IRAN: FM: 'Tehran Prepared For Both Scenarios: War Or Diplomacy'
Speaking at a presser following a 1.5hr meeting with his Turkish counterpart in Istanbul, Iranian Foreign Minister Abbas Araghchi says that his visit to Turkey is not aimed at securing direct talks with the US. Araghchi said that ahead of any talks or meetings, there are three prerequisites that need to be agreed to: format, venue, and topics. Turkish President Recep Tayyip Erdogan is reported to have offered US President Donald Trump a videoconference with Iranian President Masoud Pezeshkian earlier in the week, but had been waiting on a response from Tehran.
- Utilising relatively bellicose language, Araghchi says that "We are even more ready than in June last year" (during the 12 Day War and the US' 'Operation Midnight Hammer' airstrikes). Claims "Tehran is prepared for both scenarios: war or diplomacy", adding "I hope the US acts with common sense and logic."
- Iran Nuances reports on Araghchi's comments: "We reject any dictated policies but are ready to participate in a meaningful, logical & fair diplomatic process. Despite US's past lack of goodwill, Tehran is ready to return to nuclear talks, provided its legitimate interests and legal concerns are fully addressed."
- Araghchi: "Nuclear weapons have no place in our defence doctrine or security calculations. We have always emphasised the peaceful nature of Iran's activities. Tehran is fully ready to rebuild trust and enter talks based on an equal footing and mutual respect."
- From these comments, it would appear the Iranian gov't maintains its long-standing tactic of indicating that it could engage in talks (and therefore arguing US action is unjustified) while also looking to dissuade US action by threatening its own retaliation.
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US TSYS: Where's the Beef? Treasuries Bid on Added China Tariff, Early NYE Close
- Treasuries holding firmer on light holiday volumes (TYH6 under 115k) - futures near top end of narrow range since the Asia cross-over to London trade - when yields dipped in reaction to additional tariffs on beef by China overnight: the US will have to pay 55% additional tariffs on beef exports to China, above its specified quota (164k tons a year in 2026).
- TYH6 trading 112-24 (+3.5) overnight high vs. 112-18 low, 10Y yld at 4.1083% (-.0136), curves mildly flatter with the Bonds outperforming: 2s10s -.966 at 66.183, 5s30s -.580 at 112.170.
- Trend theme remains bearish and a break of 111-29 would confirm a resumption of the bear cycle. This would open 111-19, a Fibonacci projection. Key short-term resistance has been defined at 112-31, the Dec 18 high, where a break would undermine a bear theme and signal scope for a stronger recovery instead.
- Markets close early today for New Years eve (1300ET; 1600ET Globex), re-open/electronic trade Thursday evening for Friday's order of business. Today's shortened session sees Weekly Jobless Claims (0830ET). Followed by staggered US Treasury supply: 4W & 8W bills at 1000ET, 17W bills at 1130ET.
SECURITY: Finnish Police Confirm Damage To Gulf Telecoms Cable, Vessel Seized
Finnish police have confirmed that, as part of a joint operation with Estonia, a vessel has been seized by Finnish authorities after it was suspected of damaging telecoms provider Elisa's cable running under the Gulf of Finland between Helsinki and Tallinn. The Finnish police say that the damage to the cable occurred within the waters of Estonia's exclusive economic zone, and that the seized vessel's anchor chain was found to have been lowered into the sea. It is now known at present which country the vessel is associated with.
- Posting on X, Finland's President Alexander Stubb said, "We are monitoring the situation in close cooperation with the government. Finland is prepared for security challenges of various kinds, and we respond to them as necessary."
- Helsingin Sanomat: "The disruption has no impact on Elisa's services in Finland or Estonia "due to the network's reliable structure," Elisa said in a statement. However, the disruption may have had an impact on customers who have purchased direct transmission connections from cable."
- Earlier in 2025, crew from a Cook Island-flagged vessel believed to be part of Russia's 'shadow fleet' were charged over an incident in Dec 2024, when five cables running between Finland and Estonia were damaged by an anchor dragged for 90km.
- Russia hawks in Europe have warned that such incidents are likely to continue as part of 'hybrid attacks' by Moscow intended to unnerve, distract, and disrupt European nations amid the ongoing war in Ukraine.
EUROPEAN INFLATION: Portugal HICP Accelerates In December; CPI Roughly Stable
Portugal HICP accelerated to 2.4% Y/Y in December according to the Statistics Portugal flash release (2.1% November).
- The national-level CPI (non-HICP) meanwhile was almost stable this time, at 2.19% (2.21% November). Discrepancies in the annual rates between CPI and HICP can often be related to owners equivalent rents or package holidays, but the lack of details in today's Portugal release makes this rather tricky. Looking CPI, for which the statistics agency publishes some, limited, details:
- Core (excl. unproc. food and energy) saw some moderate acceleration Y/Y, to 2.06% from 1.96% in November.
- "The annual rate of change of the index for energy products decreased to -2.4% (-0.8% in November)"
- Food was mixed this time, with unprocessed food further accelerating (6.02% Dec vs 5.95% Nov) while processed food was lower than before (0.93% vs 1.15% prior).
- For reference, Portugal contributes 2.6% to the overall Eurozone HICP 2025 basket.
- The print comes after Spain HICP came in in line with expectations, at 3.0% Y/Y, down from 3.2% while Belgium HICP decelerated by 0.4pp to 2.2% (no consensus).
- France will be the next country to follow with national-level flash December HICP data, scheduled for next Tuesday, January 6.
