US: Speaker Johnson Eyes Tuesday Vote On Government Funding Stopgap
Mar-06 14:06
House Speaker Mike Johnson (R-LA) is expected to hold a Tuesday vote on a Continuing Resolution to extend government funding through September 30. The funding bill, which could be released on Friday, is expected to be 'clean', without additional policy riders and continuing funding at Biden administration-era levels.
- Trump met yesterday with a group of fiscal hawks at the White House to lock down their support for the measure. Two members of the House Freedom Caucus – the bloc of disruptors who have repeatedly voted down short-term government funding measures – told reporters they would back the measure and indicated that other conservatives will get on board.
- Trump wrote on Truth Social after the meeting: “Government funding runs out next week, and Democrats are threatening to shut down the Government - But I am working with the GREAT House Republicans on a Continuing Resolution to fund the Government until September to give us some needed time to work on our Agenda. Conservatives will love this Bill, because it sets us up to cut Taxes and Spending in Reconciliation, all while effectively FREEZING Spending this year...”
- Although bettors consider the probability of a shutdown in 2025 high, if Johnson can pass the measure through his chamber, there is likely to be sufficient Democrat support in the Senate to clear the filibuster.
Figure 1: Government Shutdown in 2025, %Implied Probability
Source: Polymarket
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STIR: Effective Fed Funds Rate
Feb-04 14:05
- FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $94B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $264B
- Earlier Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.35% (-0.03), volume: $2.413T
- Broad General Collateral Rate (BGCR): 4.33% (-0.01), volume: $913B
- Tri-Party General Collateral Rate (TCR): 4.33% (-0.01), volume: $890B
- (rate, volume levels reflect prior session)
FOREX: CADJPY Recovery Bolstered by Hold of Trendline Support
Feb-04 14:01
- Following in the footsteps of Mexico’s administration, Canadian PM Justin Trudeau announced an agreement with the US, circumventing the immediate implementation of 25% tariffs.
- CADJPY has moderately outperformed following the sharp CAD recovery from Monday’s lows, extending the bounce to 2.93% in recent trade, and up 0.68% during today’s session.
- The recovery has been bolstered by the cross holding trendline support on Monday, drawn from the 2020 lows. The trendline intersects close to the psychological 105.00 handle, which has proved pivotal on a closing basis over the last 18 months.
- An extension of strength today has narrowed the gap to both 20- and 50-day EMAs, currently intersecting at 108.13 and 108.52 respectively.
- ING believe markets are not fully pricing out the tariff threat just yet. Primarily because of the short delay, but also because headlines have provided a higher degree of uncertainty and unpredictability that harms high-beta currencies. This is due to direct protectionism exposures and due to risk sentiment implications.
- However, they highlight a cross like AUD/CAD should trade sharply lower given Canada has dodged tariffs and China has not, but it is only 0.5% lower on the day. That signals markets are pricing in a good chance that the US and China will also strike a deal and delay tariffs.
BONDS: Core Bonds are seeing broader selling
Feb-04 13:55
- Some selling in Govies across both sides of the Pond, and while the Volume in Tnotes is fairly subdued, the German Bund sees a notable session in terms of Volumes.
- Initial support in Bund is seen at 132.34, Monday's opening gap.
