Markets
In yet another session stripped of volumes, volatility and news worthy the name, an overlooked NY Fed tariff study of last week drew some attention. It was Kevin Hassett’s (director of the National Economic Council) aim at the conclusion that ironically enough brought it back in the spotlight. He disagrees with the findings that US businesses and consumers paid nearly 90% of the cost of president Trump’s tariffs last year. The share was the largest in the first months of Trump’s presidency, 94%, before dropping to 86% in November (cut-off period). The study results of course undercut POTUS’ claim that foreign companies would bear the burden. Hassett called for the authors of what he described as “the worst study in the Fed’s history” to be disciplined. Also to be found in the non-market related section (at least for now) is speculation on ECB’s Lagarde early exit as president of the ECB. British newspaper Financial Times ran an article this morning floating the possibility to give French president Macron a say in her succession before the presidential elections of next year. A glimpse at the polls reveals the motive. The far-right Rassemblement National is consistently polling ahead of rivals and the belief is that the party’s unconventional views would complicate the nomination process. Commentators are drawing parallels with French central bank governor Villeroy’s announcement earlier this month to step down ahead of the end of his term. Lagarde is part of a bigger position switch going on at the ECB. Chief economist Lane’s and board member Schnabel’s terms end in 2027 too with the latter having openly solicited for Lagarde’s position in the past. Other touted candidates include Germany’s Nagel, the Netherland’s Knot and Spain’s de Cos.
Turning to markets then. Treasury yields build on yesterday’s intraday recovery to add 0.8-2.5 bps in a bear flattening move. It offers little relief for the likes of the 2-yr, which remains close to critical 3.4% support. The 10-yr tenor (4.07%) is trying to create breathing space, away from the 4% psychological barrier. European yields rise slightly, Bunds underperforming vs. swap. The US dollar extended earlier (marginal) gains after stronger-than-expected durable goods orders (December) in all of the gauges. The headline series (-1.4% vs -2% expected) was impacted by a sharp drop in nondefense aircraft orders (Boeing, -24.9%) but core measures all printed solid increases, including the one used for capital investments in GDP (shipments, +0.9%). December housing data came in well above consensus as well. Building permits and housing starts rose by 4.3% and 6.2% m/m respectively. An unexpected deterioration in the NY Fed’s services sector activity gauge (-25.7, from -16.1) tempered dollar bulls a bit. The 6-month gauge improved to the highest since February 2025 but remains below the series’ long-term average. DXY inches higher to 97.34, EUR/USD depreciates from 1.185 to 1.182. The kiwi dollar underperforms after the central bank this morning doused an Aussie-fueled fire for short-term rate hikes. NZD/USD’s stay north of 0.60 was cut short. Other noteworthy moves include NOK strength on higher oil prices. Brent rises 3% amid reports from news outlet Axios that a US-Iran war may be closer and longer-lasting than currently assumed.
News & Views
The Flemish Community raised €2bn via a long 10-yr bond (Jun2036) issued via syndication. The bond was priced to yield 17 bps over the Belgian OLO reference curve, compared with initial and revised guidance of respectively +21 bps and +19 bps. Books were above €11bn, highlighting solid demand. Flanders Department of Finance estimates total funding needs for 2026 at €9bn, the lion share of which is to cover new funding needs (€6bn). The funding need mainly stems from an estimated budget deficit of €1.83bn and other (recurring) funding needs such as the Flemish Social Housing Company (VMSW €0.92bn), the Flemish Housing Fund (VWF €1.36bn) and costs related to the Oosterweel link (LANTIS; €0.86bn). Debt redemptions for 2026 are projected at €2.82bn. They include Flanders’ short term Belgian Commercial Paper programme, rolling over a €1.5bn 3-month bill (current maturity 04/22/26) and a €0.75bn bond redemption (June2026). Internal redemptions (€0.17bn) are expected to be reinvested in the Flemish Community by the consolidated public institutions. Total new funding needs are forecasted to remain constant in the 2027-2030 period at €5-5.33bn. Including bond redemptions results in gross borrowing needs of €6.36bn-6.88bn in 2027, 2028 & 2030 and €7.6bn in 2029.
 aim at the conclusion that ironically enough brought it back in the spotlight. He disagrees with the findings that US businesses and consumers paid nearly 90% of the cost of president Trump’s tariffs last year.){kind=link}