IRAN: Trump Threatens Tehran: "Next Attack Will Be Far Worse"

• The MNI Chicago PMI (Tuesday) offers an alternative look at manufacturing activity ahead of the ISM manufacturing survey the following week and should be watched after sliding 7.5 points to 36.3 in November with a particularly large drop in new orders.
• Weekly labor: ADP announced the "NER Pulse won’t publish Dec. 30 because the week ending Dec. 13 corresponds to the reference week of the monthly National Employment Report. Main Street Macro and the NER Pulse will resume publication Jan. 13, 2026."
• Jobless claims (Wednesday) meanwhile are a day early again and aside from offering a latest look at the health of the labor market will also give a better indication of continuing claims in the payrolls reference period.
• The final manufacturing PMI (Friday) rounds the week off after the flash release saw it at 51.8 after 52.2 for a five-month low. From the press release: “Production growth dipped to a three-month low as new orders fell for the first time since December 2024.”
• Away from data, the FOMC minutes from the Dec 9-10 meeting will be interesting (Tuesday). Powell delivered a not-so-hawkish 25bp cut but with signs of a still clearly divided committee whilst we watch for discussions around changes in administered rates.
• Powell on the perceived differences in the risks to the outlook on the FOMC: “"The risk is that tariff inflation just turns out to be more and more persistent... I think the other possibility is, less likely, and that is just that the labor market gets tight, or the economy gets tight. And you see, just traditional inflation. I don't see that as particularly likely, but ... again, all across the Committee, people see the picture pretty similarly, but see the risks quite differently. And some people do see the inflation risk. And I wouldn't dismiss that case. But you've got to make an assessment, and this is the assessment."

• Treasuries gained moderate support after Europe returned from extended Christmas holiday, rates holding to narrow band since the Asia session cross-over.
• Currently, TYH6 trades 112-21.5 (+3) vs. 112-23.5 high with key short-term resistance into 112-31, the Dec 18 high. Improved volumes with London back on-line, the 10Y contract trading just over 215k at the moment.
• Curves mildly flatter: 2s10s -.947 at 63.722, 5s30s -.668 at 110.990. 10Y yield -.0156 at 4.1121.
• Cross asset update: Bbg US$ index near flat (BBDXY +.05 at 1201.00); Stocks mildly weaker (SPX emini -13.5 at 6965.75); Gold off last Friday's record high of 4533.21 to 4449.00 (down appr -84.0).
• Today's economic data limited to Pending Home Sales (1000ET) and Dallas Fed Mfg Activity (1030ET).
• Main focus on Tuesday's data schedule including the FOMC meeting minutes for the December meeting. Powell delivered a not-so-hawkish 25bp cut but with signs of a still clearly divided committee whilst we watch for discussions around changes in administered rates.
• In addition to FHFA housing prices and regional Fed data tomorrow, markets see latest MNI Chicago PMI release. Note: ADP announced the "NER Pulse won’t publish Dec. 30 because the week ending Dec. 13 corresponds to the reference week of the monthly National Employment Report. Main Street Macro and the NER Pulse will resume publication Jan. 13, 2026."

OI data points to a mix of net long setting and short cover as SOFR futures ticked higher on Friday. Net long setting in the reds provided the most meaningful net pack OI swing.