Dec US 30Yr Treasury Bond Futures Lower

INTEREST RATE MARKET FUTURES

The December U.S. 30-year Treasury bond futures are lower and remain near the lowest level since November 2023.

The yield on the 10-year U.S. Treasury note remained near 4.60% and is close to a  seven-month high as markets continue to assess the extent of interest rate cuts the Federal Reserve may implement in 2025.

The U.S. Treasury will auction three-year notes today.

Lisa Cook of the Federal Reserve will speak at 8:15.

There is a 91% probability that the Federal Open Market Committee will keep its fed funds rate unchanged at 4.25% – 4.50% at its January 29, 2025 policy meeting, and there is a 9% chance of a 25 basis point reduction.

There is a 53% probability that the FOMC will keep its key rate unchanged at its March 19 meeting, and there is a 47% probability that the FOMC will lower its fed funds rate.

The U.S. economy is likely to perform well, which may cause the FOMC to be slower to add accommodation in 2025 than the consensus view.

The March 30-year U.S. Treasury bond futures are likely to remain relatively weak compared to futures at the short end of the yield curve.

STOCK INDEX FUTURES

Stock index futures are higher across the board.

Some of the strength today can be linked to reports that the Trump administration is considering softer tariff measures. The Washington Post reported that Trump’s aides are exploring tariff plans that would be applied to every country but would only cover critical imports. This is a major shift from his plans of universal tariffs during the presidential campaign.

The 8:45 central time December PMI composite final is expected to be 56.6.

The 9:00 November factory orders report is anticipated to show a 0.4% decline.

Investors are closely watching the Federal Reserve’s 2025 policy outlook.

Stock index futures are likely to be supported by ideas that the U.S. economy will grow faster than the consensus view.

CURRENCY FUTURES

The U.S. dollar index is lower today, retreating from the recent two-year highs. Today’s decline is due to reports that the new Trump administration is considering softer tariff measures, which was the catalyst for today’s flight to quality long liquidation.

Traders will closely monitor speeches from Federal Reserve officials this week and the minutes of the Federal Open Market Committee’s December 18 policy meeting for insights into the central bank’s policy direction.

Since financial futures markets have fully priced just one interest rate reduction in the fed funds rate this year, it is likely that despite today’s declines in the greenback, the main trend is higher.

In the longer term, the fundamentals and technicals remain supportive to the U.S. dollar, and higher prices are likely.

Morale among investors in the euro zone declined to the lowest level in more than a year in January.

The Sentix index for the euro zone fell to -17.7 in January, which is down from -17.5 in December, marking the lowest level since November 2023. Despite this drop, the decline was not as steep as the -18.0 predicted by analysts.

December data from the S&P Global U.K. Services PMI indicated a subdued end to 2024 in the U.K. Weak demand and higher payroll costs led to the steepest decline in service sector employment since January 2021.

The fundamentals and technicals remain bearish for the euro currency and the British pound, and lower prices are likely.

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