NBP: Glapinski Says MPC Has Been Almost Unanimous For Long Time

Tsy quarterly futures roll from March'25 to June'25 is still early in the process, but 5s have been leading volumes so far this week. Percentage complete remains low, less than 2% across the curve ahead the "First Notice" date on February 28. Current roll details:

• TUH5/TUM5 appr 2,200 from -5.88 to -5.5, -5.5 last
• FVH5/FVM5 appr 78,100 from -3.0 to -2.25, -2.5 last
• TYH5/TYM5 appr 14,100 from 0.25 to +0.5, +0.5 last
• UXYH5/UXYM5 less than 200 from 4.25 to 4.5, 4.5 last
• USH5/USM5 less than 100 from 5.75 to 6.25, 6.0 last
• WNH5/WNM5 less than 100 from 3.5 to 4.5, 4.25 last
• Reminder, March futures won't expire until next month: 10s, 30s and Ultras on March 20, 2s and 5s on March 31. March Tsy options expire February 21.

Natixis recommend going long SGLT 07/2025 at 2.40% with a target of 2.25% over a 3-month horizon.

• They look to “capture a faster pace of ECB rate cuts vs. current market expectations.” 

Cleveland Fed President Hammack (hawk, non-2025 voter) maintains her skepticism over the case for further rate cuts absent evidence that inflation is heading to target - indeed her speech Tuesday is called "Show Me The Low Inflation". Her overall stance is that "it will likely to be appropriate" to hold rates at current levels "for some time":

• "As long as the labor market remains healthy, I am looking for broad-based evidence that inflation is sustainably returning to 2% before adjusting policy further...Given current economic conditions, it will likely be appropriate to hold the funds rate steady for some time. A patient approach will allow us to assess the health of the labor market, whether inflation is returning to 2% on a sustained basis, and how the economy is performing in the current rate environment."
• Hammack notes upside risks to inflation, with government policy shifts playing a part: "Taking the case of tariffs as one example, it is appropriate for policy to be patient in assessing their ultimate effects...given the recent history with elevated inflation, the risks to the inflation outlook appear skewed to the upside, and this could delay a return to 2% and further risk embedding elevated inflation into the economy."
• On inflation readings, while she calls market-based core PCE's 2.4% rate is a "more hopeful signal", "we will need to see further disinflation in market-based core, to readings below 2 percent."
• She parts ways with Chair Powell's recent assessment that policy is "meaningfully restrictive", calling current policy  "only modestly restrictive", and pointing out again that rates may already be at a neutral level:
• "broad financial conditions indices are accommodative, something which does not appear consistent with a view that policy is meaningfully restrictive. But considerable uncertainty surrounds this assessment, and we may be at or close to a neutral setting already."
• This stance is no surprise for a noted Committee hawk, having dissented to December's 25bp cut when she was a voter.