THE WEEK AHEAD ECONOMIC DATA RELEASE 7TH DEC 2025 NO FALL IN RUSSIAN CRUDE EXPORTS POST NOV SANCTIONS DEC FOMC PREVIEW: A HAWKISH CUT CAN 10YR USTs MAKE A DASH TO 4.5% THE WEEK AHEAD ECONOMIC DATA RELEASE 30TH NOV 2025 EX OIL COMMODITIES ARE SET FOR MORE UPSIDE IN CY26 CHINA IS IRREVERSABLY DECOUPLING FROM US: THINK 2027, THINK TAIWAN IS THIS DECEMBER DIFFERENT FOR DOLLAR BUY 10YR UK GILTS AGAINST SELL 10YR GERMAN BUNDS BUY 10YR UK GILTS SELL 10YR UST BUY S&P 500
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Central Bank Watch

POWELL USES A DIVIDED FED TO DELIVER A HAWKISH CUT

ADMIN || 30th October 2025

After a benign CPI report last week, 10-year UST yields had shifted lower to where 4% was acting more as a ceiling than a floor. But a hawkish dissent has broken that celling today. It wasn’t just the dissent from Kansas City Fed President Jeffrey Schmid. It was also the way Powell described a burgeoning three-way split on the FOMC. Schmid’s dissent caused only a few basis points of damage. But Powell’s comments, especially his stress that a December cut is not a “foregone conclusion” were most damaging to Treasuries across the curve, with two-year yields spiking the most in a single day since May, up by 10 bps.

The Fed doesn’t like to surprise the market. It usually guides and delivers on expectations. So it’s advantageous for it to start the six weeks before the next FOMC meeting with rate cut expectations right down the middle. That gives Fed officials plenty of time to move the market in either direction. Comments from hawks Bostic and Hammack are among the first out of the gate we should watch tomorrow.

Swaps still suggest about a 60% chance of easing in December, but the repricing has further to run and with every basis point shed from cut expectations, the greenback’s rally gathers fresh momentum. The Bloomberg Dollar Spot Index is up around 0.3%, pushing toward its strongest level in two weeks.

As long as we don’t get job data due to shut down, DXY might get stronger and UST yield curve might flatten further.

On QT, balance-sheet runoff is set to stop Dec. 1, after more than $2 trillion of Treasuries and MBS have rolled off, taking the SOMA holdings below $6.6 trillion. From that date, maturing Treasury and Agency debt principal will be fully rolled over into T-bills while the MBS cap stays at $35 billion per month.

Rolling maturing Treasury and agency debt principal removes a steady source of duration supply, nudging term premium lower at the margin. Reinvesting paydowns into bills adds reserves back into the system improving the liquidity backdrop. This gives dealers better balance-sheet flexibility and reduces volatility in the front end a precondition for tighter credit spreads, better Treasury market depth, and calmer cross-asset VAR.

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