Member Services Desk Weekly Market Update

This MSD Weekly Market Update reflects information for the week ending December 12, 2025.

Economist Views

THIS WEEK'S ECONOMIC CALENDAR HIGHLIGHTS
Date Time	Event	Period	Survey	Prior
Date Time	Event	Period	Survey	Prior
12/15/25 8:30	Empire Manufacturing	Dec	10.50	18.70
12/15/25 10:00	NAHB Housing Market Index	Dec	38.00	38.00
12/16/25 8:30	Change in Nonfarm Payrolls	Nov	50k	--
12/16/25 8:30	Unemployment Rate	Nov	4.40%	--
12/16/25 8:30	Retail Sales Advance MoM	Oct	0.30%	0.20%
12/16/25 8:30	New York Fed Services Business Activity	Dec	--	-21.70
12/18/25 8:30	Initial Jobless Claims	13-Dec	--	236k
12/18/25 8:30	CPI YoY	Nov	3.10%	--
12/19/25 10:00	Existing Home Sales	Nov	4.14m	4.10m
12/19/25 10:00	U. of Mich. Sentiment	Dec F	--	53.30

The highlight of the past week was the December 10 FOMC outcome. The expected 25-bps cut was delivered, although there were three dissents on the decision, the most since 2019. Reflecting the diversity of opinion at the Fed, two dissents were in favor of no rate move and one dissent, unsurprisingly the most recent appointee, favored a 50-bps cut. Chairman Powell declared that gradual labor market cooling justified the rate cut but that “risk management” cuts are likely now over, absent clear and more severe labor market weakness, since policy is closer to neutral. “We are well positioned to wait and see how the economy evolves from here,” Powell stated in his press conference. The Summary of Economic Projections (SEP) was relatively unchanged from September; GDP was marked modestly higher, and there was little change to inflation and unemployment rate projections. The dot plot, despite a wide range of participant projections, remained the same and still reflects a yearend-2026 median projection of 3.375%. Chair Powell sounded relatively relaxed about inflation and optimistic that it would gradually return to the Fed’s 2% target, especially if/when tariff impacts fully feed through the economy and potentially dissipate. Indeed, he stated that “it’s really tariffs causing inflation overshoots”. The FOMC meeting produced notable news relevant to money markets; please see herein for further information.    

Given the Fed’s dual mandate on employment and inflation, the upcoming week’s jobs and consumer prides reports will garner the most attention from markets.

Empire Manufacturing Report for NY State:  Activity was strong in November following October’s rebound from September, and so the report will reveal if this positive momentum was sustained.

Employment Situation Report:  Non-farm payrolls are expected to show an increase of 50k jobs in November. Average hourly earnings are expected to post a .3% increase which would equal a 3.60% increase year-over-year.  The unemployment rate is expected to be 4.40%. The report’s various metrics will each provide helpful color on labor market dynamics.

Retail Sales: The October report will be released and will provide further information, albeit somewhat stale, on actual behavior of the consumer sector. Expectations are a rise of .30%.

Initial & Continuing Jobless Claims:  After last week’s low print representing the Thanksgiving holiday week, initial claims this past week rebounded higher to 236K, or well above the 4-week moving average of 216k.  However, continuing claims dropped by approximately 100K, thereby revealing the volatility inherent in recent and delayed data reports.

Consumer Price Index (CPI) Report:  The Bureau of Labor Statistics will, unfortunately, only publish November’s Y-o-Y CPI  – expectations are a 3.10% reading and 3.00% on the core.

Existing Home Sales:  The report for November is expected to post a mild uptick month-on-month from the prior figure of 4.10mn. The sector continues to struggle with affordability constraints.

University of Michigan Sentiment:  The final reading for this month will provide an updated snapshot of consumer opinions about the economic conditions.

Federal Reserve Bank Member Appearances:

• 12/12/2025 8:00  Fed's Paulson Speaks on Economic Outlook
• 12/12/2025 8:30  Fed's Hammack Speaks at Real Estate Roundtable Series
• 12/12/2025 10:35  Fed's Goolsbee Speaks at Economic Outlook Symposium
• 12/15/2025 10:30  Fed's Williams delivers Keynote Remarks

UPCOMING WEEK'S US TREASURY AUCTIONS
Bills	Offering Amount	Auction Date -- Settle Date
4-Week; 8-Week	85 Bln; 80 Bln	12/18 -- 12/23
13-Week; 26-Week	86 Bln; 77 Bln	12/15 -- 12/18
6-Week	75 Bln	12/16 -- 12/18
TIPs	Offering Amount	Auction Date -- Settle Date
4-Year 10-Month	24 Bln	12/18 -- 12/31
Bonds	Offering Amount	Auction Date -- Settle Date
19-Year 11-Month	13 Bln	12/17 -- 12/31

Key Market Trends

Source:Bloomberg. In the second half of this year, the combination of the Fed’s securities portfolio runoff and Treasury’s heavy net-positive T-bill issuance served to remove funds from the financial system and decrease bank reserves. Indeed, as seen here, the reserves-to-total assets ratio has declined to a level that the Fed now terms “ample”. With a goal of alleviating financial market funding pressures, keeping bank reserves ample in a growing economy, and maintaining effective control of the Fed Funds rate, the FOMC announced the imminent (December 12) start of a new Reserve Management Purchase (RMP) program which will purchase T-bills to the tune of $40bn/month over the next few months. Note that this program is in addition to the ~$15bn/month of T-bill purchases via the Fed’s MBS principal reinvestments which began this month. The RMP schedule begins with a $8.167bn purchase on December 12, and the schedule can be viewed on the New York Fed’s website. Also, in a more symbolic gesture to lubricate and unclog the financial system’s plumbing, the Fed tweaked its Standing Repo Facility (SRF) by removing the SRF’s aggregate balance limit, previously $500mn.

Source: Barclays Research. Here we can see the potential extent of the Fed’s T-bill demand for its System Open Market Account (SOMA). Barclays Research now forecasts the Fed to buy ~$525bn in T-bills in 2026. This development could translate into net issuance to private investors declining to just $220bn in 2026 from the $400bn that Barclays Research had previously forecast. In turn, this trend would further alleviate the T-bill supply pressures that have been affecting repo markets over the second half of this year.

Source: Bloomberg. Here we can see that the Fed’s easing cycle has not led to lower term rates which would, arguably, have more impact on the economy. Indeed, the 10-year UST yield is currently higher than at the cycle’s start and has been so throughout the cycle. And the same goes for mortgage rates. Chair Powell was asked about this dynamic in his press conference, and he essentially cited heightened expectations for growth in the future as being a potential causal factor for the higher term yields. Other factors such as national debt and deficits, term premium, inflation expectations, and supply/demand factors also play a part in determining long-end yields. Clearly, moves in official short-term rates do not necessarily translate to moves in long-term rates.

Source: Bloomberg. Top pane is yield (LHS, %); bottom pane is change (LHS, bps). As of Thursday afternoon, the UST term curve was modestly higher by 1 to 5 bps from the week prior, led by the 5-year-and-out sector. With the Fed in a potential pause mode, implied volatility in options is hovering near multi-year lows. As of Thursday afternoon, the market priced the chance of a 25-bps January Fed ease at only ~19%. The market’s end-2026 forward is ~3.10%, or 5.5 bps higher than a week ago.

FHLBNY Advance Rates Observations

Front-End Rates

• As of midday Thursday and vs. a week ago, short-end rates were lower across the board. Naturally, with the Fed rate cut, Overnight led the way and was 24 bps lower. Other tenors were 5 to 8 bps lower, as our paper has traded at notably tighter levels in the past two weeks. After a tumultuous November month-end, pressures in the short-term financing markets eased further this week, best evidenced by SOFR normalizing to other rates such as Fed Funds. Net T-bill issuance is projected to be negative this month, and the Fed has begun MBS portfolio principal reinvestments into T-bills as of December 1. Further decreasing net supply is the Fed’s freshly announced Reserve Management Purchases program which will buy T-bills over the next few months. Money Market Fund AUM, meanwhile, remains near record high levels and has absorbed T-bills and our paper. These dynamics should help alleviate short-end financing pressures and upward pressure on SOFR and our advance rates. The mid-month December 15 date deserves notice, however, as the corporate tax date in tandem with UST auction settlements that day may spur renewed financing pressure. And the usual yearend pressures loom closer. However, the measures to mitigate financing market constraints should hopefully serve to contain any severe rate spikes.
• The jobs report is likely to be the highlight of the upcoming week, as any further near-term Fed rate cuts appear contingent on labor market weakness.

Term Rates

• The longer-term curve, as of Thursday afternoon and generally mirroring the moves in USTs and swaps, was modestly steeper and higher vs. a week ago. While the 2-year was unchanged, the 5-year rose by 4 bps. Kindly refer to the previous section for color on market dynamics and changes.
• On the UST term supply front, the upcoming week serves a 20-year nominal and a 5-year TIPS auction, both settling on the December 31. Note that UST auctions usually occur at 1pm and can occasionally spur volatility around that time. Please contact the Member Services Desk for further information on market dynamics, rate levels, or products.