HIGHLIGHTS
- Treasuries look to finish moderately lower, off lows set prior to the September FOMC minutes release, not much of a reaction on learning of the "substantial majority" 50bp cut crowd vs. "some" 25bp.
- Projected rate cuts running near recent lows vs. late Tuesday (*): Nov'24 cumulative -20.7bp (-22.7bp), Dec'24 -45.6bp (-50.5bp), Jan'25 -65.1bp (-70.4bp).
- Moderate short covering reported as markets continue to digest the Sep FOMC minutes while attention turned to Thursday morning's CPI inflation data.
US TSYS
MNI US TSYS: Holding Near Lows After FOMC Minutes 25Bp Debate
- Treasuries are near late session lows after Wednesday's FOMC minutes showed "some" voting members failed to sway the 50bp cut majority at the September policy meeting.
- "Noting that inflation was still somewhat elevated while economic growth remained solid and unemployment remained low, some participants observed that they would have preferred a 25 basis point reduction of the target range at this meeting, and a few others indicated that they could have supported such a decision," the report said.
- Muted reaction to a small tail at the Tsy 10Y auction reopen (4.066% high yield vs. 4.061% WI). The Dec'24 10Y futures trade -9 at 112-06 after the bell vs. 112-04.5 low and above round number technical support of 112-00. Curves have flattened mildly after the bell, 2s10s -.230 at 4.933, 5s30s -1.552 at 43.017. Moderate volumes (TYZ4 1.4M) as market focus turned towards Thursday morning's CPI inflation measures for September.
- Core non-housing service CPI inflation is expected to ease modestly in September from the 0.33% in August, with seven analysts eyeing an average 0.27% M/M from a range of 0.20-0.34.
- Weekly Jobless claims, a few more Fed speakers (Cook, Barkin and Williams) and the 30Y Bond auction re-open are also on tap.
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.00055 to 4.82299 (-0.02259/wk)
- 3M -0.01767 to 4.65828 (+0.07430/ wk)
- 6M -0.02239 to 4.44581 (+0.16482/wk)
- 12M -0.03181 to 4.12794 (+0.26212/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.84% (+0.01), volume: $2.166T
- Broad General Collateral Rate (BGCR): 4.83% (+0.01), volume: $807B
- Tri-Party General Collateral Rate (TGCR): 4.83% (+0.01), volume: $771B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.83% (+0.00), volume: $90B
- Daily Overnight Bank Funding Rate: 4.83% (+0.00), volume: $226B
FED Reverse Repo Operation
RRP usage climbs to $343.448B this afternoon from $325.355B prior. Compares to $239.386B on Monday September 16 2024 -- the lowest level since early May 2021. Number of counterparties up to 71 from 65 prior.
US SOFR/TREASURY OPTION SUMMARY
Option desks reported varied SOFR put trade on heavy volumes Wednesday, largely Dec'24 expiries with some unwinds in soon to expire October options. Underlying futures remain moderately weaker after the Sep FOMC minutes showed "some" voting members sought 25bp cut rather than 50bp. Projected rate cuts running near recent lows vs. late Tuesday (*): Nov'24 cumulative -20.7bp (-22.7bp), Dec'24 -45.6bp (-50.5bp), Jan'25 -65.1bp (-70.4bp).
- SOFR Options: Reminder, October options expire Friday
- Block, +10,000 SFRV4 95.62/95.75 1x2 put over risk reversals, 0.25 vs. 95.67/0.74%
- -10,000 SFRZ4 95.50 puts, 4.0
- -5,000 2QZ4 96.25/96.50/97.50/97.75 call condors 16.25 ref 96.60
- -5,000 SFRZ4 95.43/95.50/95.62/95.68 put condors 1.0 ref 95.69
- +6,000 0QZ4 96.87/97.12 call spds 5.75 ref 96.59
- +3,500 SFRV4 95.56/95.62/95.68 put flys 1.0 ref 95.695
- +30,000 SFRZ4 95.25/95.37/95.50 put trees 1.25 ref 95.70
- -5,000 SFRM5 95.75/96.00 call spd vs 2QM5 96.50/96.75 call spds 4.5
- 5,000 SFRM5 96.50 calls 29.5 ref 96.35
- -5,000 0QZ4 96.37/97.00 call spds vs 3QZ 96.50/97.00 call spds, 7.5
- -5,000 0QX4/SFRZ5 96.87 put spds 26
- +8,000 SFRZ4 95.25/95.37/95.50 put flys 1.25 ref 95.705
- Block, 12,000 SFRV4 95.62 puts, 1.5 ref 95.705
- +5,000 SFRM4 96.50 calls, 29.5 ref 96.35
- 45,000 SFRZ4 95.68/95.81 2x1 put spds ref 95.71 to -.715
- over 20,900 0QV4 96.50 puts ref 96.63
- 2,000 SFRZ4 95.37/95.62/96.31/96.56 put condors ref 95.715
- 2,300 SFRH5 96.56/0QH5 97.25 call spds
- 6,300 SFRZ4 95.50 puts ref 95.715
- 10,000 SFRH5 95.37/95.62/95.87 2x3x1 put flys ref 96.11
- 2,500 2QZ4 96.62/96.87 put spds ref 96.665
- 4,000 SFRZ4 95.18/95.37 put spds ref 95.715
- 4,900 0QF5 95.87/96.12 put spds ref 96.66
- 2,500 SFRH5 96.25/96.50 call spds ref 96.12
- Treasury Options:
- 5,000 USZ4 112/132 strangles ref 121-04
- -5,000 USZ4 114/118 put spds, 47 ref 121-03
- 4,800 TUX4 103 puts ref 103-14.12 to -14
- 2,500 TYX4 111.5/113 call over risk reversal ref 112-15
- 5,000 FVZ4 107.5 puts
- 3,000 FVZ4 109/110 call spds
- 3,500 Wednesday wkly FV 108.75 calls, 2 ref 108-20.25
- 2,800 TYX4 111.5 puts 12 last
EGBS
MNI BONDS: EGBs-GILTS CASH CLOSE: Gilts Modestly Outperform With US CPI Awaited
Gilts gained marginally as Bunds weakened Wednesday.
- After a constructive start, yields rose in afternoon trade, led by a continuation of the post-nonfarm payrolls sell-off in US Treasuries and strengthening equities, rather than any European-centric factors.
- Gilts softened from session highs in morning trade after a tail in the 10Y Gilt auction, but the move faded, and all segments on the UK curve would end up outperforming their German counterparts. Some of the outperformance was seen as reflecting an apparent dilution of some of the UK government's more controversial fiscal proposals.
- ECB's Wunsch and Kazimir unsurprisingly cast a hawkish tone ahead of next week's meeting, but the latter said he could not rule out an October cut and that outcome remains over 90% implied in rate futures.
- In a limited data slate, the German trade surplus rose more than expected, driven by a fall in imports.
- On the day, the UK curve twist steepened, with Germany's bear flattening. Periphery EGB spreads closed mixed, with Spain and Portugal modestly underperforming Italy and Greece; 10Y OAT/Bund was flat.
- Thursday's calendar is highlighted by US inflation data - we also get German retail sales, Italian industrial production, and the accounts of the September ECB meeting.
Closing Yields / 10-Yr Periphery EGB Spreads To Germany
- Germany: The 2-Yr yield is up 3.2bps at 2.26%, 5-Yr is up 2.2bps at 2.125%, 10-Yr is up 1.4bps at 2.257%, and 30-Yr is up 0.4bps at 2.542%.
- UK: The 2-Yr yield is down 0.5bps at 4.189%, 5-Yr is down 0.8bps at 4.064%, 10-Yr is down 0.4bps at 4.18%, and 30-Yr is up 0.2bps at 4.718%.
- Italian BTP spread down 0.1bps at 130bps / Spanish up 0.6bps at 75.5bps
FOREX
MNI FOREX: USD Index Premium Over 50-dma Largest Since April
Greenback strength continues to play out after the strong start to the European session - EUR/USD now through the earlier lows and USD/JPY is nearing 149.13 - the Monday high. Clearance here resumes the bounce off the mid-September low, and a revisit of the US 10y yield to Tuesday's 4.055% would likely be a sufficient catalyst.
- The USD Index has already printed a new multi-month high at 102.764 today - opening the largest gap between spot and the 50-dma since April, thereby underscoring the strength of near-term momentum.
- Comments from Fed's Logan argue further in favour of a gradual approach from the Fed, stopping well short of endorsing another 50bps step at the November meeting - particularly as Logan flags the "meaningful risk" that inflation could stick above 2%.
Figure 1: USD Index premium over 50-dma highest since April
EQUITIES
MNI US STOCKS: Late Equities Roundup: Holding Decent to Moderate Gains Ahead CPI
- Stocks are holding decent to moderate gains late Wednesday, little to no reaction to the September FOMC minutes that showed "some" members wanted a 25bp cut rather than the 50bp delivered. Currently, the Dow trades up 360.8 points (0.86%) at 42440.75, S&P E-Minis up 30 points (0.52%) at 5830.5, Nasdaq up 76.9 points (0.4%) at 18260.15.
- Information Technology and Financial sectors led gainers in late trade, carry-over support for Super Micro Computer, up 4.98% in late trade and nearly 17% on the week after strong graphics processor sales were announced. Other gainers included Corning +4.8%, Palantir +4.25%.
- Insurance and servicer stocks led the Financial sector late Wednesday: Everest Group +4.23%, Raymond James +2.51%, Globe Life +2.41%.
- Conversely, Utilities and Communication Services continued to underperform in lat etrade, independent power and electricity providers weighed on the Utility sector: Constellation -7.16%, NRG Energy -6.25%, Vistra -3.85%.
- Meanwhile, interactive media and entertainment weighed on Communication Services: Google -2.16% after headlines reported the US DOJ "told a federal judge it’s considering recommending that Google be forced to sell off parts of its operations" (BBG). Match traded -2.31%, Meta -0.39%.
MNI EQUITY TECHS: E-MINI S&P: (Z4) Bulls Remain In The Driver’s Seat - RES 4: 5900.00 Round number resistance
- RES 3: 5868.50 1.00 proj of the Apr 19 - Jul 16 - Aug 5 price swing
- RES 2: 5854.15 2.0% Upper Bollinger Band
- RES 1: 5830.00/5838.75 High Sep 26, High Oct 9
- PRICE: 5828.50 @ 1425 ET Oct 9
- SUP 1: 5742.64/5724.00 20-day EMA / Low Oct 2
- SUP 2: 5674.40 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 the latest shallow pullback still appears to be a correction. Price is trading closer to its recent highs. MA studies are in a bull-mode setup, highlighting a dominant uptrend and positive market sentiment. Sights are on 5868.50, a Fibonacci projection, and 5900.00 further out. Initial support to watch is 5742.64, the 20-day EMA. It has been pierced. Key support lies at 5674.40 the 50-day EMA.
COMMODITIES
MNI COMMODITIES: Crude Continues Pullback, Spot Gold Falls For Sixth Session
- Crude markets are heading for the close trading lower, although they have moderated some losses following a larger than expected US crude draw. A roll back in the political risk premium and comments that there are no changes to the OPEC+ deal under discussion have added downside.
- WTI Nov 24 is down by 0.4% at $73.3/bbl.
- For WTI futures, initial firm support to watch is at $71.59, the 20-day EMA.
- Meanwhile, spot gold has fallen for a sixth consecutive session, with the yellow metal declining by 0.5% to $2,608/oz.
- The latest short-term retracement in gold is considered corrective. The trend condition is unchanged and bulls remain in the driver’s seat.
- A resumption of gains would refocus attention on $2,690.2, a Fibonacci projection.
- Firm support at $2,615.7, the 20-day EMA, has been pierced. A clear break would signal scope for a deeper retracement to $2,584.9, the Sep 20 low.
- Copper has also declined by another 1.2% to $441/lb, amid doubts over prospects for Chinese stimulus.
- Copper futures remain in a short-term retracement mode, which for now is considered corrective.
- Key support is seen at $436.04, the 50-day EMA.
THURSDAY DATA CALEDAR
| Date | ET | Impact | Period | Release | Prior | Consensus | |
| 10/10/2024 | 0830 | *** | 05-Oct | Continuing Claims | 1826 | -- | (k) |
| 10/10/2024 | 0830 | *** | 05-Oct | Initial Jobless Claims | 225 | -- | (k) |
| 10/10/2024 | 0830 | *** | 05-Oct | Prev Continuing Claims, Rev | -- | -- | (k) |
| 10/10/2024 | 0830 | *** | 05-Oct | Prev Initial Jobless Claims, Rev | -- | -- | (k) |
| 10/10/2024 | 0830 | ** | 03-Oct | Corn Net Sales | -- | -- | MT (k) |
| 10/10/2024 | 0830 | ** | 03-Oct | Corn Weekly Exports | -- | -- | MT (k) |
| 10/10/2024 | 0830 | ** | 03-Oct | Soy Net Sales | -- | -- | MT (k) |
| 10/10/2024 | 0830 | ** | 03-Oct | Soy Weekly Exports | -- | -- | MT (k) |
| 10/10/2024 | 0830 | ** | 03-Oct | Wheat Net Sales | -- | -- | MT (k) |
| 10/10/2024 | 0830 | ** | 03-Oct | Wheat Weekly Exports | -- | -- | MT (k) |
| 10/10/2024 | 0830 | *** | Sep | CPI Ex Food and Energy m/m (1 dp) | 0.3 | 0.2 | % |
| 10/10/2024 | 0830 | *** | Sep | CPI Ex Food and Energy m/m (3 dp) | 0.281 | -- | % |
| 10/10/2024 | 0830 | *** | Sep | CPI Ex Food and Energy y/y (core nsa) | 3.2 | 3.2 | % |
| 10/10/2024 | 0830 | *** | Sep | CPI Supercore m/m (3 dp) | -- | -- | % |
| 10/10/2024 | 0830 | *** | Sep | CPI m/m (1 dp) | 0.2 | 0.1 | % |
| 10/10/2024 | 0830 | *** | Sep | CPI m/m (3 dp) | 0.187 | -- | % |
| 10/10/2024 | 0830 | *** | Sep | CPI y/y (nsa) | 2.5 | 2.3 | % |
| 10/10/2024 | 1030 | ** | 04-Oct | Natural Gas Stocks w/w | -- | -- | Bcf |
| 10/10/2024 | 1130 | ** | 11-Oct | Bid to Cover Ratio | -- | -- | |
| 10/10/2024 | 1130 | * | 11-Oct | Bid to Cover Ratio | -- | -- | |
| 10/10/2024 | 1300 | *** | Oct | Bid to Cover Ratio | -- | -- | |
| 10/10/2024 | 1400 | ** | Sep | Treasury Budget Balance | -380.1 | -- | USD (b) |
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