HIGHLIGHTS
- Treasuries look to finish higher but off session highs - near opening levels as safe-have/risk-off support receded after dozens of rockets fired by Iran at Israel were repelled in transit.
- Stocks reacted negatively to the news of Iran's missile launch (with no noticeable reaction to Israel's ground incursion into southern Lebanon overnight), rebounded midmorning as crude rallied, supporting oil & gas stocks.
- Geopol risk overshadowed the day's ISM Mfg miss and higher than expected job openings in JOLTS data. Focus turns to Wednesday's ADP private employ data ahead of Friday's headline September jobs data.
- Treasuries look to finish higher, near Friday's closing levels amid waves of risk-on/safe haven support in the first half. Treasuries initially rallied with EGBs after Israel kicked off a ground assault in southern Lebanon. Levels extended the rally back to September 20 levels as wires reported Iran had launched dozens of ballistic missiles at Israel.
- Dec'24 10Y futures climbed to 115-00.5 high, near initial technical resistance of 115-02.5 (Sep 19 high). The rally did not translate to steeper curves, however, 2s10s flattening another -1.514 to 12.470 after Monday's move off near 20.0 high.
- Treasury futures receded from session highs as IDF officials reported "no additional threats" after Iran missile attack largely intercepted in transit to Israel and Israelis allowed to exit shelters. Dec'24 10Y futures currently trade 114-23 (+14), 10Y yield currently -.0437 at 3.7372%.
- Projected rate cut pricing into year end gaining some momentum vs. this morning's levels (*): Nov'24 cumulative -34.9bp (-35.4bp), Dec'24 -70.8bp (-68.9bp), Jan'25 -102.3bp (-102.1bp).
Geopol risk overshadowed the day's ISM Mfg miss and higher than expected job openings in JOLTS data. Focus turns to Wednesday's ADP private employ data ahead of Friday's headline September jobs data.
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M +0.00384 to 4.84954 (+0.00544/wk)
- 3M +0.01742 to 4.60953 (+0.01618/wk)
- 6M +0.03015 to 4.28402 (+0.02217/wk)
- 12M +0.04456 to 3.82124 (+0.03816/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.96% (+0.12), volume: $2.523T
- Broad General Collateral Rate (BGCR): 4.88% (+0.05), volume: $790B
- Tri-Party General Collateral Rate (TGCR): 4.88% (+0.05), volume: $742B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.83% (+0.00), volume: $73B
- Daily Overnight Bank Funding Rate: 4.83% (+0.00), volume: $172B
FED Reverse Repo Operation
RRP usage declines as new month/quarter end underway, latest at $375.221B this afternoon from $465.638B prior. Compares to $239.386B on Monday September 16 2024 -- the lowest level since early May 2021. Number of counterparties at 58 from 69 prior.
US SOFR/TREASURY OPTION SUMMARY
SOFR/Treasury option trade remained mixed on net Tuesday, two-way adjustments and position unwinds as underlying futures scale back from session highs as risk-off sentiment cools. SOFR White pack (SFRZ4-SFRU5) currently +0.015-0.040, while projected rate cuts gained some momentum vs. this morning's levels (*): Nov'24 cumulative -34.9bp (-35.4bp), Dec'24 -70.8bp (-68.9bp), Jan'25 -102.3bp (-102.1bp).
- SOFR Options:
- -10,000 SFRV4 95.93/96.00/96.12/96.18 call condors, 2 ref 95.99
- -8,000 SFRX4 95.62 puts, 1.0 ref 95.995
- +8,000 SFRV4 96.06/96.12 call spds 1.5 ref 95.97
- +6,000 SFRZ4 95.68/95.81 2x1 put spds, 1.25 ref 95.965
- +4,000 SFRF5 96.12/96.31/96.37/96.56 put condor 4.0 ref 96.495
- 5,000 SFRZ4 95.68/95.81 2x1 put spds
- 1,500 0QZ4 96.43/96.62/96.62/96.87 broken put trees
- 4,200 SFRF5 96.12/96.31/96.37/96.56 put condors ref 96.50
- Block, 3,500 SFRX4 96.00/96.12 call spds vs. 95.43/95.75 put spds, 2.25 net/call spd over
- 2,000 SFRV4 95.68/95.81/95.93 2x3x1 put flys ref 95.975
- Block, 3,750 SFRX4/SFRZ4 96.12/96.37 call spd spd, 0.75 net/Dec over
- 2,000 2QX4 96.37/96.62/97.50/97.75 put condors
- 5,000 SFRX4 95.75/95.87/96.00 put flys ref 95.98
- 3,200 0QV4 97.12/97.31 call spds ref 97.03
- Block, 2,500 SFRZ4 95.93/96.25 5x6 call spreads, 41.5 vs. 2,850 SFRZ4 at 95.97
- 2,000 SFRZ5 96.87 puts, ref 97.02
- Treasury Options:
- +4,000 FVZ4 110.25 straddles, 141 red 110-09
- 3,000 TYZ4 117 calls, 27 ref 114-28
- over 6,900 TYX4 116.5 calls, 13 last ref 114-23
- over 3,700 FVX4 109.25 puts, 12 last
- over 3,000 FVX4 109.50 puts, 15 last
- over 10,700 wk 2 10Y 115.25 calls, 21 ref 114-21.5
- over 9,600 Wednesday wkly 115 calls, 5 ref 114-20.5
EGBS
BONDS: EGBs-GILTS CASH CLOSE: OATs Give Up Early Outperformance On Geopolitics
European bonds rallied sharply Tuesday, with geopolitical concerns driving a safe-haven bid later in the session.
- Core FI and periphery EGBs alike enjoyed gains in the morning, led by OATs on reports of forthcoming French fiscal tightening measures.
- OATs would give up some of their gains later in the day after French PM Barnier failed to follow up with policy specifics - 10Y to Bund -2.1bp on the day, vs -5.2bp at the intraday tights.
- Global core FI soared in mid-afternoon trade with risk spreads widening as Iran launched missiles at Israel.
- Data was not a market mover: Eurozone September flash inflation had been anticipated after national-level data already released; manufacturing PMI data from Italy (below-consensus) and Spain (above-consensus) likewise failed to move the needle.
- The German and UK curves both bull flattened. Periphery EGB spreads closed mixed, but little changed overall.
- Wednesday's calendar includes Eurozone labour market data and several ECB speakers including Schnabel and Lane, as well as the record of the September BoE FPC meeting.
Closing Yields / 10-Yr Periphery EGB Spreads To Germany
- Germany: The 2-Yr yield is down 4.8bps at 2.02%, 5-Yr is down 7.2bps at 1.875%, 10-Yr is down 8.7bps at 2.036%, and 30-Yr is down 9.8bps at 2.361%.
- UK: The 2-Yr yield is down 2.8bps at 3.955%, 5-Yr is down 4.3bps at 3.817%, 10-Yr is down 6.2bps at 3.941%, and 30-Yr is down 7.1bps at 4.513%.
- Italian BTP spread up 0.2bps at 133.2bps / Spanish down 0.5bps at 79.8bps
FOREX
FOREX: Iran Missile Launches See Key Pairs Testing Support
Reaction to headlines that Iran has launched missile strikes on Israel has been relatively limited in FX space, not materially adding to earlier sizeable risk-off moves on the earlier, well-telegraphed warnings, but BBDXY is nevertheless at fresh session highs (+0.4%).
- EURUSD has seen session lows of 1.1048 having for now stopped just short of resting support at 1.1044 (50-day EMA) after which lies 1.1002 (Sep 11 low).
- GBPUSD is also of note, setting new recent lows of 1.3246, now down more than 180 pips from last week’s cycle high. It’s through support at 1.3269 (38.2% retracement for the upleg off the mid-September low) and tests the 20-day EMA at 1.3250 after which lies 1.3088 (50-day EMA).
- However, USDJPY remains within session ranges as a function of similar moves in FI and equities.
- CAD, buoyed by WTI surging 5% on the day on to top of US linkages, is top G10 FX performer on the day followed by JPY.
EXPIRY
OPTIONS: Expiries for Oct02 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.1025(E1.8bln), $1.1100(E976mln), $1.1115-25(E1.8bln), $1.1200(E671mln)
- USD/JPY: Y144.00($753mln)
EQUITIES
US STOCKS: Late Equities Roundup: Oil & Gas Still Leads Even as Risk Off Cools
- Stocks have bounced off session lows as risk-off sentiment abates in late trade, Treasury futures receded from session highs after IDF officials reported "no additional threats" after Iran missile attack largely intercepted in transit to Israel and Israelis allowed to exit shelters. Nasdaq lagging the Dow and Eminis as the two are close to unchanged in late trade.
- Currently, the DJIA is down 22.51 points (-0.05%) at 42308.14, S&P E-Minis down 35.5 points (-0.61%) at 5779.25, Nasdaq down 218.9 points (-1.2%) at 17970.35.
- Stocks had bounced off lows earlier as the Middle East conflict helped crude prices jump (WTI marking 71.30 high) in turn supporting oil and gas shares. The dynamic continues in late trade even though WTI crude has scaled back support (WTO trading 69.75).
- Leading gainers in the Energy sector included APA Corp +4.5%, Marathon +3.38%, ConocoPhillips +3.33% while Occidental Petroleum gained 3.28%. Independent Power sector shares continued to outperform: Vistra +3.02%, Pinnacle West +1.85%, Constellation Energy +1.83%.
- On the flipside, Information Technology and and Real Estate sectors underperformed in late trade. Hardware and semiconductor stocks weighed on IT: HP Inc -3.44%, Dell -3.53%, Apple -3.19% while Intel trades -2.98%. Investment trusts, particularly Industrial and Residential REITs weighed on the Real Estate sector: Prologis -1.60%, Federal Realty Inv -1.48%, Alexandra Real Estate -1.46%.
EQUITY TECHS: E-MINI S&P: (Z4) Bulls Remain In The Driver’s Seat - RES 4: 5900.00 Round number resistance
- RES 3: 5871.77 2.0% Upper Bollinger Band
- RES 2: 5868.50 1.00 proj of the Apr 19 - Jul 16 - Aug 5 price swing
- RES 1: 5830.00 High Sep 26
- PRICE: 5775.00 @ 1458 ET Sep 30
- SUP 1: 5709.39 20-day EMA
- SUP 2: 5641.58 50-day EMA
- SUP 3: 5500.00 Round number support
- SUP 4: 5451.25 Low Sep 6 and a bear trigger
A bull cycle in S&P E-Minis remains intact and last week’s fresh cycle highs, reinforce this theme. Moving average studies are in a bull-mode setup and this highlights a dominant uptrend. Scope is seen for a climb towards 5868.50, a Fibonacci projection, and 5900.00 further out. On the downside, initial support to watch is 5709.39, the 20-day EMA. Key support lies at 5641.58, the Sep 27 low.
COMMODITIES
Crude Rallies As Middle-East Tensions Rise, Spot Gold Climbs
- Oil is pricing off some earlier gains as the impact of Iranian missile strikes on Israel become clearer, but uncertainty surrounds the response.
- WTI Nov 24 is up 2.4% at $69.8/bbl.
- The strikes step up escalations in the region and represent a more significant attack than the orchestrated efforts in April, which were largely thwarted by the iron dome and seemingly at lower value targets.
- For WTI futures, key resistance remains at the 50-day EMA of $71.69, which is the key upside hurdle for bulls. A move lower would refocus attention on $64.61, the Sep 10 low and bear trigger.
- Meanwhile, spot gold has risen by 1.1% to $2,663/oz, amidst the escalation in tensions in the middle-east.
- The focus is on $2690.2 next, a Fibonacci projection. Firm support lies at $2589.8, the 20-day EMA.
- Silver has also gained by 0.9% to $31.4/oz, narrowing the gap to resistance at $32.715, the Sept 26 high.
- Copper has risen by 0.7% to $459/lb, albeit off the session high at $462.5.
- Key near-term resistance is seen at $479.00, Monday’s intraday high. A break of this level would mark a resumption of the uptrend.
WEDNESDAY DATA CALENDAR
| Date | ET | Impact | Period | Release | Prior | Consensus | |
| 02/10/2024 | 0700 | ** | 27-Sep | MBA Mortgage Applications w/w | 11.0 | -- | % |
| 02/10/2024 | 0815 | *** | Sep | ADP Private Payrolls | 99 | 120 | (k) |
| 02/10/2024 | 1030 | ** | 27-Sep | Crude Oil Stocks ex. SPR w/w | -- | -- | bbl (m) |
| 02/10/2024 | 1030 | ** | 27-Sep | Distillate Stocks w/w change | -- | -- | bbl (m) |
| 02/10/2024 | 1030 | ** | 27-Sep | Gasoline Stocks w/w change | -- | -- | bbl (m) |