STIR: Next Fed Cut Fully Priced For July, ISM Services In Focus
Feb-05 11:31
- Fed Funds implied rates have extended yesterday’s decline along with broader FI rallies. Expect continued sensitivity to Trump headlines but today’s scheduled macro focus is on ISM Services at 1000ET (after its priced paid series jumped 5.9pts to 64.4 in December for the highest since Feb 2023) plus any spillover from Treasury’s QRA at 0830ET.
- We also have three Fedspeakers scheduled today but only Barkin last spoke prior to Trump’s inauguration. Recent context below.
- Cumulative cuts from 4.33% effective: 4.5bp Mar, 11.5bp May, 22bp Jun, 28bp Jul and 47bp Dec.
- Vice Chair Jefferson (permanent voter) spoke late yesterday for the first time since early October. He appeared broadly in line with the median member: “I continue to see a gradual reduction in the level of monetary policy restraint placed on the economy as we move toward a more neutral stance as the most likely outcome.That said, I do not think we need to be in a hurry to change our stance.”
- 0730ET – Barkin (non-voter) on Bloomberg TV (no text). He last spoke Jan 15, saying latest CPI data suggest inflation is still declining but the Fed should remain restrictive until inflation returns to 2%. He was encouraged by the drop in the US unemployment rate in December. It’s currently difficult to build Trump policies into forecasts.
- 0900ET – Barkin in fireside chat at Conference Board “2025: A Year In Preview” (no text)
- 1430ET – Goolsbee (’25 voter, text only) at automotive conference (text only). He has already spoken this week, saying the Fed has to be more careful with how fast to cut rates – of note for the most dovish member of the committee.
- 1500ET – Bowman (permanent voter) gives update on economy & bank regulation (text only). One of the most hawkish members of the FOMC, she said Jan 31 that she wants to see inflation progress before adjusting rates and that it’s unlikely rates are exerting “meaningful restraint”.
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BONDS: Bund/Schatz Swap related trade
Jan-06 11:26
Bund/Schatz Swap related trade:
- DUH5 7.95k at 106.73 (suggest Payer).
- RXH5 1.36k at 13.40 (suggest Receiver).
GERMAN DATA: Small Regions Suggest Some Upside Risk For National CPI
Jan-06 11:23
December CPI Y/Y prints for Hesse (2.7% vs 2.0% Nov) and Rhineland-Palatinate (3.3% vs 2.7% Nov) clearly accelerated more than consensus expects for the national-level CPI due today (with the median analyst looking for 2.4% Y/Y after 2.2% in Nov). The Hesse M/M print of +0.7% was also notably higher than the national-level consensus of +0.3%.
- This means that there should be some upside risks here, but as Hesse and Rhineland-Palatinate cumulatively only account for 12.6% of the national basket, we can't put too much weight on the apparent beat just yet.
- Also, as the Hesse & R-P statistics agencies both noted some elevated uncertainty with the data on the back of a methodology update, the national agency Destatis might also be less certain on the flash print than usual. Nevertheless, focus lies on that national-level data, scheduled to be released today at 1300GMT/1400CET.
- Final data bringing some more clarity for Hesse and R-P is scheduled for Thursday, alongside releases from a wider set of other states, before the finalised national CPI release on Jan 16.
- Looking at the services prints of the two states already released, developments were mixed - there was some acceleration in Hesse but a lower print than before in Rhineland-Palatinate.
LOOK AHEAD: Monday Data Calendar: Serv/Comp PMIs, Dur/Cap Goods, Tsy 3Y Sale
Jan-06 11:22
- US Data/Speaker Calendar (prior, estimate)
- 6-Jan 0915 Fed Gov Cook eco-outlook at law and economics conf (text, Q&A)
- 6-Jan 0945 S&P Global US Services PMI (58.5, 58.5)
- 6-Jan 0945 S&P Global US Composite PMI (56.6, --)
- 6-Jan 1000 Factory Orders (0.2%, -0.4%); ex-trans (0.1%, --)
- 6-Jan 1000 Durable Goods Orders (-1.1%, -0.4%); ex-trans (-0.1%, 0.3%)
- 6-Jan 1000 Cap Goods Orders Nondef Ex Air (0.7%, 0.1%)
- 6-Jan 1000 Cap Goods Ship Nondef Ex Air (0.5%,0.3%)
- 6-Jan 1130 US Tsy $84B 13W and $72B 26W bill auctions
- 6-Jan 1300 US Tsy $58B 3Y note auction (91282CMF5)
