Friday's blow was no 'accident' (+15Pts on T-Bonds) as bond markets continue to deteriorate after Friday's very bad session.

Bunds tightened by +8pts to 2.313% (they fell heavily despite a drop in the 'services' PMI and a decline in exports, and growth of 0.3% at the end of 2024), Italian BTPs climbed by +8pts to 3.8900% and our OATs by +8pts to 2.8230% (a level quite close to the zenith of 2.847% on January 18 and December 8 last year).

In France, the HCOB PMI composite index of global activity remained unchanged below the 50 mark for the eighth consecutive month in January. It fell from 44.8 in December to 44.6 in January, signalling a slight acceleration in the decline in activity. The services sub-index fell from 45.7 in December to 45.4 for the month.

Turning to the Eurozone, investors took note this Monday morning of a slight recovery in the HCOB composite PMI index from 47.6 in December to 47.9 in January, reaching a six-month high, and thus indicating the weakest contraction in private sector activity in the region since last July.
But one swallow doesn't make a spring, as the OECD revises its 2024 growth forecasts for the Eurozone downwards, to 0.6% from +0.8% and +1.3% in 2025... and to +0.3% in Germany (after 4 quarters of recession (Q3/Q4 2023 and Q1/Q2 2024).
Across the Channel, Gilts finished +15.2pts higher at 4.0280%, with a peak of 4.08%, the worst level since December 4, 2023.

Across the Atlantic, T-Bonds were +13pts higher at 4.153% (the highest since 19 and 24/01), while the Composite PMI recovered to a 6-month high of 52, despite the decline in the Manufacturing PMI.

In addition, the monthly Institute for Supply Management (ISM) survey published on Monday showed an increase for the 43rd month out of 44 (the last episode of contraction dates back to December 2022) in the wake of the US services sector, which accelerated more strongly than expected, by +3Pts to 53.4 in January.
While the activity sub-index remained stable at 58, the sub-index measuring new contracts rose to 55, after 52.8 the previous month, while employment moved back into the growth zone, at 50.5 compared with 43.8 in December.
Treasury specialists also had to digest an interview with Jerome Powell broadcast yesterday on the weekly program 60 Minutes: he reiterated his statements of last Wednesday, according to which a rate cut in March was not the institution's central scenario.

The Fed boss also endorsed the 'dot plot' provided at the end of last December's meeting, in favor of three rate cuts this year", commented Danske Bank.

By way of comparison, the financial markets are currently forecasting five rate cuts in 2024', the Danish bank points out.

'Powell highlighted the robustness of the economy, the strength of the job market and added that the diagnosis he made in Jackson Hole in August 2022, namely that rate hikes would penalize economic activity, had not materialized so far', the Scandinavian bank stresses.
But perhaps the most significant phrase is 'the current US debt trajectory is unsustainable'.

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