FED: Powell – Fed Doesn’t Need To Hurry, Waiting For Greater Clarity

The government of French Prime Minister Francois Bayrou has survived a 'no confidence' vote, clearing the path for the government to adopt a 2025 budget. 

• The vote is in line with expectation, as MNI noted in an earlier bullet: FRANCE: Bayrou Gov't Safe In Today's Votes; Gov't Expects Budget Adopted Mid-Feb
• France24 noted ahead of the vote that although the National Assembly, Socialists, and National Rally declined to back the no-confidence motion, "it is unlikely to be the only challenge to [Bayrou's] shaky administration in the coming months."
• RN leader Jordan Bardella said that although, "it's a bad budget... we need a budget... We need to avoid uncertainty because many of our fellow citizens... are extremely worried about possible long-term instability."
• Socialist leader Olivier Faure said toppling the government over the budget would only have resulted in France having "a prime minister further to the right," adding: "We chose to give France a budget."
• Bloomberg notes: "Bayrou has now largely completed his two most pressing missions: adopting a budget and breaking the unity of the leftist New Popular Front alliance," but, "will still likely struggle to adopt new legislation in the coming months given the fragmented parliament and the diminished power of Macron’s coalition."

• US Data/Speaker Calendar (prior, estimate)
• 6-Feb 0730 Challenger Job Cuts YoY (11.4%, --)
• 6-Feb 0830 Initial Jobless Claims (207k, 213k)
• 6-Feb 0830 Continuing Claims (1.858M, 1.870M)
• 6-Feb 0830 Nonfarm Productivity (2.2%, 1.2%)
• 6-Feb 0830 Unit Labor Costs (0.8%, 3.4%)
• 6-Feb 1130 US Tsy $95B 4W & $90B 8W bill auctions
• 6-Feb 1430 Fed Gov Waller fireside chat (no text, Q&A)
• 6-Feb 1710 Dallas Fed Logan, future challenges for Mon-Pol

European curves flattened Wednesday, with Gilts outperforming.

• EGBs and Gilts benefited in early trade amid a lack of meaningful headline flow and softer oil prices and equities (tech earnings, US tariff concerns in the background), with Gilts outperforming on solid demand at a green bond auction.
• The rally extended in afternoon trade as the day's key data report, US ISM Services, came in on the soft side of expectations.
• ECB Chief Economist Lane drew a modestly hawkish reaction as he flagged risks that disinflation could take longer than expected; Centeno noted that the ECB may have to cut below neutral.
• The German curve twist flattened, with the UK's bull flattening as 10Y Gilt yields saw one of their biggest drops in several months (8.5bp), hitting the lowest level since mid-December. EGB periphery EGB spreads were mixed.
• French OAT saw slightly tighter spreads to Bunds on the day though they underperformed BTPs, as PM Bayrou's government survived a no-confidence vote.
• The Bank of England decision will be Thursday's focus (with apologies to German factory orders). MNI's preview (link) looks for a 25bp cut on an 8-1 vote, with any meaningful tweaks to forward guidance unlikely. Attention will be paid to other matters including the Agents' Pay Survey, and the MPR projections. 

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 0.6bps at 2.057%, 5-Yr is down 1.5bps at 2.155%, 10-Yr is down 3bps at 2.366%, and 30-Yr is down 4.7bps at 2.599%.
• UK: The 2-Yr yield is down 3.1bps at 4.15%, 5-Yr is down 6.4bps at 4.124%, 10-Yr is down 8.5bps at 4.437%, and 30-Yr is down 10.2bps at 5.023%.
• Italian BTP spread down 1.5bps at 108.5bps / French OAT down 0.4bps at 71.6bps