MNI ASIA MARKETS ANALYSIS: Fed Chair Speculation Strikes Nerve

HIGHLIGHTS

• Treasuries continued to trend lower Friday, extending lows after headlines appeared to suggest Pres Trump would not be nominating his chief economist Kevin Hassett to be the next Fed Chair.
• Fed VC Bowman: "Absent a clear and sustained improvement in labor market conditions, we should remain ready to adjust policy to bring it closer to neutral.
• Industrial production was more solid to end the year than had been expected - even though a strong December was largely driven by volatile factors.

US TSYS

MNI US TSYS: Extending Late Session Lows

• After some massive Block/buying in 5s (20k at 108-25.75) and 10s (+50k 111-28) buoyed rates in late morning trade - futures are back to extending lows last few minutes, more flow driven amid a lack of obvious headline triggers.
• TYH6 trades 111-23.5 (-15.5) low vs. 112-07.5 overnight. After breaching technical support at 111-29 (Dec 10 low and bear trigger) earlier - the next support level is 111-19, a Fibonacci projection: 1.236 proj of the Oct 17 - Nov 5 - 25 price swing.
• Below that, keep an eye on 111-11, 1.382 proj of the Oct 17 - Nov 5 - 25 price swing.
• Curves mixed: 2s10s +2.711 at 62.821, 5s30s -1.579 at 101.076.
• Projected rate cut pricing vs. late Thursday levels (*): Jan'26 at -0.7bp (-1.2bp), Mar'26 at -5.3bp (-5.6bp), Apr'26 at -8.9bp (-9.2bp), Jun'26 at -19.8bp (-20.8bp).
• Cross asset roundup: Bbg US$ index +.55 at 1212.23, stocks near flat (SPX eminis +6.75 at 6988.50), Gold weaker (-33.45 at 4582.70).
• Look ahead to next week - slow  start in US with Monday holiday closure, ADP Weekly NER Pulse and Philadelphia Fed Non-Manufacturing Activity expected Tuesday.

REFERENCE RATES
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US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 3.66% (+0.02), volume: $3.201T
• Broad General Collateral Rate (BGCR): 3.63% (+0.01), volume: $1.315T
• Tri-Party General Collateral Rate (TCR): 3.63% (+0.01), volume: $1.289T
• (rate, volume levels reflect prior session)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 3.64% (+0.00), volume: $94B
• Daily Overnight Bank Funding Rate: 3.63% (+0.00), volume: $180B

FED Reverse Repo Operation

RRP usage slips to $1.222B with 6 counterparties this afternoon vs. $2.003B Thursday. Compares to December 12 low of $0.838B (lowest level since mid-March 2021); this years highest excess liquidity measure: $460.731B on June 30.

US SOFR/TREASURY OPTION SUMMARY

SOFR & Treasury options continue to revolve around put structures as underlying futures extend lows into late trade. Note, huge (appr 150K) Green Jun'26 SOFR put buy in the first half (expires same time as front June options on June 12, but use Green Jun'28 futures as their underlying. Projected rate cut pricing vs. late Thursday levels (*): Jan'26 steady at (-1.2bp), Mar'26 at -5bp (-5.6bp), Apr'26 at -9bp (-9.2bp), Jun'26 at -20bp (-20.8bp). 

SOFR Options:
3,500 SFRJ6 96.37/96.50/96.56 put trees
+30,000 SFRG6 97.12 calls, .25 ref 96.38
over +145,000 2QM6 96.00 puts, 3.0-3.5 ref 96.54
+10,000 SFRZ6 98.00/99.00 call spds, 2.0
-1,500 SFRU6 96.56 straddles, 31.5
+25,000 0QH6 98.12/96.93/97.00 call trees, 0.5 ref 96.765
Block/screen,13,000 SFRZ6 98.50 calls, 2.0 ref 96.765
9,000 SFRG6/SFRH6 96.37 put spds 
3,000 SFRJ6 96.37/96.43 2x1 put spds, 1.25 ref 96.54
1,500 SFRZ6 97.00/97.25 call spds ref 96.775
-6,000 SFRZ6 97.00/97.50 2x1 put spds, 6.75 ref 96.775 to -.78
+3,000 0QM6 96.00 puts, 1.5 vs. 96.695/0.05%
+1,500 SFRH6 96.50/96.56/96.75 broken call trees, 0.0 ref 96.375
10,000 2QH6 96.87 calls ref 96.615
+2,000 SFRH6 96.50/96.56 call spds, 0.75 ref 96.38

Treasury Options:
5,000 TYH6 106.5/108.5/110.5 put flys, ref 111.26
23,000 FVH6 109 calls, 16 ref 108-24.75 (total volume over 31.8k)
6,000 TYH6 111 puts, 12 ref 111-27
2,900 FVG6/FVH6 109 call spds, 12
Block, 5,000 TUJ6 103.87/104.12/104.25/104.37 put condors
8,000 FVH6 109 puts, 31 ref 108-26
3,000 TUH6 104.25/104.5 2x1 put spds
over 5,200 FVH6 109.75 calls ref 108-29
over 13,100 TYG6 112 puts, 11 last
2,000 TYJ6 110.5/111.5 2x1 put spds ref 112-02
+3,500 TYH6 112/112.5 call spds, 15 ref 112-06.5/0.15%
+3,000 TYH6 109/110 put spds, 2 vs. 112-01.5/0.05%
+7,500 wk1 FV 108.25/108.5 2x1 put spds, 0.5 ref 109-00.5 (exp 2/6)
3,000 TYG6 111.5 puts ref 112-07.5
-2,000 TYG6 112 calls, 20

MNI BONDS: EGBs-GILTS CASH CLOSE: Slight Retreat As OATs Underperform

EGBs and Gilts retreated modestly to conclude the week.

• Core European FI yields had edged higher in early trade before the move accelerated in the early London afternoon.
• Bunds/EGBs saw pressure from a rise in natural gas prices, then hit an air pocket as US President Trump appeared to suggest that he would not be nominating his chief economist Kevin Hassett to be the next Fed Chair (he had been seen as the most dovish possible candidate).
• Treasury yields sold off, dragging EGBs/Gilts with them into the weekend. Both the German and UK curve bellies underperformed on the day.
• For the week, the German curve twist flattened (2Y yield +0.4bp, 10Y -2.8bp) while the UK's was largely flat (2Y yield +2.7bp, 10Y +2.6bp).
• Periphery/semi-core EGB spreads were little changed. OATs underperformed on political uncertainty: after cancelling budget debates scheduled for Friday and Monday, French PM Lecornu is due to speak by end-day on the government's decision on how to pass a budget in the face of opposition.
• Potential sovereign ratings reviews after the cash close include Fitch on the Netherlands and both Morningstar DBRS and Scope on the EFSF and ESM.
• Next week's scheduled highlights include the latest UK inflation and labour market data.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 1.3bps at 2.111%, 5-Yr is up 1.8bps at 2.453%, 10-Yr is up 1.6bps at 2.835%, and 30-Yr is up 1.6bps at 3.42%.
• UK: The 2-Yr yield is up 0.1bps at 3.671%, 5-Yr is up 1.3bps at 3.873%, 10-Yr is up 1.2bps at 4.4%, and 30-Yr is up 0.9bps at 5.135%.
• Italian BTP spread down 0.6bps at 61.9bps / French OAT up 0.8bps at 68.2bps  

MNI OPTIONS: Put Structure Flow Continues Apace At Week's End

Friday's Europe rates/bond options flow included:

• ERM6 98.00c, bought for 3.5 in 12.5k
• 0RU6 97.75/98.00cs 1x2, bought the 1 for 3.5 in 5k.
• SFIM6 96.30/96.25ps 1x2, sold the 1 at -0.25 in 7.5k
• SFIZ6 96.75/90 call spread vs. 96.25 puts paper paid 1.5 for the call spread on 4K
• 2NM6 96.10p vs 0NM6 96.30p, bought the 2yr for 1.25 in 5.5k Around 10k Total in the last couple of sessions

MNI FOREX: Fed Chair Speculation Sparks Volatility, DXY Consolidates Weekly Advance

• Currency markets had been trading in a subdued manner approaching the weekend close, however, latest speculation surrounding a likely Warsh-led Fed sparked a fresh round of dollar demand, helping the USD index to consolidate its moderate weekly advance and extend a firmer spell for the greenback so far in 2026.
• President Trump’s comments on keeping Kevin Hassett in his current role prompted the volatility late Friday, with US 10-year yields notably rising above the pivotal 4.20%. Losses across the G10 were led by EUR, AUD and CAD, while spot gold prices declined notably from $4.620 to $4,537/oz on the news.
• For EURUSD, the pair looks set to post a 0.4% decline on the week, although the pull lower from Monday’s 1.1700 highs is more notable. Price action saw the pair breach support at 1.1618, the Jan 9 low, confirming a resumption of the downtrend and maintaining the price sequence of lower lows and lower highs. While 1.1549 is the next technical target for the move, November lows either side of 1.15 appear more significant.
• Amid analyst reports suggesting that investors are preferring to fund carry trades out of the euro, the decline for EURMXN this week has really stood out, with spot breaking through a cluster of significant support between 20.90/95, and extending this week’s declines to 2.25%. Price has substantially narrowed the gap to the August 2024 lows at 20.4379, and a break below here would signal scope for a more protracted selloff towards 19.9047 and 19.1703.
• Elsewhere in the G10, the USD’s advance has been offset by the rebounding yen, prompting USDJPY to briefly slide back below 158. This comes amid a significant ramping up of verbal warnings regarding JPY weakness this week, with both the finance minister and Japan’s top currency official more aggressively sounding the alarm. Initial support remains further down at 157.20, the 20-day EMA.
• China activity and Canada inflation data highlight Monday’s economic calendar, while US markets will be closed for the MLK holiday.

MNI FX OPTIONS: Expiries for Jan19 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1250(E2.5bln), $1.1500(E2.7bln), $1.1585(E1.6bln), $1.1615(E1.1bln), $1.1730(E942mln)
• USD/JPY: Y159.00($1.4bln)

MNI US STOCKS: Late Equities Roundup: Tech & Financials Outperforming

• Early session swings aside, stocks are holding mildly higher in late Friday trade, narrow ranges as accounts squared up ahead of the extended holiday weekend. Currently, the DJIA trades up 1.00 points (+0.00%) at 49442.0, S&P E-Minis Future up 5.0 points (0.08%) at 6986.75, Nasdaq up 24.017 points (0.1%) at 23554.03.
• A mix of Industrials, Financials and Technology sector shares continued to lead advances in the second half: Super Micro Computer +10.84%, GE Vernova +6.19%, Micron Technology +6.12%, Synchrony Financial +4.50%, Quanta Services +4.38%, Qnity Electronics +4.28%, PNC Financial Services +4.24%, Eaton Corp +3.43%, CoStar Group +3.06%, PPL Corp +3.04% and International Business Machine +3.03%.
• Conversely, Materials and Health Care sector shares held weaker in the second half: Amcor -6.75%, Albemarle -5.37%, Mosaic Co -4.93%, Freeport-McMoRan -2.27% and Smurfit WestRock -1.92% weighed on the Materials sector as Gold trades weaker (-24.15 at 4592.0).
• Meanwhile, pharmaceutical stocks weighed on the Health Care sector in late trade: West Pharmaceutical Services -5.48%, Humana -3.22%, Agilent Technologies -2.57%, CVS Health -2.53%, Mettler-Toledo International -2.43% and HCA Healthcare -2.34%.
• Expected after today's close: Interactive Brokers, Netflix Inc and United Airlines Holdings.

MNI EQUITY TECHS: E-MINI S&P: (H6) Trend Theme Remains Bullish

• RES 4: 7089.25 1.000 proj of the Dec 18 - 26 - Jan 2 price swing 
• RES 3: 7080.92 0.764 proj of the Nov 21 - Dec 11 - 18 price swing
• RES 2: 7036.74 0.764 proj of the Dec 18 - 26 - Jan 2 price swing
• RES 1: 7036.25 High Jan 13  
• PRICE: 7003.25 @ 14:38 GMT Jan 16
• SUP 1: 6952.17/6898.30 20- and 50-day EMA values
• SUP 2: 6771.50 Low Dec 18 and a key support
• SUP 3: 6684.50 Low Nov 24 
• SUP 4: 6583.00 Low Nov 21 and a reversal trigger  

The trend structure in S&P E-Minis is unchanged, it remains bullish and the latest pullback appears to have been a correction. Recent gains confirm a resumption of the primary uptrend and maintain the bullish price sequence of higher highs and higher lows. Sights are on 7036.74, a Fibonacci projection point. On the downside, initial support to watch lies at the 20-day EMA (pierced) - currently at 6952.17. The 50-day EMA lies at 6898.30.

COMMODITIES

MNI AMERICAS OIL: US OIL: January 16 - Americas End of Day Oil Summary: Crude Rises

WTI Crude prices ended higher after the pull back from a high on Jan 14. The market is weighing geopolitical risk in Iran amid a buildup of US forces in the region against oversupply risks. US economic fundamentals remain net positive. 

• The US total oil and gas rig count was down 1 rig on the week at 543 rigs, according to Baker Hughes. This puts total US oil and gas rigs down 37, or 6.4% on the year.
• Oil: 410 (1) - down 68 rigs, or 14.2% on the year.
• Axios reports that Israeli officials think that despite the delay, a U.S. military strike could take place in the coming days. Adds, "The U.S. military is sending additional defensive and offensive capabilities to the region to be ready in case Trump orders a strike, U.S. sources say."
• There is no shortage of Iranian oil in the market, with Iranian crude in transit conservatively estimated at around 80m bbl, Platts said.
  • WTI Feb futures were up 0.4% at $59.44
  • WTI Mar futures were up 0.4% at $59.30

MONDAY/TUESDAY DATA CALENDAR

Date	GMT/Local	Impact	Country	Event
19/01/2026	1000/1100	***	EU	EZ HICP Final
19/01/2026	1000/1100	***	EU	EZ HICP Final
19/01/2026	1000/1100	***	EU	EZ HICP Final
19/01/2026	1000/1100	***	EU	EZ HICP Final (2dp)
19/01/2026	-		EU	ECB Cipollone at Eurogroup Meeting, Brussels
19/01/2026	1330/0830	***	CA	CPI
19/01/2026	1530/1030	**	CA	BOC Business Outlook Survey
20/01/2026	0700/0800	**	DE	PPI
20/01/2026	0700/0700	***	GB	Labour Market - AWE & Unemployment
20/01/2026	0700/0700	***	GB	Labour Market - Payrolls & Claimants
20/01/2026	0700/0700	***	GB	Labour Market - Payrolls & Claimants
20/01/2026	0700/0700	***	GB	Labour Market - AWE & Unemployment
20/01/2026	0900/1000	**	EU	EZ Current Account
20/01/2026	1000/1100	***	EU	EZ GDP 4th (Final)
20/01/2026	1000/1100	**	EU	EZ Construction Output
20/01/2026	1000/1100	***	DE	ZEW Current Expectations Index
20/01/2026	-		EU	ECB de Guindos at ECOFIN Meeting, Brussels
20/01/2026	1330/0830	**	US	Philadelphia Fed Nonmanufacturing Index
20/01/2026	1630/1130	*	US	US Treasury Auction Result for 26 Week Bill
20/01/2026	1630/1130	*	US	US Treasury Auction Result for 13 Week Bill
20/01/2026	1800/1300	**	US	US Treasury Auction Result for 52 Week Bill
21/01/2026	0001/0001	*	GB	Brightmine pay deals for whole economy