US Treasury Bond Futures Fall to New Lows

INTEREST RATE MARKET FUTURES

Yesterday Federal Reserve governor Lisa Cook said it will be appropriate to cut interest rates to neutral over time.

The March U.S. 30-year Treasury bond futures declined to the lowest level since November 17, 2023.

The U.S. Treasury will auction 10-year notes today.

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.

It also appears that the FOMC will keep policies on hold at the March 19, 2025 meeting as well.

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.

Futures at the long end of the yield curve are likely to trend lower, while futures at the front end of the yield curve are likely to trade sideways.

STOCK INDEX FUTURES

Stock index futures are higher.

The 9:00 central time December ISM services index is expected to be 53.2.

The 9:00 November Job Openings and Labor Turnover survey (JOLTS) is anticipated to be 7.650 million.

Investors are closely watching the Federal Reserve’s 2025 policy outlook, focusing on the likelihood of fewer interest rate cuts. This bearish influence is likely to be offset by prospects of the U.S. economy growing faster than the consensus view.

CURRENCY FUTURES

The U.S. dollar Index is a little lower. However, the greenback is likely to recover and trade higher on the day.

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

Euro zone households increased their inflation expectations in November, according to a European Central Bank poll.

The median respondent in the ECB’s Consumer Expectations Survey expected prices will increase by 2.6% over the next 12 months. This marks the second increase in a row. The expectation for three years ahead was increased to 2.4%, which is the highest level since July, from 2.1%.

Activity in the U.K. construction industry grew at the slowest rate in six months in December, according to a survey.

The S&P Global Purchasing Managers’ Index for the construction sector declined to 53.3 in December from November’s 55.2, which was the lowest since June, 2024.

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

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