STIR: Fed Rate Path Holds Yesterday Nudge Higher With Data In Focus
Jan-07 11:27
- Fed Funds implied rates hold yesterday’s mild increase with ahead of a docket focused on both the November JOLTS and December ISM Services reports at 1000ET.
- Cumulative cuts from 4.33% effective: 2bp Jan, 11bp Mar, 16bp May, 25bp June and 39bp Dec.
- The SOFR-implied terminal yield of 3.985% holds close to recent highs of 4.03% seen late last month and cycle highs of 4.15% back in April.
- In FOMC shuffling, Semafor reported earlier today that Bowman is a top candidate for the VC Supervision role according to several people familiar with the matter after Barr announced his resignation yesterday. That doesn’t surprise us, as we wrote at the time yesterday.
- Today’s Fedspeak is limited to Richmond Fed’s Barkin speaking to the Raleigh Chamber at 0800ET. It shouldn’t be a market mover as the text will be a repeat of Friday’s speech on the 2025 outlook and we don’t expect the Q&A to differ from the tone of more ambiguity on scope for further rate cuts after the 100bps last year, which has been viewed as a necessary recalibration in monetary policy. Previously a ’24 voter, he’s next set to vote in ’27.
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MNI UST Issuance Deep Dive: Dec 2024 (2/2)
Dec-06 21:53
Throughout November’s policy and market volatility, though, Treasury auctions largely impressed, with 5 of 7 nominal coupon sales trading through.
- Auction Results: November’s nominal coupon auctions were generally strong, with five out of seven auctions trading-through, of which four saw a positive reading on MNI’s Relative Strength Indicator (RSI). The remaining two auctions; 3 and 20-year auctions tailed. See page 2.
- Upcoming Supply: Issuance resumes next week with sales of $58B in 3Y Note, $39B in 10Y Note (reopen), and $22B in 30Y Bond (reopen). December is set to see $15B in nominal Treasury coupon sales, in addition to $22B in 5Y TIPS and $28B FRN for a total of $365B – slightly below the Oct and Nov totals of $369B which were joint-highest since Oct 2021.
- MNI's review includes a calendar of upcoming auctions and buyback operations.
US TSYS/SUPPLY: MNI UST Issuance Deep Dive: Dec 2024 (1/2)
Dec-06 21:51
MNI's latest US Treasury Issuance Deep Dive has just been published (PDF link here):
November proved a dramatic month for Treasuries. Yields were volatile before and after the Nov 5 election - after ending October at 4.28%, 10Y yields peaked at five-and-a-half-month high just above 4.50% mid-month before closing November just below 4.18%, as markets attempted to price in the implications of a Republican “sweep”.
- Also buffeting rates was speculation over the would-be successor to Treasury Secretary Yellen. President-elect Trump’s selection of hedge fund manager Scott Bessent was greeted with bull flattening in the curve, implying perhaps that he’s seen as more cautious on fiscal deficits than some of the alternatives (he has expressed support for halving the annual budget shortfall to 3% of GDP).
- The first quarterly Refunding process of Bessent’s Treasury is in early February, by which point we may start to have a better sense of the incoming administration’s approach to both fiscal policy and to more issuance-specific considerations such as duration management.
- Bessent for instance has argued that Yellen’s Treasury erred from a risk management perspective by boosting short-duration issuance, and there are suggestions he would be in favor of reversing course, telling Bloomberg in June “When rates are very low, you should extend duration…I think it’s very unfortunate what Secretary Yellen’s doing. She’s financing at the front end, and she’s making a bet on the carry trade, which is not good risk management.”
US LABOR MARKET: MNI US Employment Insight: Soft Enough To Keep Fed Cutting
Dec-06 21:05
Our latest Employment Insight has just been published and emailed to subscribers.
