HIGHLIGHTS
- Better than expected job gains and small downtick in the unemployment rate in the December jobs data weighed heavily on Treasuries Friday.
- Treasury 10Y yield climbed to 4.7860%, the highest level since November 2023, while curves bear flattened, 2s10s falling to 36.572, the lowest level since early May 2022.
- The strong data and moves in rates saw projected rate cuts cool significantly Friday, with September seeing the first and possibly only 25 bp rate cut in 2025.
MNI US TSYS: Strong Jobs & Unemployment Rate Dip Dashes Rate Cut Hopes
- Treasuries gapped lower after Friday morning's larger than expected December non-farm and private payroll gains while unemployment dipped slightly.
- The 256k in December leaves a strong recent trend, with 255k in Sep, an average of 128k for those two months (initially 132k) before surprisingly reaccelerating again. Unemployment rate: 4.086% in Dec after very small downward revisions in the prior two months, with 4.23% in Nov (initially 4.246%) and 4.14% in Oct (initially 4.15%).
- The Dec'24 10Y contract traded down to 107-12 low (-27) well through technical support of 107-19.5 (1.618 proj of the Oct 1 - 14 - 16 price swing) next level: 107-04 (Low Apr 25 ‘24 and a key support). Curves bear flattened but finished off lows, 2s10s -3.937 at 38.383 vs. 36.572 low, 5s30s -9.612 at 37.484. 10Y yield taps 4.7860 - highest since May 2022.
- Futures retreated towards post data lows late in the session while projected rate cuts through mid-2025 have retreated since this morning's data, current vs. morning levels* as follows: Jan'25 at -0.7bp (-1.7bp), Mar'25 -6.3bp (-10.1bp), May'25 -10.5bp (-15.9bp), Jun'25 -18.2bp (-25.6bp), Jul'25 -20.2bp (25.5bp).
- Next week brings CPI and PPI inflation measures on Wednesday and Thursday respectively, the scheduled Fed speaker docket rather muted with the Fed Blackout next Friday.
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M +0.00046 to 4.30254 (-0.01289/ wk)
- 3M -0.00193 to 4.28701 (-0.00668/wk)
- 6M -0.00602 to 4.24458 (+0.00263/wk)
- 12M -0.01404 to 4.17833 (+0.01362/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.30% (+0.01), volume: $2.211T
- Broad General Collateral Rate (BGCR): 4.28% (+0.01), volume: $829B
- Tri-Party General Collateral Rate (TGCR): 4.28% (+0.01), volume: $805B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $104B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $296B
FED Reverse Repo Operation
RRP usage bounces to $178.800B this afternoon from $168.225B on Thursday. Compares to $98.356B on Friday, December 20 - the lowest level since mid-April 2021. The number of counterparties slips back to 48 from 52.
US SOFR/TREASURY OPTION SUMMARY
Heavy option volumes reported Friday, SOFR outpacing Treasury flows with the former leaning towards downside puts as underlying futures retreated towards post data lows late in the session. Projected rate cuts through mid-2025 have retreated since this morning's data, current vs. morning levels* as follows: Jan'25 at -0.7bp (-1.7bp), Mar'25 -6.3bp (-10.1bp), May'25 -10.5bp (-15.9bp), Jun'25 -18.2bp (-25.6bp), Jul'25 -20.2bp (25.5bp).
SOFR Options
Block, 9,000 SFRM5 95.62/95.75 put spds, 6.0 ref 95.84
+20,000 0QK5 95.25/95.50 put spds 1.0-1.25 over 96.00/96.12 call spds
Block, +6,400 SFRZ5 97.00/98.00 call spds, 8.0 vs. 95.925/0.12%
+8,000 0QM5/0QU5 94.50/95.00 put spd strip 9.75 total
+5,000 0QM5 94.00/94.50/95.00 put flys, 2.5 vs. 95.87/0.05%
+10,000 SFRZ5 95.25/95.75 2x1 put spds, 3.25 ref 95.915
+6,000 SFRM5 96.00/96.25 call spds, 4.5 ref 95.845
-5,000 SFRZ5 96.56 calls, 18.5 ref 95.905
-6,000 0QM5 95.75 puts cvrd vs 2QM5/3QM5 95.75 put strip cvrd, 10.5 net puts over
+20,000 0QM5 96.37/97.00 call spds vs 95.37/95.62 put spd, 3.0 net calls over
-10,000 0QG5 96.00 calls, 12.0 ref 95.95
-20,000 0QH5 96.62 calls, 3.0
+7,000 0QZ5 97.25 calls, 9.5 vs. 95.87/0.14%
+10,000 SFRJ5 96.50 calls, 2.75 ref 95.855
-5,000 SRM5 96.00/96.25 call spds, 4.5 ref 95.845
-8,000 SFRJ5 95.75 puts, 7.0 ref 95.84
-10,000 SFRG5 95.68 puts, 1.5 ref 95.75
+5,000 SFRU5 96.50/97.00 call spds 5.0 ref 95.88
+10,000 SFRK5 96.50/96.75/97.00/97.25 call condors, 1.00 ref 95.91
Block, 5,000 SFRZ5 95.25/95.75 2x1 put spds, 3.0 net ref 95.935
5,000 SFRM5 96.06/96.18 call spd vs. 0QM5 96.25/96.37 call spd
10,000 SFRF5 95.87 calls, cab
2,000 0QG5 95.81/95.87/95.93 put flys ref 96.02
Block/screen, 10,000 2QH5 95.00/95.50 put spds, 4.0 vs. 95.94/0.15%
+3,000 SFRH5 95.875/96.1875 call spd 3.25, ref 95.795
1,500 SFRK5 95.75/95.87/96.00 put flys ref 95.92
Blocks, +10,000 SFRM5 95.75/95.9375/96.1875/96.375 call condor, 5.0 vs. 95.90/0.10%
Blocks, +18,966 SFRJ5 96.125/96.3125/96.5625/96.75 call condor, 2.50 ref 95.93
Treasury Options
10,000 TYG5 107.5/108.25 call spds 27 ref 107-24
4,000 TYG5 104.25/105.75 put spds ref 107-21
-10,000 TYG5 106/106.5 put strips, 14
4,000 Monday wkly TY 107/107.25 put spds ref 108-03 (expire Monday)
over -19,500 wk2 TY 107.5 puts, 4-5 (expire today, OI 39,662)
2,000 TYH5 106/108 2x1 put spd vs. 108.5/111 1x2 call spds ref 108-08.5
3,150 TYH5 111/113 1x2 call spds ref 108-02.5
2,000 TYG5 109.5/110.5/111.5 call flys ref 108-04.5
+13,000 TYH 106.5/107.5 2x1 put spd, 4 ref 108-05 (106.5 strike appr 4.95%)
3,500 TYG5 108/109.5 put spds, ref 108-05
5,000 TYG5 106.5/107.5 put spds, ref 108-05
MNI FOREX: USD Index Consolidates 0.5% Gains Post NFP, JPY Outperforms
- Following the stellar US jobs report, the greenback surged prompting the ICE dollar index to print a fresh cycle high of 109.97. While there was some intra-day volatility following the data release, the DXY looks set to post 0.5% gains on the session and confirm another positive weekly advance of around 0.75%.
- Most G10 currencies have fallen as a result, with the likes of EUR and GBP printing cycle lows against the dollar in the process. EURUSD sank to 1.0215 before partially recovering but once again, it is sterling that stands out, with cable briefly printing below 1.22.
- Weakness for equities have played their part here, and similar weakness for AUDUSD and NZDUSD is notable, extending multi-year lows below 0.62 and 0.56 respectively. CAD moderately outperforms following a similar impressive domestic employment report.
- Standing out has been the Japanese Yen, which has outperformed significantly in the weak equity environment. Overbought conditions and intervention zone risks prompted an entire reversal of the post-data USDJPY rally. Spot reached as high as 158.87 in the direct aftermath but then slipped over 1%, picking up momentum through the Wed/Thu lows to print an intra-day low of 157.23.
- This dynamic has prompted strong losses for the likes of GBPJPY, which extends its weakening trend amid the growing fiscal risks in the UK. The first major target on the downside would be 190.60 for the cross.
- More immune to the equity sentiment, USDCHF continues to print fresh cycle highs above 0.9150, narrowing the gap to 0.9224/44, key medium-term targets for the pair.
- China trade data crosses Monday and the focus for global markets will be centred around UK/US CPI scheduled on Wednesday.
MNI US STOCKS: Late Equities Roundup: Chip Makers, Insurance Providers Lagging
- After recovering slightly from midday lows, stocks are receding again late Friday, no real changes to underlying drivers IT and Financial sectors continued to underperform.
- Currently, the DJIA trades down 566.66 points (-1.33%) at 42065.08, S&P E-Minis down 70.75 points (-1.19%) at 5887.75, Nasdaq down 248.9 points (-1.3%) at 19229.91.
- Semiconductor and hardware makers weighed on the tech sector after the exiting Biden administration looked to tamp down on high end chips used for AI applications sold to China. Leading laggers included ON Semiconductor -6.12% , Advanced Micro Devices -4.64% while Oracle, Intel, Nvidia, AMAT and Broadcom traded -4.5-2.5%.
- Insurance and services shares weighed on the Financials sector, partially driven by expected losses tied to the California wildfires: Allstate -6.07%, Global Payments -5.51%, Cincinnati Fncl Services -5.21% and Travelers -4.11%.
- On the positive side, the Energy sector continued to outperform with oil and gas stocks supported by a rally in crude (WTI +2.62 at 76.54): Devon +2.87%, Coterra +2.50%, EOG +2.35 and Valero +1.89%.
- 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) Support Remains Exposed
- RES 4: 6178.75 High Dec 6 and key resistance
- RES 3: 6163.75 High Dec 16
- RES 2: 6068.25/6107.50 High Jan 6 / High Dec 26
- RES 1: 6001.82 50-day EMA
- PRICE: 5885.50 @ 1430 ET Jan 10
- SUP 1: 5866.00/5845.25 Low Dec 20 and bear trigger / Intraday low
- 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. The reversal lower from the Dec 26 high, highlights the end of the Dec 20 - 26 correction. Attention is on 5866.00, Dec 20 low and a key short-term 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 Rallies On Further Russian Sanctions, Henry Hub Surges
- WTI has relinquished earlier gains but continues to be sharply higher on the day and the week as US sanctions on Russia are likely to be bullish for oil markets.
- WTI Feb 25 is up 3.5% at $76.5/bbl.
- The U.S treasury has issued details on the widely speculated list of further sanctions on Russian oil entities that has been driving oil markets higher on Friday.
- The new US sanctions on Russian crude and products is bullish for oil globally, but history has shown Russian barrels generally find markets despite sanctions, Platts said.
- The trend structure in WTI futures remains bullish and today’s gains reinforce current conditions.
- The stronger reversal to the upside has resulted in a breach of key short-term resistance at $76.41, the Oct 8 high. Clearance of this hurdle strengthens a bull theme and opens $79.59, the Jul 5 ‘24 high.
- Henry Hub is set to close with a net gain on the week of nearly 19%. Cold weather on the US East Coast looks set to continue. Meanwhile, production has dipped and LNG export terminal feedgas flows rise to record levels.
- US Natgas Feb 25 is up by 7.5% at $3.98/mmbtu.
- Meanwhile, spot gold has risen by 0.7% to $2,687/oz, leaving the yellow metal 1.8% higher on the week.
- Scope is seen for a continuation higher near-term, with sights on $2,726.2, the Dec 12 high and an important short-term resistance.
MONDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 13/01/2025 | - | *** |  CN | Trade |
| 13/01/2025 | - | *** | CN | Money Supply |
| 13/01/2025 | - | *** | CN | Social Financing |
| 13/01/2025 | - | *** | CN | New Loans |
| 13/01/2025 | 1600/1100 | ** |  US | NY Fed Survey of Consumer Expectations |
| 13/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 13/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 14/01/2025 | 0500/1400 |  JP | Economy Watchers Survey |