US FISCAL: Trump Tax Priorities Takes Shape With House Leadership Meeting
President Trump has laid out his tax priorities with Republican House Representatives, per multiple news outlets citing the White House press secretary. They are:
- Renewing the TCJA tax cuts
- Eliminating tax on tips, Social Security, and overtime pay
- Cutting taxes on products that are made in the US
- Adjusting the SALT (state and local tax) cap
- Eliminating tax breaks for sports team owners
- Closing the "carried interest" loophole
There are plenty of details yet to be seen about several of these propositions, but Trump's biggest tax cut proposals in the campaign had been the first three (TCJA, various tax eliminations, corporate tax cuts for domestic producers), which over 10 years would cost $6-7T ($3.4T making TCJA permanent plus potential $1T for estate/business tax cut permanence, $1.2T Soc Sec, $120B tipping income tax/$200B if also exempting payroll tax; $750B overtime tax; $360B lowering corporate rate for domestic producers to 15% - all estimates from the Tax Foundation). We assume that Trump is making the case for the TCJA cuts to be permanent though some fiscal hawks have pushed for them to be only temporary.
- The SALT adjustment is a question here, as restoration of the full deduction would cost $1T over 10 years, but one that Trump will probably need to include to get some members of Congress on board - doubling the cap for married couples would add $100-200B to the bill.
- Some items from the campaign trail are missing, for example an itemized deduction for auto loan interest, though that was "only" due to cost $60B, and it may yet be included in the final proposal.
- The main surprises here are the latter two: closing the "carried interest" loophole which applies mainly to private equity and investment managers, but would only cut the deficit by $11B over 10 years (around $1B per year) per CBO estimates, while the impact of the sports team owner tax break elimination is unclear.
- There's no word on the revenue side of the equation - particularly on tariffs - and cutting expenditure in the budget, which will be essential to closing the gap implied by the tax cuts and get the bill through the reconciliation process. Axios reported that Speaker Mike Johnson, Majority Leader Steve Scalise and Majority Whip Tom Emmer were in attendance, among others, though we haven't heard anything further.
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AUDUSD TECHS: Tests Resistance At The 20-Day EMA
- RES 4: 0.6471 High Dec 9
- RES 3: 0.6400 50-day EMA
- RES 2: 0.6341 High Dec 18
- RES 1: 0.6273/0.6302 20-day EMA / High Jan 6
- PRICE: 0.6239 @ 20:02 GMT Jan 7
- SUP 1: 0.6179 Low Dec 31
- SUP 3: 0.6158 1.236 proj of the Sep 30 - Nov 6 - 7 price swing
- SUP 3: 0.6100 Round number support
- SUP 4: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
Despite Monday’s gains, a bearish trend condition in AUDUSD remains intact. Recent weakness maintains the price sequence of lower lows and lower highs. Note that moving average studies are in a bear-mode position too, highlighting a dominant downtrend. Scope is seen for an extension towards 0.6158 next, a Fibonacci projection. Initial firm resistance to monitor is 0.6276, 20-day EMA. It has been pierced. The 50-day EMA is at 0.6400.
JGB TECHS: (H5) Bear Cycle Extends
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 143.39/144.48 - High Dec 9 High Nov 11
- PRICE: 141.36 @ 19:44 GMT Jan 07
- SUP 1: 141.05 - 2.000 proj of the Aug 6 - Sep 3 - 9 price swing
- SUP 2: 140.54 - 2.236 proj of the Aug 6 - Sep 3 - 9 price swing
- SUP 3: 140-00 - Round number support
A clear downtrend in JGB futures remains intact and this week’s fresh cycle lows, reinforce this condition. Note too that moving average studies on the continuation chart are in a bear-mode setup, highlighting a clear downtrend. The move down exposes 141.05, a Fibonacci projection point on the continuation chart. For bulls, a reversal would open 143.39 and 144.48, the Dec 9 and Nov 11 high respectively.
US TSYS: Late SOFR/Treasury Option Roundup: 2025 Rate Cut Pricing Evaporating
Mixed SOFR/Treasury wing trades reported Tuesday in addition to some chunky strangle sales as underlying futures drifted lower while projected rate cuts through mid-2025 continued to recede vs. this morning levels (*) as follows: Jan'25 at -1.2bp (-2.3bp), Mar'25 -10.2bp (-10.9bp), May'25 -14.7bp (-16.3bp), Jun'25 -23.2bp (-24.2bp).
- SOFR Options:
- -4,000 SFRF5 95.81 puts, 3.5 ref 95.79
- +10,000 SFRH5 96.12/96.37 call spds even over 20,000 95.56 puts
- +5,000 SFRF5 95.68 puts, 0.5 vs. 95.775/0.10%
- +10,000 0QJ5 95.50 puts, 7.5 vs. 96.005/0.20%
- +10,000 SFRM5/SFRU5 97.00 call spds, 4.25
- -4,000 SFRZ5 96.25/96.75 call spds vs 95.37 puts, 0.5
- 5,000 0QF5 95.87/96.12 strangles
- -10,000 SFRM5 95.43/95.56 put spds, 075 ref 95.92
- +5,000 SFRM5 95.43/95.56 put spds vs SFRZ5 95.25/95.37 put spds 1.5 net
- +5,000 SFRU5 98.00 calls 3.0 ref 95.985
- +5,000 SFRH5 95.81 puts, 9.0 vs. 95.79/0.25%
- -2,000 SFRU5 95.75 straddles vs. 96.12 calls, 31.0 net
- +10,000 SFRH5 95.87 puts, 12.5 ref 95.805
- 1,500 0QF5 96.00/96.18 2x1 put spds ref 96.015
- +15,000 0QZ5 97.00/98.00 call spds 9.5 vs. 95.96/0.14%
- 4,000 0QH5 96.75 calls ref 96.025
- 2,500 SFRH5 95.81/95.87/95.93 call flys ref 95.81
- Treasury Options:
- -10,750 TYH5 108/108.5 strangles, 144 ref 108-07.5
- 7,000 TYG5 108 puts, 33 ref 108-02, total volume over 20.3k
- 5,000 USH5 106/110 put spds ref 112-23
- 2,500 TYG5 111/114.75 1x2 call spds ref 108-16
- 2,900 TUH5 103.25/103.62/103.87/104.25 call condors ref 102-24.25
- 3,000 TYH5 108.5 straddles ref 108-16.5
- 2,300 wk2 TY 109/109.5/110 call flys ref 108-15.5 (expire Jan 10)
- over 11,000 wk3 FV 107.25/107.5/107.75 call flys ref 106-03.75 (expire Jan 17)
- 5,600 FVG5 106.75 calls ref 106-04
- 2,100 TYH5 105/107/109 put flys ref 108-18.5
- 2,000 TYH5 109/110/111 call flys ref 108-16.5
