US OUTLOOK/OPINION: GDP Revisions Come Into View [1/2]
The upcoming US economic calendar is backloaded, with the second release for Q4 national accounts on Thursday before the January PCE report on Friday.
- Real GDP growth is seen confirming what was at the time a softer than expected 2.3% annualized in Q4, whilst there will also be a first estimate for real GDI growth after 2.1% in Q3.
- Much of the relative GDP weakness in Q4 after two quarters averaging 3.0% came from a large drag from inventories. It should continue to show signs of robust domestic demand after personal consumption increased 4.2% annualized in the advance release (Bloomberg cons 4.1).
- However, January’s monthly report (on Friday) is likely to show consumption got off to a much weaker start of 2025. Recall that retail sales were far weaker than expected in January as they slid -0.9% M/M (cons -0.2) along with an even larger miss for the control group at -0.8% M/M (cons 0.3) to more than unwind the previously strong 0.8% M/M increase in December.
- As such, the Bloomberg consensus sees real personal spending growth of -0.1% M/M in Jan after 0.4% in Dec.
- Further within the details, JPMorgan expect nominal personal income growth of 0.4% M/M (to have been boosted by the 2.5% Cost of Living Adjustment for Social Security, with employee compensation rising 0.3% M/M. That should see real disposable personal income increase 0.1% M/M.
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US TSYS/SUPPLY: Preview 5Y Auction
- Tsy futures remain well bid but off highs ahead of the $70B 5Y note auction (91282CMG3) at 1300ET, WI is currently running at 4.347%, 13.1bp rich to last month's stop.
- December 5Y auction recap: Tsy futures pared losses (TYH5 trades 108-13 last, -2) after $70B 5Y note auction (91282CMD0) stopped 0.2bp through (second consecutive stop since June): drawing 4.478% high yield vs. 4.480% WI; 2.40x bid-to-cover vs. 2.43x for the prior auction.
- Peripheral stats showed indirect take-up climbed to 67.27% vs. 64.12% prior, directs at 20.26% vs. 24.58% prior (highest since Jul 2014), primary dealer take-up 12.47% vs. 11.30% prior.
US 10YR FUTURE TECHS: (H5) Meets The 50-Day EMA
- RES 4: 110-25 High Dec 12
- RES 3: 110-19 76.4% retracement of the Dec 6 - Jan 13 bear leg.
- RES 2: 109-31 High Dec 18
- RES 1: 109-12+ 50-day EMA
- PRICE: 109-02+ @ 17:01 GMT Jan 27
- SUP 1: 108-00/107-06 Low Jan 16 / 13 and the bear trigger
- SUP 2: 107-04 Low Apr 25 ‘24 and a key support
- SUP 3: 107-00 Round number support
- SUP 4: 106-11 2.00 proj of the Oct 1 - 14 - 16 price swing
The medium-term trend condition in Treasury futures is down, however a bullish short-term cycle highlights an ongoing corrective phase and the contract is trading higher today. Attention is on 109-12+, the 50-day EMA - a level tested on Monday. A clear break of this EMA is required to strengthen a bullish theme. This would open 109-31, the Dec 18 high. The bear trigger is unchanged at 107-06, the Jan 13 low. Initial support has been defined at 108-00, the Jan 16 low.
CANADA: Ford Set To Officially Request Early Ontario Election 28 Jan
Doug Ford, premier of Canada’s most populous and richest province, Ontario, is set to meet with the provincial lieutenant governor tomorrow (28 Jan) to request a dissolution of the legislative assembly and call an election for 27 February. Ford, from the centre-right Progressive Conservatives (PC), is seeking a third term in office and opinion polls show the PC’s on course to retain a majority.
- Ford argues a renewed mandate is required to present a strong stance against the threat of US tariffs on Ontario’s export-reliant industries. Speaking last week as he announced his intention to call an early election, Ford said “With a strong mandate, we will be able to fight with Donald Trump to make sure we stop the tariffs,”. It remains to be seen what power the Ontario premier has in any tariff talks between Ottawa and Washington.
- Critics have accused Ford of political opportunism and risking a lack of focus on the threat of tariffs during the election campaign.
- A strong result for the PCs in Ontario's election could point towards the main opposition Conservative Party of Canada (CPC) being in a good position to win a majority in any snap federal election. The governing Liberals choose their new party leader in March, but there is no guarantee that PM Justin Trudeau's successor will be able to avoid a swift confidence vote in the Commons.
