STIR: US Rates Still Reflecting Soft Labor Data, VC Jefferson On The Docket
Feb-06 11:36
- Fed Funds implied have lifted off yesterday’s lows (+3bp for 2H26 meetings), reversing the late additional move lower seen as the crypto sell-off extended, but still hold most of the dovish slide on weakness across four separate labor indicators and tech-led equity weakness.
- Cumulative cuts from 3.64% effective: 4.5bp Mar, 10.5bp Apr, 25bp Jun (vs 18bp pre-Challenger, the first of the releases), 34.5bp Jul, 46.5bp Sep (vs 38bp), 52bp Oct and 58bp Dec (vs 50bp).
- SOFR futures meanwhile are 2 ticks lower for the H6 but otherwise little changed on the day, although have also pulled back off highs.
- It holds yesterday’s 8.5bp slide in the terminal implied yield to 3.125% (Z6) to its lowest close since Jan 7.
- Today’s only scheduled Fedspeak is from Vice Chair Jefferson (voter) on the economic outlook and supply-side inflation dynamics at 1200ET (text + moderated Q&A). He tends not to speak publicly often although he did last make an appearance on Jan 16 arguing that policy is well positioned. He sees unemployment holding steady through 2026 whilst core goods prices are up but the tariff hit won’t be long lasting. We suspect he was one of four dots along with Chair Powell who pencilled in two cuts in 2026 (vs the median one) back at the December SEP.
- The latest on the DoJ-Powell subpoenas holding up the Warsh confirmation (Bloomberg link): “Senate Republicans, who have broadly applauded Trump’s nomination of Kevin Warsh to lead the Fed, increasingly view the probe as an unnecessary roadblock in a confirmation process that would otherwise be uneventful.”
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US 10YR FUTURE TECHS: (H6) Still Trading Above Support
Jan-07 11:32
- RES 4: 113-00+ 61.8% retracement of the Nov 25 - Dec 10 bear leg
- RES 3: 112-31 High Dec 18 and key short-term resistance
- RES 2: 112-25+ High Dec 30 / 31
- RES 1: 112-19+ 50 -day EMA
- PRICE: 112-17 @ 11:17 GMT Jan 7
- SUP 1: 112-01+/111-29 Low Dec 23 / 10 and the bear trigger
- SUP 2: 111-19 1.236 proj of the Oct 17 - Nov 5 - 25 price swing
- SUP 3: 111-11 1.382 proj of the Oct 17 - Nov 5 - 25 price swing
- SUP 4: 111-00 Round number support
Treasuries continue to trade above key support at 111-29, the Dec 10 low and bear trigger. The trend set-up remains bearish and a breach of 111-29 would confirm a resumption of the bear cycle. This would open 111-19 initially, a Fibonacci projection. On the upside, key short-term resistance is unchanged at 112-31, the Dec 18 high, where a break would undermine a bear theme and signal scope for a stronger recovery instead.
STIR: Holding Two Fed 2026 Cuts From June Ahead Of Important US Data
Jan-07 11:29
- Fed Funds implied rates are 0.5bp higher on the day for the late January FOMC meeting but 0.5-1bp lower for 2H26 meetings as they follow European rates after inflation data.
- It holds yesterday’s trimming of rate cut expectations for the remaining meetings under Fed Chair Powell (cumulative 17.5bp Apr) despite downward revisions for the S&P Global US services PMI.
- Cumulative cuts from 3.64% effective: 4bp Jan, 12.5bp Mar, 17.5bp Apr, 32.5bp Jun, 49.5bp Sep and 59.5bp Dec.
- SOFR futures are up to 2.5 ticks firmer looking out to end-2027 contracts vs 4.5 ticks for Euribor, with the SOFR terminal implied yield of 3.10% (H7) holding recent ranges.
- Today’s calendar focus is on data with monthly ADP at 0815ET before ISM Services, JOLTS and factory orders all at 1000ET.
- The Fedspeak schedule is light, with VC Supervision Bowman (voter) on banking supervision and regulation (1610ET, text + Q&A).
LOOK AHEAD: Wednesday Data Calendar: ADP, ISM Services, JOLTS, Fed VC Bowman
Jan-07 11:25
- US Data/Speaker Calendar (prior, estimate). All times ET
- 01/07 0700 MBA Mortgage Applications
- 01/07 0815 ADP Employment Change (-32k, 50k)
- 01/07 0830 Chicago Fed CARTS
- 01/07 1000 ISM Services Index (52.6, 52.2), Prices Paid (65.4, 64.9)
- 01/07 1000 JOLTS Job Openings (7.67M, 7.648M), Quits (2.941M, 2.995M)
- 01/07 1000 Factory Orders (0.2%, -1.2%), Durable Goods Orders (-2.2%, -2.2%)
- 01/07 1130 US Tsy $69B 17W bill auction
- 01/07 1430 Pres Trump signs executive orders, closed press
- 01/07 1610 Fed VC Bowman on bank supervision/regulation (text, Q&A)
- Source: Bloomberg Finance L.P. / MNI
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