Sitting at the Intersection of Soft Funding January 10, 2026 12:58 AM GMT US Rates Strategy | North America Funding markets sit at the intersection of more than ample cash in the system and smaller collateral in need of financing, pointing to further repo normalization. With this carrying potential for lower EFFR prints, we think FFF6 longs offer compelling value after the market impact of a large futures block. Key Takeaways Please add me to your distribution list. M Idea Morgan Stanley & Co. LLC Martin W ...

Summary of Key Points from the December FOMC Meeting Industry Overview - The document primarily discusses the Federal Reserve's monetary policy decisions and economic outlook, impacting the financial services and investment banking sectors. Core Points and Arguments 1. **Rate Cut Announcement**: The Federal Reserve reduced the target range for the federal funds rate by 25 basis points to 3.5-3.75% with a focus on data dependency for future adjustments [6][9][10] 2. **Dissenting Opinions**: There were three dissents during the meeting; two members favored holding rates steady while one member advocated for a larger 50 basis point cut [6][20] 3. **Labor Market Concerns**: Chair Powell indicated that the labor market is showing signs of cooling, with unemployment rising by 0.3 percentage points since June [26][30] 4. **Inflation Outlook**: The Fed noted a slight decrease in inflation pressures, particularly in services, while goods inflation remains influenced by tariffs [28][29] 5. **Future Rate Cuts**: The Fed is expected to consider further cuts in January and April, contingent on labor market stability and inflation trends [9][30][34] 6. **Economic Projections**: The Fed upgraded its growth projections for 2026 and 2027, reflecting a more optimistic outlook despite ongoing risks [35][37] 7. **Reserve Management Purchases**: The Fed will initiate purchases of Treasury bills at a pace of $40 billion per month to maintain ample reserves, which is distinct from quantitative easing [12][15][77] 8. **Market Reactions**: The announcement led to a positive response in agency mortgages and a rally in Treasury yields, indicating market confidence in the Fed's approach [58][97] Additional Important Content 1. **Data Dependency**: The Fed emphasized a return to a data-dependent approach for future rate adjustments, raising the bar for further cuts [16][24] 2. **Unemployment Rate**: The unemployment rate is now viewed as being above the longer-run estimate, which could signal potential concerns for future economic stability [18][19] 3. **Balance of Risks**: The Fed sees risks to growth and inflation as more balanced than in previous assessments, indicating a shift in outlook among FOMC members [37][39] 4. **Trade Ideas**: Recommendations for investors include maintaining long positions in UST 5-year notes and entering buy contracts for FFJ6, reflecting expectations of future rate cuts [69][75] 5. **Housing Market Challenges**: Powell acknowledged ongoing challenges in the housing market, suggesting that a 25 basis point rate cut may not significantly impact housing demand due to low supply and existing low-rate mortgages [101]

December 11, 2025 01:28 AM GMT Federal Reserve Monitor | North America December FOMC Reaction: Well Positioned to Wait and See How the Economy Evolves The Fed reduced the funds rate by 25bp but signaled that future adjustments will be more data dependent, as we expected. We continue to expect further cuts in January and April, but if the labor market stabilizes, then future cuts may not come until inflation decelerates. Key expectations | M December 11, 2025 01:28 AM GMT December FOMC Reaction: | Chief US E ...