US: Trump-'Today Is The Big One: Reciprocal Tariffs'
US President Donald Trump posts on Truth Social: "THREE GREAT WEEKS, PERHAPS THE BEST EVER, BUT TODAY IS THE BIG ONE: RECIPROCAL TARIFFS!!! MAKE AMERICA GREAT AGAIN!!!"
- Trump has previously pledged to impose tariffs on every country that imposes its own trade levies on the United States. Speculation has been on what countries could be hit, but speaking in the Oval Office on 3 Feb Trump said "You know, there's a word reciprocal. I'd go right now reciprocal tariffs on everybody,"
- Speaking on 12 Feb, Speaker of the House of Representatives Mike Johnson (R-LA) indicated that he believes Trump may offer exemptions on certain sectors, notably the automotive and pharmaceutical sectors. Reuters: "Issuing exemptions would suggest a more nuanced approach to deploying tariffs than Trump has demonstrated until now with his repeated threats of sweeping tariffs."
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STIR: Short Setting Dominated In Most SOFR Futures On Monday
OI data suggests short setting dominated through the SOFR greens on Monday, with only limited pockets of net long cover seen in that area of the strip.
- Net long cover then became more prominent in the blues,
- Hawkish adjustments continued in the wake of Friday’s NFP release, with a bid in energy commodities adding further weight.
| 13-Jan-25 | 10-Jan-25 | Daily OI Change |
| Daily OI Change In Packs |
SFRZ4 | 1,087,770 | 1,098,794 | -11,024 | Whites | +48,958 |
SFRH5 | 1,198,588 | 1,184,367 | +14,221 | Reds | +85,777 |
SFRM5 | 1,065,028 | 1,030,324 | +34,704 | Greens | +32,256 |
SFRU5 | 821,991 | 810,934 | +11,057 | Blues | -11,195 |
SFRZ5 | 1,024,840 | 994,376 | +30,464 |
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SFRH6 | 670,335 | 639,796 | +30,539 |
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SFRM6 | 655,656 | 645,320 | +10,336 |
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SFRU6 | 631,967 | 617,529 | +14,438 |
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SFRZ6 | 751,998 | 734,804 | +17,194 |
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SFRH7 | 493,360 | 483,230 | +10,130 |
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SFRM7 | 401,384 | 392,266 | +9,118 |
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SFRU7 | 287,516 | 291,702 | -4,186 |
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SFRZ7 | 269,851 | 280,884 | -11,033 |
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SFRH8 | 216,396 | 219,902 | -3,506 |
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SFRM8 | 176,637 | 173,450 | +3,187 |
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SFRU8 | 105,922 | 105,765 | +157 |
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US INFLATION: PPI Details Key As Ever To PCE Readthrough
Besides setting the tone for Wednesday's CPI data, the December PPI report (0830ET Tuesday) will help shape expectations for the monthly PCE print which is due out on Jan 31, two days after the FOMC decision.
- In contrast to CPI expectations, core sequential PPI readings are seen slightly hotter in December than November. In particular, ex-food/energy/trade is seen picking up to 0.3% M/M from 0.1% prior (0.05% unrounded). Headline Final Demand PPI is seen at 0.4% M/M for a second consecutive month.
- Initial pre-PPI estimates point to core PCE inflation at ~0.20% M/M, softer than CPI in outright terms but on a relative basis an acceleration from the softer 0.115% in Nov. Analyst estimates we've seen range from 0.18% (Goldman) to 0.27% (Deutsche), with a median 0.20% and mean 0.21%.
- To give a sense of expectations by PCE-translated PPI categories, for which health care services, portfolio management and domestic airfares will be the focus:
- Nomura is a above consensus seeing a 0.24% M/M PCE print (with core CPI at 0.27%), and note in particular PPI domestic airfares and portfolio management /investment advice prices rising on an NSA basis by by 2.0% and 1.5% M/M respectively.
- Citi, which is in line with consensus on core PCE at 0.20% and core CPI at 0.23%, sees PPI ex-food/energy/trade up 0.3% M/M (in line with consensus) "mainly because of certain financial services components such as portfolio management."
- As we note in our CPI preview, Fed leadership is likely to discount the signal from a surprising PCE print if it's driven by categories such as portfolio management.
US TSYS: Paring Overnight Gains Ahead Dec PPI
- Treasuries are scaling back from early London session highs, marking the low end of the range in the last few minutes.
- Focus is on December PPI at 0830ET (prior, est): Final Demand MoM (0.4%, 0.4%), YoY (3.0%, 3.5%) while Ex Food and Energy MoM (0.2%, 0.3%), YoY (3.4%, 3.8%). Wednesday’s US CPI report headlines the weekly calendar, however, with with Bloomberg consensus currently looking for a 0.2% M/M print for core CPI in what’s a close call with a 0.3% M/M.
- Tsy Mar'25 10Y futures tapping 107-10 (+2.5) low, trading 107-11 last. Initial technical support at 107-06 (Jan 13 low)followed by 107-04 (Low Apr 25 ‘24 and a key support). 10Y yield +.0042 at 4.7821%, curves mixed with 2s10s -.014 at 39.629, 5s30s +1.273 at 37.574.
- Scheduled Fed speakers for today include KC Fed Schmid (text TBA, Q&A) at 1000ET followed by NY Fed Williams open remarks (text, no Q&A) at 1500ET.
- Tsy auction: $85B 42D CMBs at 1130ET.
