Weak consumption trajectory into Q1!

Treasuries pared earlier losses after the December income report showed cooling in income, a drop in spending, and deceleration in the annual measures of inflation. The numbers support the well-expected step down in the FOMC’s rate hikes to 25 bps on February 1. However, the headline and core rates were at 5.0% y/y and .44% y/y, respectively, well above the 2% target, and that should engender a hawkish message from Chair Powell. The 2-year yield is up 1.6 bps at 4.199% versus 4.219% earlier. T

The 10-year yield is 3.3 bps higher at 3.527% and was at 3.56% overnight. The curve is slightly steeper at -67.3 bps from -69 bps. Wall Street futures are posting modest losses with the US100 down -0.5% with the USA500 off -0.33%, while the US30 is fractionally lower. Intel’s weak earnings and a warning of future losses rippled across the tech sector and cast a pall over the market. The USDIndex continues to chop in the 101.90 area on the expectation for a step down, but the potential for a hawkish stance from Powell.

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Stuart Cowell

Head Market Analyst

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