Core Viewpoint - The U.S. Treasury is expected to maintain a stable debt issuance plan in its upcoming debt financing statement, despite market concerns about potential aggressive policy actions from the Trump administration aimed at lowering long-term yields. Group 1: Debt Issuance Plans - The upcoming "quarterly refinancing" auction is anticipated to remain at $125 billion, marking the longest period of "zero adjustments" since the mid-2010s, with current issuance levels being more than double those from that time [1] - Treasury Secretary Besant hinted at a possible increase in long-term bond issuance, but high long-term yields currently make this strategy less attractive [1] - The Treasury is expected to reaffirm its guidance to maintain stable issuance of interest-bearing debt for "at least the next few quarters" [1] Group 2: Market Reactions and Speculations - There is speculation that the U.S. may follow Europe and Japan in reducing the supply of ultra-long bonds due to weakened demand for 30-year bonds globally [4] - Market focus is on whether the Treasury will lower the auction size of interest-bearing bonds amid strong demand for Treasury bills [4] - Discussions around a "new coordination mechanism" between the Treasury and the Federal Reserve have been reignited, particularly with the potential appointment of Kevin Walsh as the next Fed Chair [5] Group 3: Future Auction Expectations - The upcoming quarterly refinancing auction is set to include $58 billion in 3-year notes, $42 billion in 10-year notes, and $25 billion in 30-year notes [6] - If the Treasury increases interest-bearing bond issuance, the focus may shift to the "belly" of the yield curve (2 to 7 years), while supply of ultra-long bonds may remain unchanged [6] - There is anticipation of an increase in the issuance of Treasury Inflation-Protected Securities (TIPS) in the upcoming quarter, with several banks predicting at least one TIPS auction size increase [6][7] Group 4: Market Sentiment and Pressure - The market expects the Treasury to maintain stable debt issuance policies in the short term, but any subtle changes in language could trigger significant market volatility due to rising deficit pressures and changing government policy objectives [7]

Group 1 - The market reacted calmly to President Trump's nomination of Kevin Walsh as the next Federal Reserve Chairman, which is seen as a victory given Trump's history of creating policy uncertainty [1] - Following the announcement, the S&P 500 index fell approximately 0.4%, and the 10-year Treasury yield slightly increased to 4.242%, indicating a cautious market sentiment [1] - Gold and silver, which had recently risen due to monetary policy uncertainty, experienced significant declines, with silver dropping over 25% [1] Group 2 - Walsh's policy stance is viewed as ambiguous on Wall Street; he is often seen as hawkish but has criticized Powell, leading to mixed interpretations of his future policy direction [2] - Some market participants expect Walsh to implement two to three rate cuts this year, suggesting that his leadership may not differ significantly from other candidates [2] - Walsh advocates for a smaller balance sheet for the Fed and has criticized quantitative easing for inflating asset prices without improving wage growth [2] Group 3 - Analysts suggest that Trump may have chosen a candidate more acceptable to Wall Street to reduce confirmation uncertainties, especially given recent tensions with Powell and ongoing investigations [3] - Trump's nomination of Walsh may signal an attempt to lower resistance while maintaining the independence of the Federal Reserve [3] - There are concerns that Trump may express dissatisfaction with Walsh in the future, similar to his previous criticisms of Powell [3]

Core Viewpoint - The U.S. 30-year Treasury yield has increased by 6 basis points, reaching 4.91%, the highest level since January 21, indicating a steeper yield curve as the market anticipates President Donald Trump's nomination of Kevin Warsh as the next Federal Reserve Chairman [1]. Group 1 - The U.S. 30-year Treasury yield has risen to 4.91%, marking a significant increase [1]. - The yield curve is becoming steeper, reflecting market expectations [1]. - The 2-year Treasury yield remains relatively unchanged, indicating a divergence in market sentiment across different maturities [1].

Core Insights - President Trump has indicated he has a preferred candidate for the new Federal Reserve Chair and plans to announce this choice soon, potentially during the week of January 26 [2] - Wolfe Research highlights a significant time window for the announcement, particularly during the FOMC meeting, suggesting a strategic move to shift market focus away from the Fed's lack of rate cuts [2] - The announcement is expected to fill the vacancy left by the Fed Governor's seat, which will be vacated on January 31, with a nomination likely before the March FOMC meeting [2] Candidate Analysis - Market reactions suggest that Rick Rieder from BlackRock and Kevin Hassett are viewed as relatively dovish candidates, while Christopher Waller and Kevin Warsh are seen as more hawkish [3] - Hassett's potential appointment could steepen the yield curve, whereas Warsh's nomination might flatten it [3] - Wolfe Research indicates that Hassett has a higher probability of being nominated than the current market prediction of 6%, although there is no perfect candidate that meets all of Trump's criteria [3]

Core Viewpoint - Pacific Investment Management Company (PIMCO) remains optimistic about Japanese 30-year government bonds despite recent market sell-offs, indicating that the current yield levels present attractive investment opportunities [2]. Group 1: Investment Sentiment - PIMCO's positive outlook aligns with a growing number of investors who find the Japanese bond market appealing [2]. - The recent sell-off resulted in a market value loss of approximately $41 billion, driven by concerns over the fiscal expansion of Prime Minister Fumio Kishida's government [2]. - PIMCO emphasizes that higher yields could lead to capital gains during interest rate declines and help hedge against economic shocks, stock market volatility, or significant yen appreciation [2]. Group 2: Yield Curve and Policy Outlook - PIMCO prefers the long end of the yield curve, specifically the 30-year Japanese government bonds, citing steepness and limited issuance incentives from the Japanese Ministry of Finance [2]. - The firm anticipates that the Bank of Japan will gradually normalize its policy, potentially raising the policy rate by 25 to 50 basis points within the next year, targeting a range of 1% to 1.25% [3]. - The current 10-year Japanese government bond yield is approximately 2.235%, and PIMCO expects it to remain around this level [3]. Group 3: Global Context and Risks - The current currency hedging costs are favorable for global investors, enhancing the relative attractiveness of Japanese bonds compared to similar global assets [3]. - Potential risks that could push yields beyond the expected range include a weaker yen or unexpected acceleration in inflation, which may prompt quicker or larger policy rate hikes [3]. - The more expansionary fiscal stance of the Kishida government introduces additional uncertainty, although financial market pressures are expected to limit excessive policy expansion [3]. Group 4: Broader Market Insights - The short-term outlook for Chinese bonds remains positive, particularly for longer-term government bonds [4]. - Strong current account balances and returning capital inflows are expected to support the gradual appreciation of the renminbi against the US dollar and other major currencies [4]. - Australia's long-term neutral cash rate is projected to be close to 3%, with policy rates stabilizing around this level after inflation stabilizes and economic growth returns to trend [4].

Investment Rating - The report does not explicitly provide an investment rating for the industry [1]. Core Insights - The potential candidates for the next Federal Reserve Chair include Kevin Hassett, Kevin Warsh, and Scott Bessent, with Warsh currently seen as the frontrunner due to his previous experience and connections in Washington [5][28]. - The market has reacted to the speculation surrounding the Fed Chair nomination, with a notable shift in the U.S. Treasury yield curve following President Trump's comments about Hassett [20]. - The report highlights the importance of central bank independence, suggesting that a more politically influenced Fed could lead to increased economic volatility [22][24]. Summary by Sections - **Candidates for Fed Chair**: Kevin Hassett's chances have diminished due to his close ties with the Trump administration and his support for the investigation into Jerome Powell. Kevin Warsh is favored due to his experience and critical views on recent Fed policies [13][28]. - **Market Reactions**: Following the speculation about the Fed Chair nomination, the Treasury yield curve experienced a significant upward shift, indicating market adjustments to the potential changes in monetary policy [20]. - **Central Bank Independence**: The report emphasizes that central banks with greater operational independence tend to maintain lower inflation rates and more stable economic growth, contrasting with more politicized institutions [22][24].

Core Viewpoint - US Treasury bonds are under pressure, maintaining a downward trend during trading hours, influenced by geopolitical tensions and market risk aversion [1][4]. Group 1: Market Trends - The long end of the US Treasury yield curve steepened, with yields rising by up to 8 basis points compared to the previous trading day [1][4]. - The 2-year/10-year yield spread widened by 6 basis points, while the 5-year/30-year spread increased by 4.5 basis points [1][4]. Group 2: Yield Data - As of 3:05 PM Eastern Time, the yields were reported as follows: 2-year at 3.5947%, 5-year at 3.854%, 10-year at 4.2906%, and 30-year at 4.9179% [3][6]. - The yield spread between 5-year and 30-year bonds was 106.21 basis points, and the spread between 2-year and 10-year bonds was 69.37 basis points [3][6]. Group 3: Trading Activity - Strong demand for 5-year and 10-year Treasury bonds helped prevent a more significant sell-off, with notable purchases totaling approximately $12.5 million/DV01 [5]. - The S&P 500 index fell by about 2%, while gold prices rose nearly 2%, reflecting market reactions to heightened tensions between the US and Europe [5].

Group 1 - The current trading price of spot silver is around $90.68 per ounce, down 1.83% from the opening price of $92.38, with a high of $92.78 and a low of $90.21, indicating a bearish short-term trend [1] - Strong economic data released on Thursday, including a decrease in initial jobless claims and a 0.4% increase in import prices, led to a rise in U.S. Treasury yields, with the 10-year yield increasing by 1.6 basis points to 4.156% [2] - The market's optimistic outlook on the economy is reflected in the positive spread of 59.6 basis points between the 2-year and 10-year Treasury yields, suggesting a cooling of expectations for Federal Reserve rate cuts [2] Group 2 - The recent price action in silver shows a critical resistance level between $93 and $94, with a potential for significant pullback if this level is not breached [2] - Key support for silver is identified in the $86 to $87 range, with further potential declines expected if this support fails, possibly leading to prices dropping below $80 [2] - The market is advised to monitor support levels at $78 and $74-$73 for potential stabilization before any upward movement [2]

Group 1 - Ed Devlin, a former executive at PIMCO and current head of a Toronto hedge fund, is increasing bets on a steepening yield curve, anticipating that if the Trump administration loses a tariff case, the U.S. will be forced to increase borrowing, thereby raising the supply of long-term U.S. Treasuries [1] - The U.S. Supreme Court is expected to rule on a challenge to President Trump's trade policies, which could impact the legal basis for tariffs imposed under the International Emergency Economic Powers Act (IEEPA) [1] - If the court strikes down the tariff basis, the U.S. Treasury could face a significant shortfall, as last year's budget deficit narrowed to $1.67 trillion, largely due to increased tariff revenues of $264 billion [1] Group 2 - Devlin believes that alternative tax measures to fill the potential revenue gap will be politically difficult to implement, especially with midterm elections approaching and voters sensitive to inflation and living costs [1] - The market may be underestimating the scale of U.S. Treasury supply for a considerable part of this year, which could lead to an increase in long-term yields or at least a slower decline compared to short-term rates, thus steepening the yield curve [1] - The yield curve has already steepened significantly since Trump's first year in office, with the spread between two-year and ten-year Treasury yields widening to 64 basis points, up from approximately 30 basis points at the time of his inauguration [1]

Core Viewpoint - US Treasury bonds mostly rose on Wednesday despite busy corporate new debt issuance, driven by weaker-than-expected ADP private sector employment data, which supported bond strength [1][2]. Group 1: Treasury Yield Movements - Long-term yields fell by nearly 5 basis points, while short-term yields remained unchanged, leading to a narrowing of the yield spreads between 2-year/10-year and 5-year/30-year bonds by approximately 4 basis points and 3 basis points, respectively [1][2]. - As of 3:30 PM Eastern Time, the yields were reported as follows: 2-year at 3.4653%, 5-year at 3.6924%, 10-year at 4.1377%, and 30-year at 4.8182% [3]. Group 2: Employment Data Impact - The ADP employment data for December showed an increase of 41,000 jobs in the private sector, which was below the expected increase of 50,000 jobs, contributing to the rise in Treasury futures [1][2]. Group 3: Corporate Debt Issuance - The total amount of new corporate debt issuance this week reached a non-pandemic high, with 11 issuers collectively raising $16.35 billion in new investment-grade bonds [1][2].