01/30/2026
Interest rates ended the week mostly flat. 10Y --, 2Y -8bps, 30Y +4bps, 2s/10s +8bps steeper.
President Trump has revealed his pick for the next Chairman of the Federal Reserve – Kevin Warsh. I have attached two write ups on Kevin for anyone interested in reading a little bit about who will lead the charge in setting interest rates in the future. The most prominent take is Warsh is not an uber dove that most people thought Trump would nominate for the position.
Earlier in the day, Producer Prices came in considerably hotter than expected in December. Headline +0.5% MoM, Core +0.7% MoM.
Services costs dominated the rise in the headline PPI (not Goods - which would be affected by tariffs).
Final demand services: The index for final demand services advanced 0.7 percent in December, the largest increase since moving up 0.9 percent in July. Two-thirds of the broad-based December rise in prices for final demand services can be traced to a 1.7-percent jump in margins for final demand trade services. (Trade indexes measure changes in margins received by wholesalers and retailers.) The indexes for final demand services less trade, transportation, and warehousing and for final demand transportation and warehousing services also moved up, 0.3 percent and 0.5 percent, respectively.
Final demand goods: Prices for final demand goods were unchanged in December following a 0.8-percent increase in November. In December, a 0.4-percent advance in the index for final demand goods less foods and energy offset declines in prices for final demand energy and for final demand foods, which fell 1.4 percent and 0.3 percent, respectively.
Earlier in the week, the Fed held rates unchanged, as expected, and is likely on an extended pause. During his press conference, Powell did say no one on the board is currently expecting a need to raise rates. There is currently a 70% chance of a 25 bps rate cut in June.
