HIGHLIGHTS
- Treasuries traded sideways since establishing session lows after JOLTS data saw surprisingly elevated job openings in November (8.098M vs. 7.740M) but the quits rate reversed a surprise increase from back in October.
- December's ISM Services survey was largely in line with expectations, with one notable exception: a sharp rise in Prices Paid (64.4 vs. 57.5 est)
- Though Tsy curves climbed to new three year highs (2s10s 39.618), projected rate cuts for 2025 continued to recede with June 25 no longer fully pricing a 25bp rate cut.
MNI US TSYS: Ylds Climb After Strong JOLTS Jobs, ISM Prices Paid Jump
- Treasuries have drifted sideways since establishing lows after this morning's data: JOLTS report saw surprisingly elevated job openings in November but the quits rate reversed a surprise increase from back in October. Job openings 8090k (cons 7740k) in Nov after an upward revised 7,839k (initial 7,744k) in Oct.
- Headline ISM index strengthened to 54.1, a little higher than the 53.5 expected (52.1 prior), with New Orders (54.2, 53.7 prior) and Employment (51.4, 51.5 prior) exactly matching survey expectations. But Prices Paid soared to 64.4 (57.5 expected, 58.2 prior), jumping by the most since January to the highest level in 22 months.
- The Mar'25 10Y contract slipped below Dec 26 low to 108-01.5 low (-15.5), 10Y yld climbing to 4.6972% high. Though Tsy curves climbed to new three year highs (2s10s 39.618), projected rate cuts for 2025 continued to recede with June 25 no longer fully pricing a 25bp rate cut. Current lvls this morning levels (*) as follows: Jan'25 at -1.2bp (-2.3bp), Mar'25 -10.2bp (-10.9bp), May'25 -14.7bp (-16.3bp), Jun'25 -23.2bp (-24.2bp).
- Reminder, much of Thursday's data has been moved to Wednesday (Wholesale Sales, Weekly Jobless Claims) as well as the 30Y Bond auction re-open to avoid conflicts with Thursday's Federal Holiday/day of Mourning for former President Carter. The CME Group FI trade closes at 1315ET Thursday. Thursday still includes Challenger Job cuts at 0730ET, Tsy 4- & 8W bill auctions at 1130ET, and several scheduled Fed speakers through the day.
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.00896 to 4.29743 (-0.01800/ wk)
- 3M -0.00304 to 4.28516 (-0.00853/wk)
- 6M +0.00345 to 4.24557 (+0.00362/wk)
- 12M +0.00782 to 4.18552 (+0.02081/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.27% (-0.04), volume: $2.349T
- Broad General Collateral Rate (BGCR): 4.26% (-0.03), volume: $844B
- Tri-Party General Collateral Rate (TGCR): 4.26% (-0.03), volume: $829B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $98B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $280B
FED Reverse Repo Operation
RRP usage continues to recede, $208.296B this afternoon from $231.926 Monday. Compares to $98.356B on Friday, December 20 - the lowest level since mid-April 2021. The number of counterparties slips to 56 from 57.
US SOFR/TREASURY OPTION SUMMARY
Mixed SOFR/Treasury wing trades reported Tuesday in addition to some chunky strangle sales as underlying futures drifted lower while projected rate cuts through mid-2025 continued to recede vs. this morning levels (*) as follows: Jan'25 at -1.2bp (-2.3bp), Mar'25 -10.2bp (-10.9bp), May'25 -14.7bp (-16.3bp), Jun'25 -23.2bp (-24.2bp).
SOFR Options:
-4,000 SFRF5 95.81 puts, 3.5 ref 95.79
+10,000 SFRH5 96.12/96.37 call spds even over 20,000 95.56 puts
+5,000 SFRF5 95.68 puts, 0.5 vs. 95.775/0.10%
+10,000 0QJ5 95.50 puts, 7.5 vs. 96.005/0.20%
+10,000 SFRM5/SFRU5 97.00 call spds, 4.25
-4,000 SFRZ5 96.25/96.75 call spds vs 95.37 puts, 0.5
5,000 0QF5 95.87/96.12 strangles
-10,000 SFRM5 95.43/95.56 put spds, 075 ref 95.92
+5,000 SFRM5 95.43/95.56 put spds vs SFRZ5 95.25/95.37 put spds 1.5 net
+5,000 SFRU5 98.00 calls 3.0 ref 95.985
+5,000 SFRH5 95.81 puts, 9.0 vs. 95.79/0.25%
-2,000 SFRU5 95.75 straddles vs. 96.12 calls, 31.0 net
+10,000 SFRH5 95.87 puts, 12.5 ref 95.805
1,500 0QF5 96.00/96.18 2x1 put spds ref 96.015
+15,000 0QZ5 97.00/98.00 call spds 9.5 vs. 95.96/0.14%
4,000 0QH5 96.75 calls ref 96.025
2,500 SFRH5 95.81/95.87/95.93 call flys ref 95.81
Treasury Options:
-10,750 TYH5 108/108.5 strangles, 144 ref 108-07.5
7,000 TYG5 108 puts, 33 ref 108-02, total volume over 20.3k
5,000 USH5 106/110 put spds ref 112-23
2,500 TYG5 111/114.75 1x2 call spds ref 108-16
2,900 TUH5 103.25/103.62/103.87/104.25 call condors ref 102-24.25
3,000 TYH5 108.5 straddles ref 108-16.5
2,300 wk2 TY 109/109.5/110 call flys ref 108-15.5 (expire Jan 10)
over 11,000 wk3 FV 107.25/107.5/107.75 call flys ref 106-03.75 (expire Jan 17)
5,600 FVG5 106.75 calls ref 106-04
2,100 TYH5 105/107/109 put flys ref 108-18.5
2,000 TYH5 109/110/111 call flys ref 108-16.5
MNI BONDS: EGBs-GILTS CASH CLOSE: US Data Exacerbates Long-End Selloff
Bunds outperformed Gilts Tuesday, with bear steepening evident across European curves.
- Core FI was under some pressure in European morning trade, with the long end under duress amid supply (including 30Y Gilt auction) and higher oil prices/equities.
- An in-line December flash Eurozone HICP report (on softer-than-expected Italian and French prints) had only a modest dovish impact.
- Stronger-than-expected US economic data (job openings, ISM Services prices) saw Bunds and Gilts head to session lows a couple of hours before the cash close.
- Yields closed near the session highs, and the UK and German curves bear steepened on the day. 10Y UK yields hit the highest in 15 months, with 30Y the highest since 1998. 10Y Bund yields saw their highest close since July 2024/
- Periphery EGB spreads widened despite the rise in equities, led by BTPs.
- Data Wednesday includes German factory orders and retail sales, with consumer confidence surveys from France and the Eurozone. ECB's Villeroy is also due to speak.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 0.2bps at 2.196%, 5-Yr is up 1.5bps at 2.278%, 10-Yr is up 3.6bps at 2.483%, and 30-Yr is up 5.4bps at 2.717%.
- UK: The 2-Yr yield is up 3.8bps at 4.471%, 5-Yr is up 4.8bps at 4.449%, 10-Yr is up 7.3bps at 4.683%, and 30-Yr is up 6.7bps at 5.246%.
- Italian BTP spread up 2.2bps at 114.7bps / French OAT up 1.2bps at 82.3bps
MNI EGB OPTIONS: Upside Rate Plays Continue Tuesday
Tuesday's Europe rates/bond options flow included:
- DUH5 107.20/107.50cs 1x2, bought for -0.25 (receive) in 5k.
- OEH5 118.00/118.75cs, bought for 15.5 in 4.25k.
- ERG5 97.625/97.50ps 1x2, sold at 2.75 in 2.5k.
- ERM5 97.87/98.00/98.12/98.25c condor vs ERM5 97.62/97.50ps, bought the Condor for -0.25 (receive) in 3k.
- ERZ5 99.00/100.00cs, bought for 2.75 in 6k.
- 0NJ5 96.20/96.60/96.80 broken call fly, bought for 6.75 in 4k.
MNI FOREX: Greenback Receives Boost from Above-Estimate ISM/JOLTS Data
- The US dollar pared initial losses on Tuesday, as both US ISM Services data and Jolts Job opening beat consensus expectations. The USD Index is up 0.15% on the session, although notably the DXY still sits just below the levels before the release of the WaPo tariff article during Monday trade.
- EURUSD has echoed this sentiment with the early push back above 1.04 being met with solid resistance around Monday’s highs ~1.0435. Spot trades closer to 1.0370 as we approach the APAC crossover and will look to the old November low at 1.0335 as initial support.
- Despite being unchanged on the session, USDJPY has traded with significant volatility with multiple two-way intra-day swings. Overnight, the pair traded multi month highs of 158.42, before encountering comments from the Japanese Finance Minister around excessive FX moves which halted the yen’s decline and saw USDJPY print a session low of 157.38.
- The US data then took us back to exactly the match the highs, before the pessimistic price action in equities led the pair lower once more to current levels around 157.70.
- In similar vein, both AUD and NZD spent the European session outperforming before risk off sentiment drove both these currencies back to unchanged levels ahead of the close.
- The Swiss franc is a touch softer on the session following a lower-than-expected core inflation print, with EURCHF briefly trading up to a near 2-month high around 0.9440. USDCHF has risen 0.35%, and is reapproaching the 0.91 handle, with medium term targets of 0.9158 and 0.9250 well defined.
- Australia CPI highlights the APAC calendar on Wednesday, before focus will turn to US ADP employment, jobless claims and the release of the December Fed meeting minutes.
MNI US STOCKS: Late Equities Roundup: Hugging Lows, Autos & Chips Still Lagging
- Stocks continue to drift near second half lows though sell pressure appears to have lost momentum late Tuesday. Currently, the DJIA trades down 116.58 points (-0.27%) at 42590.17, S&P E-Minis down 54.5 points (-0.91%) at 5966, Nasdaq down 325.6 points (-1.6%) at 19539.81.
- Consumer Discretionary and Information Technology sectors continue to underperform in late trade, autos and broadline retailers weighing on the Consumer Discretionary sector: Tesla -4.16%, GM -2.15%, Amazon -1.93%, while Ross Stores declined 1.76%.
- Semiconductor makers pared gains from the week opener (despite incoming President Trump touting a $20B investment in AI data centers after Microsoft vowed $80B last Friday): Palantir Technologies -6.52%, Nvidia -5.13%, Super Micro Computer -3.90% while Broadcom declined 2.30%.
- On the positive side, Energy and Health Care sectors led gainers, oil and gas shares supporting Energy after crude prices drifted higher (WTI +0.61 at 74.17): Devon Energy +3.19%, Hess Corp +2.52%, Occidental Petroleum +2.11%.
- Pharmaceutical makers buoyed the Health Care sector, Moderna jumping 13.39% amid bird flu vaccine hopes, Regeneron +2.14%, Incyte +1.77%.
- Reminder, the next round of quarterly earnings kicks off mid-January with Blackrock, Bank of NY Melon, Wells Fargo, JP Morgan, Goldman Sachs, Citigroup, US Bancorp, M&T Bank and PNC all reporting between January 13-16.
MNI EQUITY TECHS: E-MINI S&P: (H5) Bear Threat Still Present For Now
- RES 4: 6194.19 1.236 proj of the Aug 5 - Sep 3 - Sep 9 price swing
- RES 3: 6178.75 High Dec 6 and key resistance
- RES 2: 6163.75 High Dec 16
- RES 1: 6068.25/6107.50 High Jan 6 / High Dec 26
- PRICE: 5954.50 @ 1512 ET Jan 7
- SUP 1: 5911.25/5866.00 Low Jan 3 / Dec 20
- SUP 2: 5811.65 38.2% retracement of the Aug 5 - Dec 6 bull leg
- SUP 3: 5784.00 Low Nov 4
- SUP 4: 5698.25 50.0% retracement of the Aug 5 - Dec 6 bull leg
A bear threat in the S&P E-Minis contract remains present despite the most recent gains. The reversal lower from the Dec 26 high, highlights the end of the Dec 20 - 26 correction. Attention is on 5866.00, the Dec 20 low and a key S/T support. Clearance of this level would strengthen a bearish theme. Initial firm resistance is 6107.50, the Dec 26 high. A breach of this hurdle would highlight a bull reversal and open key resistance at 6178.75, the Dec 6 high.
MNI COMMODITIES: Crude Gains Ground, Gold Support Remains Exposed
- WTI has gained ground today, amid signs of a tighter-than-expected prompt market. Traders are also keeping an eye on colder temperatures in the US and any impacts on production.
- WTI Feb 25 is up by 1.1% at $74.4/bbl.
- OPEC 12 output in December was 26.46m b/d, down 49k b/d on the month, according to a Reuters survey.
- For WTI futures, recent gains have exposed key short-term resistance at $76.41, the Oct 8 high. On the downside, a reversal lower would expose support at the 20-day EMA, at $71.10.
- Meanwhile, Henry Hub renewed its pull back to trade lower on the day. Despite this, prices remain supported by current cold weather, curtailed production and strong LNG export demand.
- US Natgas Feb 25 is down by 6.2% at $3.45/mmbtu.
- Spot gold has risen by 0.5% to $2,650/oz, amid reports that the PBoC expanded its gold reserves for a second month in December. Bullion held by the central bank rose to 73.29mn fine troy ounces last month, from 72.96mn previously.
- A bear threat in gold remains present, despite the latest recovery, with first firm support to watch at $2,583.6, the Dec 19 low.
- On the upside, a continuation of gains would instead signal scope for a climb towards resistance at $2,726.2, the Dec 12 high.
WEDNESDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 08/01/2025 | 0700/0800 |  SE | Flash CPI | |
| 08/01/2025 | 0700/0800 | ** |  DE | Retail Sales |
| 08/01/2025 | 0700/0800 | ** | DE | Manufacturing Orders |
| 08/01/2025 | 0745/0845 | ** |  FR | Consumer Sentiment |
| 08/01/2025 | 0745/0845 | * | FR | Foreign Trade |
| 08/01/2025 | 1000/1100 | ** |  EU | EZ Economic Sentiment Indicator |
| 08/01/2025 | 1000/1100 | * | EU | Consumer Confidence, Industrial Sentiment |
| 08/01/2025 | 1000/1100 | ** | EU | PPI |
| 08/01/2025 | 1000/1000 | ** |  GB | Gilt Outright Auction Result |
| 08/01/2025 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 08/01/2025 | 1005/1005 | GB | BOE's Woods Financial Services Regulation hearing | |
| 08/01/2025 | 1200/0700 | ** |  US | MBA Weekly Applications Index |
| 08/01/2025 | 1315/0815 | *** | US | ADP Employment Report |
| 08/01/2025 | 1330/0830 | *** | US | Jobless Claims |
| 08/01/2025 | 1330/0830 | US | Fed Gov Waller | |
| 08/01/2025 | 1500/1000 | ** | US | Wholesale Trade |
| 08/01/2025 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 08/01/2025 | 1700/1200 | ** | US | Natural Gas Stocks |
| 08/01/2025 | 1800/1300 | *** | US | US Treasury Auction Result for 30 Year Bond |
| 08/01/2025 | 1900/1400 | *** | US | FOMC Minutes |
| 08/01/2025 | 2000/1500 | * | US | Consumer Credit |
| 09/01/2025 | 2330/0830 | ** |  JP | average wages (p) |
| 09/01/2025 | 0001/0001 | ** | GB | KPMG/REC Jobs Report |
| 09/01/2025 | 0001/0001 | * | GB | BRC Monthly Shop Price Index |
| 09/01/2025 | 0030/1130 | ** |  AU | Retail Trade |
| 09/01/2025 | 0030/1130 | ** | AU | Trade Balance |
| 09/01/2025 | 0130/0930 | *** |  CN | CPI |
| 09/01/2025 | 0130/0930 | *** | CN | Producer Price Index |