Highlights:
- USD firmly bid amid reports that Trump is considering a national economic emergency declaration to allow for new tariff program.
- FOMC Member Waller is on the speaker schedule, while ECB’s Villeroy speaks in Paris.
- US ADP employment and jobless claims headline the Wednesday data calendar before the FOMC minutes.
US TSYS: Gilts Pressure Weighs, Trump Tariff Deliberation Adds to Noise
Treasuries have sold off over the past hour as US desks join, lagging sharp downward pressure in Gilts after long end yields broke to fresh multi-decade high. CNN has more recently reported Trump is weighing an emergency declaration for new tariffs with TY futures mostly sideways since then.
- Today’s 30Y supply can also weigh, but with the recent large steepening offering strong outright concession (WI yield currently ~40bps above last month’s auction high yield).
- Cash yields are 1-2bp higher, bear steepening with 2s10s setting new recent highs of 40.6bps.
- 10Y yields have recently seen a session high of 4.7014%, with focus on 4.7351%, the 2024 high.
- 30Y yields at 4.936% earlier hit fresh highs since Oct/Nov 2023.
- TYH5 trades at 108-03 (-02+) whilst cumulative volumes of 370k are reasonable but not particularly elevated.
- The earlier low of 108-01+ matched yesterday’s fresh cycle low, and sees attention on the round 108-00 before 107-19+ (both Fibo projections). Moving average studies remain in a bear-mode position highlighting a dominant downtrend.
- Data: Headlined by weekly jobless claims brought forward a day early plus ADP employment.
- Fedspeak: Waller (0800ET), FOMC minutes (1400ET) – see STIR bullet.
- Note/bond issuance: US Tsy $22B 30Y re-open - 912810UE6 (1300ET)
- Bill issuance: US Tsy $64B 17W bill auction (1130ET)
STIR: Next Fed Cut Still Seen in July, Waller Kicks Off Docket
- Fed Funds implied rates have lifted off overnight lows for back little changed on the day ahead of a solid docket for data and some important Fed commentary. They continue to imply a next rate cut only with the July meeting.
- Cumulative cuts from 4.33% effective: 1bp Jan, 9.5bp Mar, 15bp May, 23bp Jun, 27bp Jul and 37bp Dec.
- Gov. Waller (permanent voter) speaks on the economic outlook at an event in Paris at 0800ET (text + Q&A) before the FOMC minutes at 1400ET.
- Waller, who last year was an important mouthpiece for the Fed, last spoke on Dec 2 ahead of the Dec 17-18 FOMC decision. His support for a rate cut at that meeting drew a dovish reaction, and he also added that he expects rate cuts to continue over 2025 to neutral, with rates still “some distance” from neutral. In light of recent steepening themes, he at the time said that the long-run neutral rate is affected by fiscal policy.
STIR: Short Setting Seen in Most SOFR Futures on Tuesday
Short setting dominated in SOFR futures on Tuesday, with only limited pockets of net long cover seen.
- Firmer-than-expected ISM services prices paid & JOLTS jobs data drove yesterday’s hawkish adjustment.
| 07-Jan-25 | 06-Jan-25 | Daily OI Change |
| Daily OI Change In Packs |
SFRZ4 | 1,120,489 | 1,126,192 | -5,703 | Whites | +22,361 |
SFRH5 | 1,160,125 | 1,133,198 | +26,927 | Reds | +20,147 |
SFRM5 | 1,018,139 | 1,015,412 | +2,727 | Greens | +32,096 |
SFRU5 | 815,205 | 816,795 | -1,590 | Blues | +17,780 |
SFRZ5 | 944,721 | 914,521 | +30,200 |
|
|
SFRH6 | 597,955 | 597,493 | +462 |
|
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SFRM6 | 651,896 | 654,399 | -2,503 |
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SFRU6 | 625,007 | 633,019 | -8,012 |
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SFRZ6 | 736,369 | 735,731 | +638 |
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SFRH7 | 479,841 | 469,381 | +10,460 |
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SFRM7 | 382,124 | 375,264 | +6,860 |
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SFRU7 | 292,852 | 278,714 | +14,138 |
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SFRZ7 | 298,925 | 288,438 | +10,487 |
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SFRH8 | 225,383 | 226,915 | -1,532 |
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|
SFRM8 | 170,127 | 160,954 | +9,173 |
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|
SFRU8 | 110,995 | 111,343 | -348 |
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MNI FOMC MINUTES PREVIEW: December 2024
- The minutes to the December 2024 FOMC meeting (released Wednesday Jan 8 at 1400ET) should provide further context for what Chair Powell dubbed a “closer call” but ultimately the “right call” to cut rates by 25bp.
- There are several elements to watch for in the minutes, including the degree to which anticipated Trump administration policies affected participants' forecasts, the shift in the perceived balance of risks, and how "close" a call it was to cut rates at all in December.
- MNI's preview of the Minutes includes what to watch for upon release; MNI's FOMC Hawk-Dove Spectrum; key highlights of FOMC participant commentary since the December meeting; and sell-side analyst expectations.
US: Trump Considering National Emergency to Enact Universal Tariffs, CNN
CNN reporting that US President-elect Donald Trump is considering, “declaring a national economic emergency to provide legal justification" to enact universal tariffs on "allies and adversaries” citing four sources who confirmed that no final decision has been made.
- According to CNN, the “declaration would allow Trump to construct a new tariff program by using the International Economic Emergency Powers Act [IEEPA] which unilaterally authorizes a president to manage imports during a national emergency.”
- A source said, “Nothing is off the table,” acknowledging a “robust discussion over declaring a national emergency [...] has taken place.”
- A trade attorney who served in Trump’s first administration said: “I think the president has broad authority to impose tariffs for a variety of reasons, and there are a number of statutory bases to do so. IEEPA is certainly one of them.”
- CNN notes: “If Trump opted to declare a national economic emergency... it’s unclear what evidence he would cite,” but it should be noted that Trump’s team has previously floated declaring a national emergency to carry out deportations.
- The report comes in the wake of market volatility prompted by a Washington Post report on Monday suggesting that Trump is investigating a softer universal tariff plan - appearing to confirm a common view that Trump is likely to pursue more pragmatic, targetted tariffs.
- Trump nixed the WaPo report on Truth Social, suggesting that the new report may be strategically released to maintain a hardline tariff posture ahead of trade talks when Trump takes office on January 20.
US: Review of President-Elect Donald Trump's Mar-a-Lago Press Conference
US President-elect Donald Trump delivered a wide-ranging press conference at his Mar-a-Lago resort in Florida on January 7, touching on various issues from energy to his foreign policy ambition of carving out a new US sphere of influence from Panama to Greenland.
- Please find below a full summary of the presser with analysis of the key comments related to foreign policy, tariffs, energy, and legislation.
- Full article here: Trump Press Conference Review
FRANCE: PS Agree to Talks w/Bayrou Gov't on Budget
On 7 Jan, a meeting of deputies from the centre-left Socialist Party (PS) agreed to engage with the minority gov't of PM Francois Bayrou to try to reach agreement on a state budget for 2025. With under a week to go until Bayrou's general policy speech to the National Assembly on Tuesday 14 Jan, swift progress will be needed in order for an agreement to be reached. It is expected that a budget will be put forward a short time after the policy speech.
- Should the PS support the budget it would not guarantee its passage (if all other opposition parties voted against it would still fail), but would markedly improve its prospects. As Le Monde notes, "The government would like to reach an agreement with the moderate left on a sufficiently consensual budget project so that it does not vote for censure in the probable event that the Prime Minister uses Article 49.3..."
- PS deputy for Indre-et-Loire, Laurent Baumel, told FranceInfo after a meeting between PS representatives and Economy Minister Éric Lombard that “If the Bayrou government does not want to be censored, it will have to make real concessions,”. These concessions will focus on reducing spending cuts and pushing for more significant tax hikes on large businesses and high earners.
- BFM reports that the final details of Bayrou's policy speech may not be confirmed until 14 Jan, just hours before he addresses parliament, reflecting the difficulty the PM faces in gaining support (or at least avoiding censure) from various parties across the Assembly.
EUROZONE DATA: PPI Slightly Higher Than Expected Though Y/Y Remains in Deflation
Eurozone PPI in November printed slightly above expectations at -1.2% Y/Y (vs -1.4% consensus, -3.3% revised prior) and 1.6% M/M (vs 1.5% consensus, 0.4% prior). This is the nineteenth consecutive month of Y/Y deflation, though the highest reading since mid 2023 as energy base effects still work their way out of the Y/Y comparison. Note that excluding energy the PPI index level has been broadly unchanged since April whereas including energy it has been increasing since May.
- Three of the five sub-components saw Y/Y pickups, whilst one saw a marginal softening and one sub-component was unchanged.
- Energy producer prices fell at a further slower pace of 5.3% Y/Y (vs -11.2% in Oct and -11.6% in Sep).
- Intermediate goods also fell at a slower pace of 0.3% Y/Y (vs -0.5% in October) - the highest print of 2024 to date.
- Durable consumer goods prices softened marginally to rise 0.6% Y/Y (vs 0.7% prior).
- Non-durable consumer goods rose at the same pace as October printing 1.9% Y/Y.
EUROZONE DATA: Economic Sentiment Slips, Downside Risk to Growth
- Eurozone economic sentiment softened more than expected in December to 93.7 (cons 95.6) after a marginally downward revised 95.6 (initial 95.8).
- It’s a notable miss and decline just a month after the US presidential election, pushing through late 2023 lows for its lowest since late 2020.
- Historically, this level would suggest downside risk to Eurozone real GDP growth of 0.9% Y/Y back in Q3 (which was helped by a solid 0.4% Q/Q non-annualised in Q3) – see chart.
- The decline goes against the latest tick higher in the S&P Global Eurozone composite PMI for December, although at 49.6 it too remained in mild contractionary territory.
FOREX: GBPUSD Sharply Lower Amid Pressure on Gilts, Firmer Greenback
- Significant pressure on UK Gilts is filtering through to a weaker currency, with the firm dollar bid prompting GBPUSD (-1.1%) to slide the best part of 120pips in short order. Momentum picked up through the early session lows of 1.2440, with spot printing lows of 1.2335 so far.
- The trend condition in GBPUSD remains bearish and the sharp sell-off on Jan 2 confirmed a resumption of the medium-term downtrend. The bear trigger of 1.2353 (Jan 2 low) has been breached and below here, the focus will be on the 2024 lows at 1.2300 and 1.2266, the Nov 14 2023 low.
- The US dollar is firmly bid, with topside momentum gaining amid reports that Trump is considering a national economic emergency declaration to allow for new tariff program. As such, EURUSD (-0.61%) has been eroding the rally from earlier in the week, and is now ~160 pips off the week’s highs and notably back below the prior breakdown point of 1.0335. The bear trigger has been defined at 1.0226, the Jan 2 low.
- The broad dollar bid has helped AUDUSD (-0.64%) back below 0.6200 to near 2-year lows. Recent weakness maintains the price sequence of lower lows and lower highs, highlighting a dominant downtrend. Scope is seen for an extension towards 0.6158 next, a Fibonacci projection.
- The bullish trend for USDCHF since the US election remains firmly intact, and yesterday’s Swiss CPI data has assisted the pair back above the 0.91 handle during this morning’s session. Cycle highs reside at 0.9137, and above here, the medium-term targets at 0.9158 and 0.9224 appear well defined. Prior pullbacks have been well supported by the 20-day exponential moving average, which now intersects at 0.9015.
- US ADP employment and jobless claims headline the Wednesday data calendar before the FOMC minutes. FOMC Member Waller is on the speaker schedule, while ECB’s Villeroy speaks in Paris.
EUROZONE ISSUANCE UPDATE
Italy dual-tranche syndication: Launched
- E13bln of the new 10y Aug-35 BTP (MNI expected E10bln). Spread set at Feb-35 BTP + 7bp (guidance was + 9bps area), Books in excess of E142bln.
- E5bln WNG of the new 20y Apr-46 BTP. Spread set at 4.45% Sep-43 BTP +5bp (guidance was + 8bps area). Books in excess of E127bln.
New 10-year PGB: Mandate
- Portugal has announced a mandate for a new 10-year OT maturing 15 June 2035 in the "near future." We had fully expected this and pencil in a transaction tomorrow for E3-4bln.
UK auction results
- Little initial reaction in wider gilts to the Mar-30 auction. Cover solid enough at 3.00x, while the tail was tighter than the previous offering.
- GBP4.25bln of the 4.375% Mar-30 Gilt. Avg yield 4.490% (bid-to-cover 3.00x, tail 0.5bp).
German auction results
- E5bln (E3.781bln allotted) of the 2.50% Feb-35 Bund. Avg yield 2.51% (bid-to-offer 1.60x; bid-to-cover 2.12x).
EQUITIES: Bull Cycle in Eurostoxx 50 Futures Intact Following This Week's Rally
- A bull cycle in the Eurostoxx 50 futures contract remains intact. This week’s strong rally highlights a reversal of the recent corrective pullback. Resistance at 5040.00, the Dec 9 high, has been pierced. A clear break of this level would confirm a resumption of the bull cycle that started on Nov 21 last year and open 5068.13, a Fibonacci projection. On the downside, initial firm support lies at 4925.88, the 50-day EMA.
- A bear threat in the S&P E-Minis contract remains present despite the most recent move higher. The reversal lower from the Dec 26 high, highlights the end of the Dec 20 - 26 correction. Attention is on 5866.00, Dec 20 low and a key S/T support. Clearance of this level would strengthen a bearish theme. Initial firm resistance is 6107.50, Dec 26 high. A breach of this hurdle would highlight a bull reversal and open key resistance at 6178.75, the Dec 6 high.
COMMODITIES: Bear Threat in Gold Remains Present Despite Latest Recovery
- The trend structure in WTI futures remains bullish and the contract is holding on to its recent gains. A stronger reversal to the upside has exposed key short-term resistance at $76.41, the Oct 8 high. A firm resistance at $71.97, the Nov 7 high, has been breached, strengthening a bullish theme. On the downside, a reversal lower would expose support at the 20-day EMA, at $71.11. This average is seen as a key short-term support.
- A bear threat in Gold remains present despite the latest recovery. The yellow metal traded sharply lower on Dec 18 and the move undermines a recent bull theme. A resumption of weakness would open key support at $2536.9, the Nov 14 low. The first firm support to watch is $2583.6, the Dec 19 low. On the upside, a strong climb would instead signal scope for a climb towards resistance at $2726.2, the Dec 12 high.
| Date | GMT/Local | Impact | Country | Event |
| 08/01/2025 | 1300/0800 |  US | Fed Gov Waller | |
| 08/01/2025 | 1315/0815 | *** | US | ADP Employment Report |
| 08/01/2025 | 1330/0830 | *** | US | Jobless Claims |
| 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 |
| 09/01/2025 | 0700/0800 | ** |  DE | Trade Balance |
| 09/01/2025 | 0700/0800 | ** | DE | Industrial Production |
| 09/01/2025 | 0900/1000 | *** | DE | North Rhine Westphalia CPI |
| 09/01/2025 | 0930/0930 | GB | Decision Maker Panel data | |
| 09/01/2025 | 1000/1100 | ** |  EU | Retail Sales |
| 09/01/2025 | 1400/0900 | US | Philly Fed's Pat Hrker | |
| 09/01/2025 | 1600/1600 | GB | BOE's Breeden Speech at University of Edinburgh | |
| 09/01/2025 | 1630/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 09/01/2025 | 1630/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 09/01/2025 | 1745/1245 | US | Fed's Barkin | |
| 09/01/2025 | 1835/1335 | US | Fed Gov Bowman | |
| 10/01/2025 | 2330/0830 | ** | JP | Household spending |
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