FOREX: USD/JPY, EUR/JPY North of Key Pivots on Light Volume

Danske on the rise in long-end US yields: "remain sceptical about whether such a rapid increase in the term premium will prove sustainable".

• "The new US administration has strong incentives to try to ease market concerns that their fiscal plans will lead to a significant increase in the issuance of long-term bonds. This could be achieved through financing strategies designed to limit the amount of duration that the bond market needs to absorb".
• "Worth remembering that just a few months ago, the focus was on the ongoing weakening of the labour market and the risk that the Fed’s easing measures might ultimately prove too late. Although there is little indication of this at present, it may only take a couple of weak job reports to shift the spotlight back"
• They maintain their 12m forecast for 10y USTs at 4.20% and have raised their 12m 10y Bund forecast to 2.25% (from a prior 2.00%)

• NY Fed consumer inflation expectations saw a mixed month for December, with the 1Y holding steady at 3.0%, the 3Y jumping 40bps to 3.0% and the 5Y falling 20bps to 2.7%.
• The 3Y measure is its highest since Nov 2023 and came amidst its highest uncertainty since May.  Largest increases in inflation uncertainty were those with lowest educational attainment and lowest pay.
• The 5Y measure meanwhile fell to its lowest since March but is still a relatively new series having only started in 2022.
• Interestingly, the unchanged 1Y figure came despite gas inflation expectations falling to their lowest since Sep’22 (down 70bps to 2.0%).
• The medium term components likely received particular focus this month after Friday’s surprise jump in the preliminary U.Mich survey, with its 5-10Y measure rising 30bps to 3.3% for its highest since 2008 (but only a preliminary release that could still be revised). To this end, the rise in the 3Y series is of some note but it can be a volatile series and it keeps to recent ranges for now.
• Back to the NY Fed’s survey (in full here), the labor market details point to less churn, with the mean probability of losing a job, voluntarily leaving a job and finding a job dropping to their lowest since Jan’24, Jan’24 and Apr’21. 

Bloomberg reporting that ten European Union nations are, “pushing to toughen sanctions against Russia by introducing further restrictions on natural gas and bolstering the enforcement of a price cap on oil.”

• According to Bloomberg, the group which includes Sweden, Ireland, Poland, Lithuania, Latvia, Estonia, Denmark, Finland, the Czech Republic and Romania, “want to prohibit imports of pipeline and liquefied natural gas to the bloc to limit the revenues that the Kremlin uses to finance the war in Ukraine.”
• The group said in a document seen by Bloomberg: “As an end goal, it is necessary to ban the import of Russian gas and LNG at the earliest date possible. An alternative to the full ban could be to gradually reduce the use of Russian gas and LNG as has also already been set out in the RePowerEU Roadmap.”
• The document adds: “In any event, the Russian LNG tanker fleet needs to be subject to targeted sanctions prohibiting docking and maritime services on EU territory.”
• Bloomberg notes that restrictive measures, “require unanimous approval from the EU’s 27 member states, which has become an increasingly difficult hurdle with Hungarian Prime Minister Viktor Orban openly skeptical of such steps.”