FED: Bowman Repeats Neutral Has Likely Risen

• -5,000 USH5 116-00, sell through 116-01 post time bid at 1010:10ET, DV01 $638,000
• prior 10Y30Y Ultra Block at 1003:43ET:
  • +5,000 TYH5 109-26.5, post time offer (DV01 $320,000) vs.
  • -3,000 WNH5 121-26, sell through 121-27 post time bid (DV01 $580,000)

• Bund goes bid on the ISM data miss, but the price action is far more limited than what is seen in the US Treasuries, with the US 10yr Yield dipping to a 4.4081% low.
• The 4.40% level equates to 109.29 today, the immediate resistance, printed a 109.27 high so far.

The January ISM Services Index missed expectations at 52.8 (54.0 expected, 54.0 prior), with pullbacks prevalent in some key categories. That said, with the 7th consecutive monthly reading that is solidly above 50.0, the index continues to suggest robust services sector activity going into 2025.

• Prices paid at 60.4 (65.1 expected) was the main standout as it saw its biggest pullback since March 2024, though this was reversing December's outsized 5.9 point rise. The January level was still higher than any other reading in the 10 months between Feb-Nov 2024 (though the erratic prices movements at the turn of the year seem to persist in ISM services).
• New orders fell 3.1 points to 51.3, a 7-month low.
• But there were brighter spots elsewhere, the most notable being employment reaching a 16-month high, up 1 point at 52.3. New export orders meanwhile rose 1.9 points to 52.0 (4-month high).
• And the ISM report notes that weather and government policy uncertainty may have been a factor in this report, potentially clouding the signal: "Poor weather conditions were highlighted by many respondents as impacting business levels and production. Like last month, many panelists also mentioned preparations or concerns related to potential U.S. government tariff actions; however, there was little mention of current business impacts as a result."