US TSYS: Extending Contract Highs Heading Into Month End

Below is a comparison of the January FOMC statement versus December's. The changes are in line with MNI's expectations. 

• The first paragraph describing recent economic developments upgraded activity to "solid" from "moderate" (a change flagged by Gov Jefferson in his pre-FOMC blackout period speech).
• For employment, job gains are now characterized as having "remained low" (saying they "slowed this year" was effectively marked-to-market), though as we cautioned there is a slightly hawkish if merely factual revision in that the unemployment rate has "shown some signs of stabilization" (vs "edged up through September" - as of December the unemployment rate has reverted back to the 4.4% in September).
• The second paragraph removes the mention that "downside risks to employment rose in recent months", again a common-sense change given that this was introduced in order to justify rate cuts last year and that's no longer the case.
• The Statement also removes "and in light of the shift in the balance of risks" which would have made little sense in describing why it decided to hold rates at 3.50-3.75%.
• Other than that though there was no tweak to forward guidance (in line with broad expectations) and December's paragraph announcing the launch of reserve management purchases was deleted.
• There were two modest surprises in the dissent department. First is that Gov Miran dissented in favor of a 25bp cut, after having called for 50bp in each of the last 3 meetings (though even he had said pre-meeting he hadn't decided the size of the cut he wanted). Second is that it was Gov Waller and not Gov Bowman who was the second dissenter, as he had been seen as relatively more cautious on further near-term cuts. A cynic would argue that this dovish dissent keeps him in the running to be the White House's Fed Chair candidate but for now we await to see his explanation (likely out Friday) for the economic underpinnings for his decision.

• "*GERMANY'S MERZ: WATCHING DOLLAR-EURO EXCHANGE RATE WITH CONCERN" (BBG)
• "*MERZ: MUST BOOST EUROPE COMPETITIVENESS TO COUNTER WEAK DOLLAR"

• After a brief delay, Treasuries extend losses after the Fed keeps target rate at 3.5-3.75 on 10-2 vote.
• TYH6 currently -9 at 111-16.5 current low. Curves mixed: 2s10s -.246 at 66.560; 5s30s -.545 at 102.363.
• Cross-asset update: Bbg US$ index gains (BBDXY +8.11 at 1182.71), stocks softer (SPX eminis -11.00 at 6997.5).