CANADA: BoC Launches Securities Lending Of Government's CMB Holdings

The minutes to the December 2024 FOMC meeting (released at 1400ET) should provide further context for what Chair Powell dubbed a “closer call” but ultimately the “right call” to cut rates by 25bp.Our preview of the December FOMC Minutes is here: (PDF):

• Recall that the meeting brought multiple hawkish surprises, with the Committee’s inflation and rate projections increased by more than expected, a more cautious Statement, and a surprise dissent by Cleveland Fed President Hammack in favor of holding rates.
• A few things to watch:
• How Many Would-Be Holders? Dot Plot indicated not just a median projection of just 50bp of cuts in 2025 (was 100bp previously), but also that 4 FOMC members saw rates remaining unchanged at the meeting. Hammack, and three other non-voting presidents, were likely the four (auguring hawkishly, because two of the other three could well have been KC Fed Pres Schmid and St Louis’s Musalem, both of whom are voters in 2025). Noted hawk and previous dissenter Gov Bowman is not (likely) to be the 4th (given that she voted in favor of a cut), which raises the question of just how close a call it was to ease at the meeting. One of our Instant Answers questions asks whether “several or more” participants could have envisaged holding rates, even if the vast majority ultimately went along with the cut.
• Hawks Fly: As such, we’ve updated our Hawk-Dove Spectrum for the New Year. Most of the Dots have been moved in a more hawkish direction. We now regard Hammack as the FOMC’s biggest hawk, though only marginally over her colleagues Bowman, Schmid and Musalem. 

MNI speaks to former IMF economist Brett House on BOC outlook and potential response to Trump threats. -- On MNI Policy MainWire now, for more details please contact sales@marketnews.com

Gilts off lows but recoveries lack momentum at this stage.

• Any bullish short-term theses we have read tend to centre on global matters and/or the degree of the move witnessed so far, as opposed to an purely fundamental gilt-bullish idea.
• This move feels relatively structural and hasn’t been particularly disorderly at any stage, which heightens the risk of it sticking/developing further.
• Bearish fundamental risks are well-defined.
• Futures still -114 at 90.26 vs. lows of 89.88.
• Yields 4.5-10.5bp higher across the curve. 10s under the most pressure.
• Today’s highs (multi-decade for 30s and highest level for 10s since ’08) now present the initial yield targets for bears.