US Open

US belly is +7 this morning, helped by Chair Powell’s weekend interview that continued playing down possibility of March cut - March pricing has moved from a peak 26bps of cuts in late Dec to under 5bps/20% this morning. There were reports that Powell also said first cut would be around the middle of the year but no signs of that in the transcript; https://blinks.bloomberg.com/news/stories/S8CUJQDWX2PS

The rise in rates has been matched by positive inflation data & a rapid fall in Oil prices (mix of China demand concerns & supply/crude stocks) - driving breaks/and front end inflation down - real rates moving higher has been the net result- though with equity markets & spreads holding at healthy levels its done little (yet) to FI conditions that remain close to their Dec lows.

$IG/HY cash finished -3.1/-10.1bps tighter on Friday & ended the week +4/+6. There was some signs of long-end spreads lagging the move (-2bps) as rates curves flattened aggressively post-NFP - though its still holding onto YTD outperformance. Even on a sell-off last week there was continuing signs of $IG compression - $A/BBB spreads at +35bps, down from ~50bps less than a year ago.

€IG index prints are wider but we don't see a clear directional skew in curves. CDX has opened +0.5/+3 wider. S&P futures are -0.1%, beauty retailer Estee Lauder up +16% after reporting. Focus today on ISM Services at 3pm Lon/10am ET & the qtrly SLOOS (7pm Lon/2pm ET). Latter will give indications on credit conditions & demand, might be in particular focus post-NYCB though covers 4Q23. The Dallas Fed's survey for Dec (19th-27th) showed some stabilisation in Loan demand & tightness though nonperforming loans continued to increase slightly - though driven by consumer not CRE loans.