Fixed Income Update 06 Feb 2025
KBVS WEEKLY FIXED INCOME UPDATE
Thursday, 6 February 2025
The Market Remains Uncertain,
Caught Between a Risk-Off and Risk-On Sentiment
The 30-day delay in Trump's tariffs on Mexico and Canada has eased trade tensions that have persisted since his election. However, the potential implementation of additional tariffs on China and the EU has raised new concerns among investors. At the same time, the deterioration in U.S. labor market data has heightened fears that the real sector in the U.S. is also under pressure. This development has reopened the possibility of a 25 bps Fed Rate cut being implemented sooner as a pro-cyclical policy, with investors anticipating such a move in early May.
Domestically, economic fundamentals remain robust. This is reflected in the fourth-quarter GDP growth of 5.02% YoY, surpassing the 5.0% threshold, and an annual growth rate of 5.03% for 2024. Additionally, the S&P Global Manufacturing PMI showed improvement in Jan ‘25, with almost all components posting significant gains, except for input costs, which remained stable in line with controlled inflation. Furthermore, inflation in Jan ‘25 recorded a deflation of -0.76% MoM or 0.76% YoY, driven by a 50% electricity tariff discount implemented during the month.
Regards,
KBVS Research Team