• Treasury yields are virtually unchanged, despite a flurry of Trump quotes on tariffs and interest rates, and that has been a feature this week with the new administration. As some of the more draconian policies promised on the campaign trail regarding tariffs and deportations have yet to become reality, Treasuries are taking a bit of a breather. Now all that can change in a minute, and likely will, but for now the market is relishing the lighter policy pronouncements. Things will turn a bit hotter next week with the Fed then the week after with January payrolls, not to mention the daily offerings from the White House, but for now enjoy the calm conditions. Currently, the 10yr Treasury is yielding 4.64%, up 1bp on the day, while the 2yr is yielding 4.28% down 1bp on the day.

 

  • It’s another day, so that means some new Trump quotes. In a Fox News interview last night, he offered that he would “rather not” put tariffs on China, so the matter of tariffs remains an open question. In an Oval Office press briefing, after calling for lower rates at the Davos Forum earlier in the day, he elaborated a bit more, “I think I know interest rates much better than [the Fed]… and I think I know it certainly much better than the one who’s primarily in charge of making that decision… but no, I’m guided by them very much, but if I disagree, I will let it be known.” Furthermore, when asked whether Fed officials would listen to him, Trump responded, “Yeah”, and added that he would speak with Powell “at the right time.” So far, the market isn’t repricing off those comments as futures still see only about 40bps of cuts this year, but the unsurprising admission that he’ll have no qualms about voicing his preference on rates will no doubt be an ongoing theme this year.

 

  • Don’t look now but we recently hit the debt ceiling. The Treasury has gone into using “extraordinary measures” to pay interest and maturing principal by using cash on hand and juggling funds between intra-governmental accounts. Indications are this financial slight-of-hand can continue for another several months so it’s not a headline item yet. But while a Republican House, Senate. and Presidency pretty much assures a deal will get done to raise the ceiling, expect some members of the House to take the matter hostage in order to extract some favor. Treasury Secretary Nominee Bessent will likely have to come up to speed quickly on these “extraordinary measures” once he is confirmed and takes office.

 

  • That’s not the only deadline staring at markets and Congress. Recall, President Trump said, somewhat casually, that tariffs may begin on Canada and Mexico on Feb. 1. He also has requested a study on “US trading practices” be completed by April 1, so that Feb. 1 tariff deadline could be a bit squishy. Also, government funding on the recently passed continuing resolution expires on March 14 which, if not extended, would necessitate a government shutdown. Again, with a Republican government in power a shutdown will likely be avoided, but again not before some hostage-taking exacts some goodies for the necessary votes.

 

  • The weekly jobless claims series is not usually headlining grabbing news, and this week is only slightly different. Last week was also survey week for the January employment report, so the weekly jobless claims series carries a little more weight than usual. Claims did rise to 223 thousand vs. 220 expected. Not so bad despite being the highest level since early December. However, it remains historically low. Continuing Claims, however, rose to a one-year high of 1.899 million vs. 1.853 million the prior week. So, it continues the familiar story that while layoffs remain tame, those looking to be rehired are finding it tougher to do so (see graph below). While that doesn’t spell doom for the January jobs numbers, it does provide one indicator that maybe it won’t be as strong as December.

 

  • Sort of in line with the above point about rehiring slowing, an article from the Philly Fed this week found the percentage of credit card borrowers making the minimum payment rose to an all-time high of 10.25%. Add that to the mix of rising delinquencies, and outstanding card balances at all-time highs, and it does paint a picture that at least a segment of consumers are facing increasing levels of financial stress (see graph below). When will that show itself in weakening consumption numbers is hard to say, but if the trend continues it seems inevitable that it at some point it will. The link to the article can be found here.

 

  • A couple items remain to be released this week. First is the preliminary S&P Global PMI series for January. It will provide an early look at January activity both from the manufacturing and services side. The familiar refrain of strong services and weak manufacturing is expected to persist in the first month of 2025. Existing home sales for January will round out the data for the week with sales expected to be slightly better than December, but no major shift in activity is anticipated.

 

  • Last but not least, I sat down this past week with Joe Keating in our Wealth Management Group to discuss his outlook for 2025. Joe has been our go-to economist for years, especially back in the legacy CenterState Bank days. I’m sure you’ll find the discussion interesting and informative. You can listen here.

 Continuing Claims Reaches a Yearly High


Credit Card Borrowers Making Minimum Payment Reaches All-Time High

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Published: 01/24/25 Author: Thomas R. Fitzgerald