary uptrend.
COMMODITIES: WTI Futures Extend Recovery Off Last Week's Lows
- Recent weakness in WTI futures marks an extension of the current corrective cycle. The 20-day EMA has been breached and attention is on support around the 50-day EMA, at $72.20. Price has traded through the average, a clear break of it would suggest scope for a deeper retracement. This would open $68.05, the Dec 20 ‘24 low. On the upside, a clear reversal higher would refocus attention on $79.48, the Apr 12 ‘24 high and a key resistance.
- A bull cycle in Gold remains in play and the yellow metal has again traded to a fresh cycle high. The continued appreciation once again confirms a resumption of the uptrend and maintains 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 $2776.3, the 20-day EMA.
| Date | GMT/Local | Impact | Country | Event |
| 11/02/2025 | 1215/1215 |  GB | BOE Bailey's speech on changes in financial markets | |
| 11/02/2025 | 1330/0830 | * |  CA | Building Permits |
| 11/02/2025 | 1350/0850 |  US | Cleveland Fed's Beth Hammack | |
| 11/02/2025 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 11/02/2025 | 1500/1000 | US | Fed Chair Jerome Powell | |
| 11/02/2025 | 1500/1000 | *** | US | US Fed Chair Speech |
| 11/02/2025 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 11/02/2025 | 1700/1200 | *** | US | USDA Crop Estimates - WASDE |
| 11/02/2025 | 1700/1800 |  EU | ECB's Schnabel in Nuremberg Talk Series' panel | |
| 11/02/2025 | 1800/1300 | *** | US | US Note 03 Year Treasury Auction Result |
| 11/02/2025 | 2030/1530 | US | New York Fed's John Williams | |
| 11/02/2025 | 2030/1530 | US | Fed Governor Michelle Bowman | |
| 12/02/2025 | 0030/1130 | ** |  AU | Lending Finance Details |
| 12/02/2025 | 0900/1000 | * |  IT | Industrial Production |
| 12/02/2025 | 1000/1000 | * | GB | Index Linked Gilt Outright Auction Result |
| 12/02/2025 | 1000/1100 | EU | ECB's Elderson in roundtable at the MNI Connect event | |
| 12/02/2025 | 1200/0700 | ** | US | MBA Weekly Applications Index |
| 12/02/2025 | - | *** |  CN | Money Supply |
| 12/02/2025 | - | *** | CN | New Loans |
| 12/02/2025 | - | *** | CN | Social Financing |
| 12/02/2025 | 1330/0830 | *** | US | CPI |
| 12/02/2025 | 1330/0830 | ** | US | US CPI Annual Revised |
| 12/02/2025 | 1500/1000 | US | Fed Chair Jerome Powell | |
| 12/02/2025 | 1500/1500 | GB | BOE's Greene speech at Institute of Directors | |
| 12/02/2025 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 12/02/2025 | 1700/1200 | US | Atlanta Fed's Raphael Bostic | |
| 12/02/2025 | 1800/1300 | ** | US | US Note 10 Year Treasury Auction Result |
| 12/02/2025 | 1830/1330 | CA | BOC Meeting Minutes | |
| 12/02/2025 | 1900/1400 | ** | US | Treasury Budget |
| 12/02/2025 | 2205/1705 | US | Fed Governor Christopher Waller |
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