The US economy has proven resilient in yet another round of data releases. Also, a closer look at US politics.
US Economics – Few signs of weakness
The US economy has proven resilient in yet another round of data releases. NFP rose 143k on Friday, below 175k consensus survey, but wages rose quicker at 0.5% MoM and the unemployment rate fell more to 4.0% than expected. Activity surveys were mixed, as ISM services gave back Decembers strength but still sat at an expansionary 52.8. The ISM manufacturing survey continued to accelerate and reached expansionary territory for the first time since October 2022, now at 50.9. Both surveys indicated resilient labour markets. Combining the slight undershoot in ISM services last Wednesday, with the net hawkish labour market release on Friday, US 10Y yields finished the week only 5bp lower, at just about 4.5%.
For Wednesday, markets expect US CPI to be unchanged at 2.9% YoY and 3.2% for core YoY.
US Politics – Never Boring
Markets faced another volatile week under Trump, as his policies remain unforeseeable. On Friday, Trump announced reciprocal tariffs against other countries, which impose tariffs against the US. Earlier in the week, he withdrew from multilateral UN organisations including the Human Rights Council (UNHRC), the main relief agency for Palestinians (UNWRA) and discussed withdrawing from the WHO. Regarding markets, new Treasury Secretary Bessent clarified that the administration was targeting lower 10Y yields instead of pressuring the Fed, and that the government maintains a stronger Dollar policy. Fed governor Bowman, likely the successor of Vice Chair for Supervision Barr, gave a speech supporting Financial markets deregulation which helped Treasury yields outperform swaps.
Algebris Investments’ Global Credit Team
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