Highlights:
- Trump's February tariff deadline undermines CAD, MXN
- Treasury rally looks corrective from technical standpoint
- Frenetic session for issuance, with syndications from UK, Finland, France, Lithuania and Spain to digest
US TSYS: Firm Reversal Of Overnight Highs As Tariff Impacts Considered
- Cash Treasuries have seen large moves off overnight highs but still trade firmer compared to Friday’s close as US desks filter in after yesterday’s MLK Day holiday.
- Yields sit 1.5-5bp lower from Friday’s close, with declines led by the long end as 2s10s at 31.5bps is close to lows since Jan 3.
- That masks a 5bp intraday increase for 2Y yields as markets react to President Trump saying late yesterday he will push ahead with 25% tariffs on Canada and Mexico from Feb 1.
- TYH5 trades at 108-22 (04+) for close to session lows of 108-20+ and back close to levels prior to Trump’s inauguration address at 1200ET. It’s via overnight highs of 109-04 on heavy cumulative volumes.
- Gains are considered corrective from a technical viewpoint, with the overnight push higher coming close to resistance at 109-06 (Dec 31 high) whilst support is seen at 108-00 (Jan 16 low).
- Fed Funds futures meanwhile continue to price a next 25bp cut from the FOMC around June or July meetings before a cumulative ~40bp of cuts for 2025.
- There’s a particularly thin docket ahead, with potential macro spillover from Canada CPI at 0830ET but with tariff headlines more impactful. See a summary of Trump’s Executive Orders from our political risk team here.
- Data: Philly Fed non-mfg Jan (0830ET)
- Bill issuance: US Tsy to sell $84bn 13-w bills & $72bn 26-w bills (1130ET), $48bn 52-w bills & $85bn 42-d CMB (1300ET)
US: Summary Of Trump's Day One Executive Orders
On January 20, US President Donald Trump was sworn in as the 47th president of the United States, in a ceremony moved inside to the US Capitol Rotunda due to freezing conditions in Washington D.C.
- As expected, Trump announced the declaration of two national emergencies, one at the US-Mexico border and another on energy, to endow the executive branch with additional powers to enact a record number of Day 1 executive orders.
- His Day 1 actions stopped short of imposing new tariffs, but Trump reiterated his plans to raise revenue with tariffs and ordered a review of global trade practices. Trump later indicated that he may impose a 25% tariff on Mexican and Canadian products on February 1: “We’re thinking in terms of 25% … I think we’ll do it Feb. 1.”
- Please find attached, a summary of key market-relevant executive orders, including Biden's-era orders rescinded by Trump.
Full article: TRUMP DAY ONE EXECUTIVE ORDERS
CANADA DATA: MNI CPI Preview: An Added Complication Amidst Tariff Fears
We have published and e-mailed to subscribers the MNI Canada CPI Preview ahead of today's release, with a particularly wide range to analyst estimates owing to uncertainty over when a temporary tax holiday will have greatest impact.
Please find the full report here.
MNI US EARNINGS SCHEDULE - Industrials in Focus
Executive Summary:
- Industrials in focus, with earnings to take some focus off Trump's first days in office
- Wednesday the busiest session of the week, with S&P 500 within range of YTD highs
- Netflix, Johnson & Johnson, P&G and American Express amongst the largest reports
Full schedule including EPS, revenue expectations and timings here: MNIUSEARNINGS210125.pdf
EUROPE ISSUANCE UPDATE:
Gilt syndication: Allocations out
- GBP8.5bln tap (MNI had expected GBP5.0-6.5bln) of the 4.25% Sep-39 gilt. Spread 4.25% Sep-39 gilt +4.00bp (Guidance was +4.00/+4.25bps), books closed in excess of GBP119bln.
France syndication: Final spread
- MNI expect E5-8bln with upside risks of E9-10bln of the new May-42 OAT. Spread at 0.50% May-40 OAT (MID) +8bps (guidance was +10bps area), books in excess of E135bln.
Lithuania dual-tranche syndication: Revised guidance
- New Jan-30 LITHUN EMTN. Spread MS+60-65 area will price in range (guidance was MS+70 area), books above E2bln.
- New Jan-40 LITHUN EMTN. Spread MS+125-130 area will price in range (guidance was MS+145 area), books above E2.4bln.
Spain syndication: Mandate
- "J.P. Morgan, Morgan Stanley, and Santander for a new Obligacion del Estado syndicated 10-year Euro benchmark maturing on 30th April 2035. The transaction will be launched in the near future subject to market conditions."
- MNI fully expected this and we pencil in a E10-15bln transaction size tomorrow.
Finland syndication: Mandate
- "The Republic of Finland has mandated Barclays, BofA Securities, Danske Bank, Deutsche Bank and J.P. Morgan to lead manage its forthcoming EUR 3bn (no-grow) 20-year Benchmark transaction. The transaction will have a 15 April 2045 maturity and is expected to be launched in the near future subject to market conditions."
- This was fully expected by MNI this week and we had also pencilled in the E3bln WNG size.
Germany auction results
- E1bln (E945mln allotted) of the 2.10% Apr-29 Green Bobl. Avg yield 2.26% (bid-to-offer 2.43x; bid-to-cover 2.57x).
- E1bln (E908mln allotted) of the 2.30% Feb-33 Green Bund. Avg yield 2.4% (bid-to-offer 2.04x; bid-to-cover 2.25x).
FOREX: Tariff Targets Suffer as Trump Eyes February Levies on Mexico and Canada
- Dollar strength pervades early Tuesday, rallying against all others in G10. Dollar strength comes off the back of Trump's clarification having entered office that his administration will be targeting 25% tariffs on Mexico and Canada as soon as February, reversing the slightly easier start to his Presidency that markets enjoyed on Monday.
- As a result, EUR/USD trades back below the $1.04 handle, while USD/CAD has rallied back toward C$1.45. These levels remain important psychological pivot points, and will help drive sentiment in either direction in the coming sessions.
- CAD is the poorest performer so far, with NOK, AUD and NZD not far behind.
- Canadian CPI takes focus going forward, with markets expecting CPI to slow to -0.4% on a monthly basis (from 0.0% prior), dragging both the core-median and the core-trim subcomponents lower. The release comes during a period of particular sensitivity for the CAD, which rallied well yesterday on news that suggested no 'day one' tariffs from Trump - but those gains have been swiftly reversed on Trump's clarification that his admin will target February 1st for 25% tariffs on USMCA nations, with migrant flows the main focus.
- Central bank speak today consists of ECB's Centeno, who appears in Lisbon following comments from Villeroy today. Villeroy pointed to sequential ECB rate cuts to neutral, but stopped short of suggesting pressing policy into accommodative territory.
OPTIONS: Two-Way USD Risk, Duelling Tariff Headlines Trigger Sizeable Flow
- Yesterday's FX derivatives volumes were seriously impressive considering the US market holiday, with over $110bln notional crossing the DTCC thanks to the USD sell-off, with tariff target currencies (namely EUR, CAD and CNY) leading the way.
- While relief was evident in the spot rally for EUR, CAD and others - short-end vol markets have not followed, with USD risk reversals and butterfly vol holding at much more cautious levels, somewhat vindicated by the follow-up from Trump overnight and his warning of 25% tariffs on USMCA nations to combat migration flow.
- As such, while USD/CAD sold off on the initial memo headlines yesterday, net upside demand via options is still evident, tipping the put/call skew toward calls. Over $4bln notional has traded in calls with strikes at 1.45 or above, positions which will have benefited from the bounce off the 1.4262 low yesterday.
- This raises the risks around Canadian politics, and increases the importance of Trudeau's succession, with tariff strategy comments on the candidates' campaign trail likely market movers.
OPTIONS: Expiries for Jan21 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0300(E2.0bln), $1.0325(E3.3bln), $1.0400(E2.2bln), $1.0415-20(E1.3bln), $1.0450(E921mln), $1.0490-00(E1.4bln)
- USD/JPY: Y153.00($1.5bln), Y156.00-05($2.2bln)
- EUR/JPY: Y159.40(E1.3bln), Y166.20($1.2bln)
- AUD/USD: $0.6200(A$775mln), $0.6245-50(A$939mln)
- USD/CAD: C$1.4285($703mln)
EQUITIES: Bull Cycle in Eurostoxx 50 Futures Remains Intact
- A bull cycle in the Eurostoxx 50 futures contract remains intact. Last week’s climb resulted in a breach of 5054.00, the Jan 8 high, to confirm a resumption of the uptrend. The contract is holding on to its gains. The focus is on a climb towards 5215.87, a Fibonacci projection point. Key short-term support has been defined at 4931.00, the Jan 13 low. A break of this level would be bearish.
- S&P E-Minis are trading higher, marking an extension of last week’s bull phase. The move higher undermines the recent bearish theme. The contract has traded through the 50-day EMA and attention is on resistance at 6107.50, the Dec 26 high. Clearance of 6107.50 would strengthen a bullish theme. Key support has been defined at 5809.00, the Jan 13 low. A reversal lower and a breach of this level would reinstate a bear theme.
COMMODITIES: Gold Pierces Key Short-Term Resistance, Strengthening Bullish Theme
- The trend structure in WTI futures remains bullish and recent gains reinforce current conditions. The latest strong impulsive climb has resulted in a breach of $75.91, the Oct 8 high. Attention is on $79.48, the Apr 12 ‘24 high. A clear break of this hurdle would strengthen the bullish theme and open 80.63, a Fibonacci projection. On the downside, a reversal lower would expose the 20-day EMA, at $73.89, a key short-term support.
- Gold is trading higher today. The yellow metal has pierced resistance at 2726.2, the Dec 12 high and a key short-term resistance. A clear breach of this hurdle would strengthen a bullish theme and signal scope for an extension higher near-term. This would expose $2790.1, the Oct 31 all-time high. On the downside, first support to watch is $2653.4, the 50-day EMA. A reversal lower and a breach of this average would reinstate a bearish threat.
| Date | GMT/Local | Impact | Country | Event |
| 21/01/2025 | - |  EU | ECB's De Guindos in ECOFIN Meeting | |
| 21/01/2025 | 1330/0830 | *** |  CA | CPI |
| 21/01/2025 | 1330/0830 | ** |  US | Philadelphia Fed Nonmanufacturing Index |
| 21/01/2025 | 1445/0945 | *** | US | MNI Chicago Business Barometer Seasonal Adjustment |
| 21/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 21/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 21/01/2025 | 1800/1300 | * | US | US Treasury Auction Result for Cash Management Bill |
| 21/01/2025 | 1800/1300 | ** | US | US Treasury Auction Result for 52 Week Bill |
| 22/01/2025 | 2145/1045 | *** |  NZ | CPI inflation quarterly |
| 22/01/2025 | 0001/0001 | * |  GB | Brightmine pay deals for whole economy |
| 22/01/2025 | 0700/0700 | *** | GB | Public Sector Finances |
| 22/01/2025 | 0700/1500 | ** |  CN | MNI China Money Market Index (MMI) |
| 22/01/2025 | 1200/0700 | ** | US | MBA Weekly Applications Index |
| 22/01/2025 | 1330/0830 | * | CA | Industrial Product and Raw Material Price Index |
| 22/01/2025 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 22/01/2025 | 1515/1615 | EU | ECB's Lagarde in dialogue on Unlocking Europes potential | |
| 22/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 22/01/2025 | 1800/1300 | ** | US | US Treasury Auction Result for 20 Year Bond |
| 23/01/2025 | 2350/0850 | ** |  JP | Trade |
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