Member Services Desk Weekly Market Update

This MSD Weekly Market Update reflects information for the week ending December 19, 2025.

Economist Views

THIS WEEK'S ECONOMIC CALENDAR HIGHLIGHTS
Date Time	Event	Period	Survey	Prior
12/23/25 8:15	ADP Weekly Employment Change	5-Dec	--	16.250k
12/23/25 8:30	GDP Annualized QoQ	3Q S	3.10%	--
12/23/25 8:30	Philadelphia Fed Non-Manufacturing Activity	Dec	--	-16.30
12/23/25 8:30	Durable Goods Orders	Oct P	-1.40%	0.50%
12/23/25 9:15	Industrial Production MoM	Nov	0.10%	0.10%
12/23/25 9:15	Capacity Utilization	Nov	75.90%	75.90%
12/23/25 10:00	Conf. Board Consumer Confidence	Dec	91.40	88.70
12/24/25 8:30	Initial Jobless Claims	20-Dec	--	224k
12/24/25 8:30	Initial Claims 4-Wk Moving Avg	20-Dec	--	217.50k
12/24/25 8:30	Continuing Claims	13-Dec	--	1,897k

**The Weekly Update will return on Friday January 9, 2025; best wishes for the holiday season!**

The past week provided data points directly related to the Fed’s dual mandate on inflation and employment. Owing to the government shutdown in the Fall, the delayed data releases have contained a fair bit of noise and quirks. Essentially, fresher data in January should provide a better picture of economic trends. Please see herein for further color. Note that there is a plethora of government shutdown-delayed data that may be announced and released on shorter notice over the next three weeks. The jobs report for December will be released on January 9 and thereby get this data point back on its standard release schedule. 

ADP Weekly Employment Change: ADP private payrolls posted a modest rise last week, but 4-week weekly averages over the past few months have presented a decidedly mixed picture.

Gross Domestic Product Report: The consensus call for the second estimate of Q3 GDP is a 3.1% Q-o-Q annualized gain. Data for Q3 on Personal Consumption, as well as the GDP and Core Personal Consumption price data, will also be released. While providing insight, the markets are likely to consider this data slate as too stale to spur much reaction.

Philadelphia Fed Non-Manufacturing Activity:  The index declined last month, and various recent data sources have portrayed a challenged manufacturing sector.

Industrial Production& Capacity Utilization: Economists expect another modest .1% M-o-M gain for November. The Federal Reserve's monthly index of industrial production and the related capacity indexes and capacity utilization rates cover manufacturing, mining, and electric and gas utilities. The industrial sector, together with construction, accounts for the bulk of the variation in national output over the course of the business cycle. The industrial production (IP) index measures the real output of all relevant establishments located in the United States. The Capacity Utilization rate is expected to register again at 75.9%.

Conference Board Consumer Confidence Survey: After a sharp fall from 95.5 to 88.7 in November, the consensus calls for a slight improvement this month to 91.4 in the headline index. The Present Situation and Expectations indexes, each of which posted notable declines last month, will also be released in the report. 

Initial Jobless Claims: Claims have slightly moderated in the last two weeks, with the 4-week moving average remaining relatively steady in this past week’s reading.  Continuing Claims, however, posted a 67K rise and continue to indicate that workers are facing greater difficulty landing new jobs.  

Federal Reserve Bank Member Appearances:

• 12/19/2025 08:30  Fed's Williams Appears on CNBC
• 12/30/2025 14:00  FOMC Meeting Minutes from the December 10th meeting

UPCOMING WEEK'S US TREASURY AUCTIONS
Bills	Offering Amount	Auction Date -- Settle Date
4-Week; 8-Week	80 Bln; 80 Bln	12/23 -- 12/26
13-Week; 26-Week	86 Bln; 77 Bln	12/22 -- 12/26
6-Week	75 Bln	12/23 -- 12/26
Notes	Offering Amount	Auction Date -- Settle Date
2-Year	69 bln	12/22 -- 12/31
5-Year/7-Year	70 Bln; 44 Bln	12/23 / 12/24 --12/31
FRNs	Offering Amount	Auction Date -- Settle Date
1-Year 10-Month	28 Bln	12/23 -- 12/26

Key Market Trends

Source: Bloomberg. Given the Fed’s dual mandate of achieving maximum employment and maintaining price stability, the tier-1 economic data of the week was the delayed employment situation report for October/November and the Consumer Price Index (CPI) inflation report for November. As can be seen here, the reports, at least in the headline results, provided information to support the Fed’s 25-bps rate cut last week. The underemployment rate, a measure of the unemployed, part-time looking for full-time, and marginal workforce, has notably risen in the second half of this year. Moreover, wage growth decelerated in November from the month prior. The Y-o-Y CPI report, meanwhile, was softer than expected, with both the headline (shown here) and core reading dipping by .4% to 2.7 and 2.6%, respectively. A slowing in housing/shelter prices contributed to the CPI decline. It should be stressed, however, that both the jobs and inflation data have been deemed “noisy/quirky” by analysts, owing to the disruptions and delay in data-gathering. Note that there were no month-over-month readings announced on CPI, for instance.

Sources: Bloomberg; Oxford Economics; Haver Analytics. Judging from trends in the ADP jobs report, it is smaller businesses experiencing declines in payrolls, whereas large companies have held steadier. With tariff dynamics and uncertainty added to the usual challenges facing smaller companies, perhaps this trend is unsurprising. Indeed, the latest National Association of Independent Business (NFIB) Small Business Optimism survey report cited a rise in uncertainty. The overall index, however, reached a 3-month high and indicated that respondents’ sales outlooks had improved. Interestingly, a notable number of businesses continue to report job openings that they cannot fill, thereby indicating an ongoing labor quality mismatch. Relevant to the small business sector is the FHLB-NY’s Small Business Recovery Grant program which we proudly offer each year to our members and their customers. Keep an eye out for another round in 2026!

Source: Bloomberg. Top pane is yield (LHS, %); bottom pane is change (LHS, bps). As of Thursday afternoon, the UST term curve was lower and steeper from the week prior. The 3-year led the decline via a dip of ~8 bps, while the 10-year fell by ~4 bps. Economic data during the week was mixed, but the employment and inflation reports provided enough impetus for the slide lower in yields and for the market to more aggressively price 2026 rate cuts. With the Fed in a potential pause mode, meanwhile, implied volatility in options remains near multi-year lows. As of Thursday afternoon, the market priced the chance of a 25-bps January Fed ease at ~21%, a tad higher than a week ago. The market’s end-2026 forward is ~3.02%, or 8 bps lower than a week ago and which equates to ~2.5 25-bps rate cuts.

Source: Bloomberg. Helping our advance rates in recent weeks has been the normalizing of T-bill yields since the tumultuous end-November and mid-October periods when heavy net positive Bill issuance sparked a relative cheapening in Bills. The recent turn in net Bill supply, along with the Fed’s freshly launched Bill-purchase programs, appear to be lending a decidedly helpful hand to the normalization. As can be seen here, 3-month Bill yields have tightened (i.e., moved lower in relative terms) to 3-month Fed Funds and SOFR swaps. Please read our short-term rates section for further color.

FHLBNY Advance Rates Observations

Front-End Rates

• As of midday Thursday and vs. a week ago, short-end rates were generally lower by two to three bps, as our paper has traded at notably tighter levels this month. Pressures in the short-term financing markets have eased since the tumultuous end of November, best evidenced by SOFR normalizing to other rates such as Fed Funds. The exception was this past Monday, as we had forewarned, when the corporate tax date coincided with a large UST auction settlement date to cause an 8-bps mini-spike in SOFR. Looking forward, net T-bill issuance is projected to be negative into mid-January, and the Fed began its MBS portfolio principal reinvestments into T-bills on December 1st. Further decreasing net T-bill supply to the market is the Fed’s new 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 in the near-term. However, the usual yearend pressures loom closer and bear monitoring for very short-term and Overnight rates. There is $88.3bn of net new cash to come out of the system from UST auction settlements on the 31st. The over-the-turn (31st to January 2nd) forward SOFR swap is ~3.93% which is well above prevailing spot SOFR.
• The markets will monitor the mostly second-tier data in the upcoming holiday week. It will be advisable to monitor financing conditions into year-end.

Term Rates

• The longer-term curve, as of Thursday afternoon and generally mirroring the moves in USTs and swaps, was lower and steeper than a week ago. The 2-year declined by ~8 bps, 5-year by ~6 bps, and 10-year by ~3 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 holiday-condensed slate of 2/5/7-year auctions, all settling on the 31st. Note that UST auctions usually occur at 1pm and can occasionally spur volatility around that time. Please contact the Member Service Desk for further information on market dynamics, rate levels, or products.