US 10YR FUTURE TECHS: (M6) Fresh Cycle Low

CNN reports that President Donald Trump’s State of the Union address “drew largely positive marks from a heavily Republican audience,” but “it didn’t fully convince significant shares of even that friendly audience that he’s focusing on the nation’s most important problems or that he’ll lower the cost of living.”

• CNN: “Nearly two-thirds of speech-watchers said they had at least a somewhat positive reaction to Trump’s speech, with a smaller 38% offering a very positive response.” Politico notes that the 38% figure is, "lower than for every recent presidency at this point in the cycle. In 2022, Joe Biden scored 41 percent on the same measure. In 2018, Trump scored 48 percent, as did Barack Obama in 2010. And they all lost the House that fall.”
• A pre-SOTU survey from CBS News found that, “Democrats and Republicans alike want to hear the president talk about the economy and the cost of living. Most still call the economy bad — as they have for years, going back to the pandemic — but views are relatively improved of late, and off the lows for this term from last fall.” CBS noted, “The way in which the president talks about that may be critical now: going into the State of the Union address, most Americans think Mr. Trump makes the situation with prices and inflation sound better than it really is.

Figure 1: State of the Country, Now vs. a Year Ago

Source: CBS News

• 10,000 0QK6 96.50/96.62/96.75 1x2x2 put trees ref 96.935
• +5,000 0QZ6 99.00/99.50 1x2 call spds, 0.0

European yields closed mixed and little changed Wednesday, with core instruments taking a bit of a breather after gains in previous weeks.

• Equity gains (Eurostoxx reaching a record high) and JGB weakness overnight weighed on EGBs and Gilts early, though there was a bit of a recovery in afternoon trade in sympathy with a rebound in Treasuries.
• Macro and headline drivers were limited in the session, with the next risk event on the radar being chipmaking giant Nvidia's earnings after the US close.
• Final Eurozone January data brought a downward revision to the services inflation estimate.
• The German curve twist flattened very slightly, with the UK's bear steepening.
• Periphery/semi-core EGB spreads tightened modestly along with the equity bounce, with France, Belgium, and Spain outperforming.
• Attention Thursday will be on the by-election in the UK's Gorton and Denton constituency, which is seen as a major test for Prime Minister Starmer and his Labour Party. We also get ECB's Lagarde speaking in EU Parliament, and various confidence survey data from the Eurozone and UK.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 0.1bps at 2.047%, 5-Yr is up 0.1bps at 2.308%, 10-Yr is unchanged at 2.707%, and 30-Yr is down 0.3bps at 3.375%.
• UK: The 2-Yr yield is up 0.4bps at 3.583%, 5-Yr is up 1.2bps at 3.76%, 10-Yr is up 1.1bps at 4.317%, and 30-Yr is up 2.1bps at 5.131%.
• Italian BTP spread down 0.6bps at 60.1bps / French OAT down 1.3bps at 54.9bps