EQUITY TECHS: (H6) Trend Needle Points North

• Treasury futures gaining again after slightly lower than expected ISM Mfg release, prices paid steady to prior, while new orders and employment figures climb higher.
• Currently, TYH6 trades 112-12 (+5.5) vs. 112-13 high.
• The 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.
• Curves mixed: 2s10s at 70.596 -.935, 5s30s +1.340 at 113.919.
• Bloomberg US$ index paring gains: BBDXY +1.30 at 1205.76.

• MNI: US ISM DEC MANUF PURCHASING MANAGERS INDEX 47.9
• US ISM DEC MANUF PRICES PAID INDEX 58.5
• US ISM DEC MANUF EMPLOYMENT INDEX 44.9

UK monetary and fiscal policy matters continue to generate active discussions.

• Markets have steadied around pricing 40bp of BoE easing through year-end, retracing some of the move that came in the wake of the BoE’s ‘hawkish’ December rate cut.
• We think that progress on headline CPI and official labour market data will not be sufficient to justify the next BoE rate cut, at least not in isolation. It is likely that the Bank will also need to see progress on inflation expectations data as well as further DMP prints and a non-adverse result from the Agents' Pay Survey.
• On the fiscal side, the government’s Spring Forecast will be presented on 3 March. A reminder that the fiscal tightening outlined in the Budget is relatively backloaded, which has generated questions around whether the bulk of the policy moves will ultimately be deployed owing to the proximity to the next general election.
• Near-term, ongoing stagnant/disappointing economic growth releases could also erode some of the freshly generated fiscal headroom.
• BMO believe that in “2026 falling inflation will offer the BoE the opportunity to rebuild its credibility & re-anchor inflation expectations”. For gilts, they suggest that “deregulation will bolster banks’ demand”. For ’26, they believe that “as policy rate easing reaches the bottom of its cycle, gilt yields should rise moderately by end 2026, led by 5s”. They look for 2s to end the year at 3.80% and 10s to finish the year at 4.70%.