UBS Projects Mixed Market Outlook for 2025 Amid Trump Policy Uncertainty 
EUR/USD Smashes 1.1660 as ADP Jobs Massacre Crushes the Dollar 
Global Markets React to Strong U.S. Jobs Data and Rising Yields 
Moldova Criticizes Russia Amid Transdniestria Energy Crisis 
US Futures Rise as Investors Eye Earnings, Inflation Data, and Wildfire Impacts 
Lithium Market Poised for Recovery Amid Supply Cuts and Rising Demand 
UBS Predicts Potential Fed Rate Cut Amid Strong US Economic Data 
US Gas Market Poised for Supercycle: Bernstein Analysts 
China's Refining Industry Faces Major Shakeup Amid Challenges 
Goldman Predicts 50% Odds of 10% U.S. Tariff on Copper by Q1 Close 
Oil Prices Dip Slightly Amid Focus on Russian Sanctions and U.S. Inflation Data 
U.S. Stocks vs. Bonds: Are Diverging Valuations Signaling a Shift? 
How desperate the market currently is for relevant news was illustrated by the reaction to a meeting between the US President Donald Trump, Treasury Secretary Steven Mnuchin and Fed chair Jay Powell yesterday. The decisive headline for the market was that amongst other subjects the three had discussed the dollar strength and its effects on the industry. The US currency immediately eased in reaction to the news, despite the fact that it contained no new information.
The US Treasury curve has bearishly steepened, supported by increased optimism that the US and China are progressing toward signing Phase 1 of a trade deal, and a Fed that believes that the current stance of monetary policy is likely to be appropriate for the medium term. Over the period, 2-, 5-, 10-, and 30-year yields rose 5bp, 10bp, 11bp, and 10bp, respectively.
Though the experience of other insurance easing cycles and modestly long investor positioning suggest risks to higher yields, the Fed’s shift toward average inflation targeting and still-high recession risks limit the scope for rates to reprice: stay neutral on duration. We review the latest round of Fed reinvestment purchases. The fall in implieds has outpaced liquidity improvement, cover 3mx2Y shorts.
Trade Updates:
Take profits on short 3Mx2Y ATMF swaption straddles
Implieds have fallen across tails, outpacing the renormalization in liquidity
conditions, and our fair value model suggests the upper left no longer looks cheap
Cover short $500mn notional of 3Mx2YATMF straddles (notification date 1/27/20, maturity 1/31/22, ATMF strike @ 1.60%, premium 52.5c). This trade requires frequent delta rebalancing (Fixed Income Markets Weekly 10/25/19). P/L since inception: +3.6abp.
Stay received EUR/USD 3Mx3M OIS/OIS basis
Receive $50kDV013Mx3M(swapstart:12/09/19,swapend:03/09/20) EUR/USD OIS/OIS basis at -59bp; Fixed Income Markets Weekly; 9/6/19. P/L since inception: -14.4bp. Courtesy: JPM
