MNI ASIA OPEN: DHS Funding, Hassett on Jobs, 1Y Infl Exp Drop

EXECUTIVE SUMMARY

• MNI US: Congress Running Out Of Time To Avert DHS Shutdown
• MNI JAPAN: PM May Renew Coalition w/Ishin After Landslide LDP Election Win
• MNI US DATA: Inflation, Job Concerns Ease In NY Fed Survey But Remain Elevated

US

MNI US: Congress Running Out Of Time To Avert DHS Shutdown

Congress is running out of time to avert a shutdown of the Department of Homeland Security on February 13. For markets, the impact of a shutdown will be limited as the vast majority of the federal government - including agencies that produce key data releases - are funded through September. 

NEWS

MNI JAPAN: PM May Renew Coalition w/Ishin After Landslide LDP Election Win

In securing the strongest-ever post-war result for the conservative Liberal Democratic Party (LDP) in the 8 Feb general election, PM Sanae Takaichi emerges from the campaign with the most significant mandate to bend Japan's political and economic direction to her will since her predecessor and mentor, the late Shinzo Abe, held office in the early/mid 2010s. 

MNI GLOBAL POLITICAL RISK: Japan: Following the 8 February general election, focus will now turn to the formation of a new government and the appointment of government officials. The record-breaking win for PM Sanae Takaichi’s conservative Liberal Democratic Party (LDP), in which it secured a solo supermajority in the House of Representatives, means the party does not require any coalition partners.

MNI ECB: Villeroy To Step Down As Banque de France Governor In Early June

Banque de France Governor Villeroy has announced that he will step down in early June, over a year before his term ends. La Tribune first reported the news ahead of Villeroy's official announcement. "According to our information, the Governor of the Bank of France will leave office on June 1, 2026, while his term ends in the fall of 2027, after the presidential and legislative elections.

US TSYS

MNI US TSYS: Hassett on Declining Labor Force - Don't Panic

• Treasuries extended early session highs after jobs comment from U.S. NEC Director Hassett, gradually extending highs to finish modestly higher after the bell. Hassett noted that “there's a pretty big decline in the labor force because of illegals leaving the country. And so the breakeven job number is quite a bit lower than it was under Joe Biden."
• Hassett posited "you should expect slightly smaller job numbers that are consistent with high GDP growth right now, and that one shouldn't panic if you see a sequence of numbers that are lower than you're used to." explaining that "population growth is going down and productivity growth is skyrocketing.”
• Rate locks and fast$ selling for $20B Alphabet 7pt debt issuance helped keep rates contained on the day.
• Currently, TYH6 trades +2.5 at 112-06 vs. -07 high, an extension higher would undermine the bear theme and open 112.-22, the Jan 7 high. For bears, a reversal lower would refocus attention on 111-09, the Jan 20 low and bear trigger.
• The stabilisation for risk sentiment late last week had been a key factor into the recent dollar recovery stalling, and the DXY returning to the prior breakdown point around the 98.00 mark appears to have provided an attractive entry point for those looking to reengage shorts.
• Focus turns to weekly ADP NER pulse employment numbers, Import/Export Prices, several Fed speakers and a $58B Tsy 3Y note sale.

OVERNIGHT DATA

MNI US DATA: Inflation, Job Concerns Ease In NY Fed Survey But Remain Elevated

The NY Fed's January Survey of Consumer Expectations (SCE) showed largely steady findings from recent months, if anything showing a stabilization in already-weak labor market sentiment with a further pullback in near-term inflation expectations. Judging from the survey, consumers' 1-year inflation fears have faded, but concerns over the labor market have not.

• The inflation expectations gauges showed a drop in 1Y to 3.09% (3.42% prior) vs analysts' expectation of a steady figure (unrounded),  and a 6-month low. 3Y (2.98%) and 5Y (3.00%) were essentially unchanged; 3Y has basically been at this level since the end of 2024 with the exception of a jump to 3.17% in April 2025 (tariff "Liberation Day").

MNI US LABOR MARKET: Large Negative Benchmark Revision Baked In For Payrolls

Cumulative growth in nonfarm payrolls across April 2024 to March 2025 was likely significantly lower than first reported judging by data from the more comprehensive QCEW survey. We expect a 700-800k downward revision to the level of Mar 2025 payrolls in this month’s payrolls release, with some limited analyst estimates in a roughly similar range albeit a little higher with a median mid-point of 825k across five estimates.

MNI US DATA: New NFIB Small Business Employment Composite Points To Stabilization

The NFIB's January Jobs Report showed slight a pullback in labor market conditions for small businesses vs December. This report continues to send mixed signals about current labor market conditions but overall is suggestive of a stabilization following a multi-year pullback. (Report PDF link here).

MARKETS SNAPSOT

Key market levels of markets in late NY trade:
DJIA up 20.2 points (0.04%) at 50135.87
S&P E-Mini Future up 29.25 points (0.42%) at 6981.75
Nasdaq up 207.5 points (0.9%) at 23238.67
US 10-Yr yield is down 0.6 bps at 4.2001%
US Mar 10-Yr futures are up 2/32 at 112-5.5
EURUSD up 0.0099 (0.84%) at 1.1914
USDJPY down 1.31 (-0.83%) at 155.9
WTI Crude Oil (front-month) up $0.74 (1.16%) at $64.29
Gold is up $105.65 (2.13%) at $5069.54

European bourses closing levels:
EuroStoxx 50 up 60.61 points (1.01%) at 6059.01
FTSE 100 up 16.48 points (0.16%) at 10386.23
German DAX up 293.41 points (1.19%) at 25014.87
French CAC 40 up 49.44 points (0.6%) at 8323.28

US TREASURY FUTURES CLOSE

Curve update:
3M10Y -0.812, 51.842 (L: 51.246 / H: 56.737)
2Y10Y +0.859, 71.29 (L: 70.885 / H: 73.699)
2Y30Y +1.451, 136.382 (L: 135.646 / H: 139.671)
5Y30Y +1.565, 110.641 (L: 109.005 / H: 112.541)
Current futures levels:
Mar 2-Yr futures up 0.625/32 at 104-10 (L: 104-07.75 / H:104-10.75)
Mar 5-Yr futures up 1.5/32 at 109-4.5 (L: 108-29.75 / H: 109-05.5)
Mar 10-Yr futures up 2/32 at 112-5.5 (L: 111-26 / H: 112-07)
Mar 30-Yr futures steady at at 115-16 (L: 114-27 / H: 115-21)
Mar Ultra futures up 1/32 at 117-26 (L: 116-30 / H: 117-31)

MNI US 10YR FUTURE TECHS: (H6) Still Below 50-Day EMA

• RES 4: 112-31   High Dec 18 and key short-term resistance
• RES 3: 113-04   76.4% retracement of the Nov 25 - Jan 20 bear leg 
• RES 2: 112-22   High Jan 7
• RES 1: 112-16+ High Feb 6 PRICE:‌‌ 112-05  @ 1226 ET Feb 09
• SUP 1: 111-29/09 20-day EMA / Low Jan 20 and the bear trigger
• SUP 2: 111-00   Round number support
• SUP 3: 110-30+ 1.618 proj of the Oct 17 - Nov 5 - 25 price swing 
• SUP 4: 110-22+ 1.764 proj of the Oct 17 - Nov 5 - 25 price swing

A sharp rally in Treasuries Thursday resulted in a breach of the 20- and 50-day EMAs. Nonetheless, the fade off highs cements the bearish M/T condition - which suggests that the latest recovery is likely a correction. However, an extension higher would undermine the bear theme and open 112.-22, the Jan 7 high. For bears, a reversal lower would refocus attention on 111-09, the Jan 20 low and bear trigger.

SOFR FUTURES CLOSE

Current White pack (Mar 26-Dec 26):
Mar 26 +0.005 at 96.395
Jun 26 +0.015 at 96.615
Sep 26 +0.015 at 96.805
Dec 26 +0.010 at 96.875
Red Pack (Mar 27-Dec 27) +0.010 to +0.015
Green Pack (Mar 28-Dec 28) +0.015 to +0.015
Blue Pack (Mar 29-Dec 29) +0.015 to +0.020
Gold Pack (Mar 30-Dec 30) +0.020 to +0.020

REFERENCE RATES

​​​​​​US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 3.64% (-0.01), volume: $3.195T
• Broad General Collateral Rate (BGCR): 3.62% (-0.01), volume: $1.322T
• Tri-Party General Collateral Rate (TCR): 3.62% (-0.01), volume: $1.301T
• (rate, volume levels reflect prior session)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 3.64% (+0.00), volume: $106B
• Daily Overnight Bank Funding Rate: 3.63% (+0.00), volume: $206B

FED Reverse Repo Operation

RRP usage retreats to $1.306B with 10 counterparties this afternoon vs. $3.111B Friday. 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.

MNI PIPELINE: Corporate Bond Update: $20B Alphabet 7Pt Jumbo Launched

Early 2026 has seen some large corporate issuance with Alphabet's $20B following Oracle's $25B over 8 tranches a week ago.

• Date $MM Issuer (Priced *, Launch #)
• 02/09 $20B #Alphabet $2.5B 3Y +27, $3B 5Y +43, $3B 7Y +53, $4.25B 10Y +63, $$1.5B 20Y +75, $4B 30Y +83, $1.75B 40Y +95
• 02/09 $3.8B #Thermo Fisher $1B 5Y +47, $750M +7Y +62, $1.3B 10Y +70, $750M 20Y +75
• 02/09 $1.575B TKC Holdings $1B 4.5NC1.5, $575M 5NC2
• 02/09 $1B TransDigm 8NC3
• 02/09 $Benchmark Bank of England 3Y SOFR+27.5a
• 02/09 $Benchmark Brazil 10Y 6.4%, 2056 tap 7.3%

MNI BONDS: EGBs-GILTS CASH CLOSE: Curves Steepen, Gilts Recover Most Early Losses

UK political uncertainty continued to impact Gilts Monday.

• Gilt yields picked up throughout the morning session, peaking in mid-afternoon before falling back in the couple of hours ahead of the cash close.
• The driving dynamic continued to be uncertainty over UK PM Starmer's future, with some speculation that he could resign in the very near future - which would be considered a fiscally-negative and thus Gilt-negative development.
• Concerns peaked intraday amid reports that the Scottish Labour leader would call for Starmer to step down. Gilts regained ground late as various Labour leaders expressed support for the PM.
• In contrast, Bund yields topped out early and descended thereafter, though trade was well within last week's ranges.
• Banque de France Governor Villeroy announced that he will step down in early June, a year before his term officially ends, though this brought no discernable market reaction.
• Supply from US tech giant Alphabet appeared to weigh on long end instruments, with steepening seen through global markets.
• On the day the German curve twist steepened modestly, with the UK's bear steepening. Periphery/semi-core EGB spreads closed mixed, with BTPs outperforming.
• As we discuss in our Gilt Week Ahead (link), we hear from BOE's Mann after the cash close Monday; global focus for the week is on the latest US employment and inflation reports.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is down 0.8bps at 2.078%, 5-Yr is down 0.7bps at 2.406%, 10-Yr is down 0.2bps at 2.84%, and 30-Yr is up 1.5bps at 3.527%.
• UK: The 2-Yr yield is up 0.2bps at 3.626%, 5-Yr is up 0.3bps at 3.9%, 10-Yr is up 1.3bps at 4.527%, and 30-Yr is up 1.1bps at 5.346%.
• Italian BTP spread down 1.3bps at 61.1bps / French OAT up 0.5bps at 60.6bps 

MNI FOREX: Renewed Dollar Pessimism, AUDUSD Back to Cycle Highs

• Constructive price action for precious metals and equities on Monday have facilitated a revival of the bearish dollar narrative. The stabilisation for risk sentiment late last week had been a key factor into the recent dollar recovery stalling, and the DXY returning to the prior breakdown point around the 98.00 mark appears to have provided an attractive entry point for those looking to reengage shorts.
• Renewed dollar pessimism appears to have also been bolstered by reports that Chinese officials urged banks to limit purchases of US government bonds and instructed those with high exposure to reduce their positions. The DXY is currently 0.8% lower on the session as we approach the APAC crossover, providing an interesting dynamic as we approach the plethora of tier-one US data this week.
• AUDUSD’s impressive 1.15% rally on Monday has seen spot narrow in on its respective cycle peak at 0.7094. Above this bull trigger, markets will turn their focus to 0.7158, the Feb 2 2023 high and 0.7208, a Fibonacci retracement level.
• The Swiss Franc has matched the Australian dollar as one of the best performing majors on Monday and while USDCHF has not returned to recent extremes, EURCHF has notably dipped to a fresh low of 0.9127, which represents the worst levels since the removal of the floor in 2015.
• USDJPY has posted an impressive 225 pip range following Sunday’s election in Japan. While Takaichi’s victory initially weighed on the yen as markets focused on the concerns surrounding the fiscal trajectory, subsequent remarks from officials on monitoring FX and the broader weakness have assisted the reversal to levels sub-156.00.
• US retail sales data headlines Tuesday’s calendar, while markets will then swiftly turn their focus to US employment (Wed) and US CPI (Fri).

TUESDAY DATA CALENDAR

Date	GMT/Local	Impact	Country	Event
10/02/2026	0700/0800	**	SE	Private Sector Production m/m
10/02/2026	0700/0800	***	NO	CPI Norway
10/02/2026	1000/1000	**	GB	Gilt Outright Auction Result
10/02/2026	1100/0600	**	US	NFIB Small Business Optimism Index
10/02/2026	1200/0700	**	BR	Brazil Final CPI
10/02/2026	-	***	CN	New Loans
10/02/2026	-	***	CN	Money Supply
10/02/2026	-	***	CN	Social Financing
10/02/2026	1330/0830	***	US	Employment Cost Index
10/02/2026	1330/0830	**	US	Import/Export Price Index
10/02/2026	1330/0830	***	US	Retail Sales
10/02/2026	1330/0830	***	US	Retail Sales
10/02/2026	1355/0855	**	US	Redbook Retail Sales Index
10/02/2026	1500/1000	*	US	Business Inventories
10/02/2026	1500/1000	*	US	Business Inventories
10/02/2026	1700/1200	***	US	USDA Crop Estimates - WASDE
10/02/2026	1700/1200		US	Cleveland Fed's Beth Hammack
10/02/2026	1800/1300		US	Dallas Fed's Lorie Logan
10/02/2026	1800/1300	***	US	US Note 03 Year Treasury Auction Result
11/02/2026	0130/0930	***	CN	CPI
11/02/2026	0130/0930	***	CN	Producer Price Index