HIGHLIGHTS
- Treasuries look to finish moderately weaker, curves bear steepen with bonds underperforming (2s10s +2.786 at 24.568, 5s30s +1.231 at 37.923).
- Bond weakness partially tied to cross asset selling tied to record-sized 10Y Gilt syndication and orderbook.
- Little new from Fed Chairman Powell congressional testimony today, all of which are almost entirely verbatim from the January FOMC press conference.
- US$ Gapped lower/extended lows in late trade, trading desks citing a rehash of earlier headlines that Ukraine is prepared to offer territory swap with Russia - US$ recovered half the move.
- Treasuries look to finish weaker Tuesday, see-sawing in a narrow, lower range since the open, March'25 10Y futures -8.5 at 108-30.5 vs. 108-28 low, above initial technical support at 108-20.5 (Low Feb 4).
- Curves bear steepened, bonds underperforming (2s10s +2.786 at 24.568, 5s30s +1.231 at 37.923) weakness partially tied to cross asset selling tied to record-sized 10Y Gilt syndication and orderbook.
- Many listened from the sidelines as Fed Chairman Powell repeated his January FOMC press conference at his Senate Banking Committee testimony today. Expect similar at Wednesday's testimony to the House.
- Treasury futures bounced briefly but remain weaker after $58B 3Y note auction (91282CMN8) 1.2bp stop, drawing 4.300% high yield vs. 4.312% WI.
- US$ Gapped lower/extended lows in late trade, trading desks citing a rehash of earlier headlines that Ukraine is prepared to offer territory swap with Russia - US$ recovered half the move. Earlier pressure on core fixed income and the associated higher yields on Tuesday have supported a recovery for Cross/JPY, with USDJPY briefly rising to a high of 152.60 roughly 1% off the Monday lows.
- Focus on key CPI inflation data tomorrow at 0830ET.
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.00109 to 4.31738 (+0.00219/wk)
- 3M +0.00035 to 4.31504 (+0.01114/wk)
- 6M +0.00412 to 4.28305 (+0.02533/wk)
- 12M +0.00468 to 4.22440 (+0.04529/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.35% (+0.00), volume: $2.316T
- Broad General Collateral Rate (BGCR): 4.33% (-0.01), volume: $916B
- Tri-Party General Collateral Rate (TCR): 4.33% (-0.01), volume: $899B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $96B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $273B
FED Reverse Repo Operation
RRP usage falls to new low at $76.446B this afternoon from Monday's $99.653B - compares to prior low of $78.788B last week Wednesday, the lowest level since mid-April 2021. The number of counterparties falls to 36 from 41 prior.
US SOFR/TREASURY OPTION SUMMARY
SOFR & Treasury option flow still leaning towards downside puts late Tuesday with some sporadic call trade reported. Relatively staid action ahead of Wednesday's key CPI inflation data. Underlying futures near session lows, curves bear steepen with short end rates outperforming. Projected rate cuts through mid-2025 look steady to mildly softer vs. this morning levels (*) as follows: Mar'25 at -1.4bp (-1.6bp), May'25 at -6.3bp (-6.8bp), Jun'25 at -14.8bp (-1539bp), Jul'25 at -19.6bp (-20.6bp).
SOFR Options:
+5,000 0QG5 95.87/96.00 put spds 3.0 ref 96.025
-5,000 2QH5 95.87 puts, 5.0 vs. 96.055/0.26%
5,000 SFRM5 95.75/95.81/95.87 call flys
+10,000 0QH5 96.50 calls, 1.5 vs. 96.04/0.10%
+2,000 0QG 95.81/95.93/96.00 2,3,1 put flys 3.5 ref 96.02
+7,500 SFRN5 95.56/95.75/95.93 put flys 6.5 ref 95.915
-3,000 SFRM5 95.75/96.12 put over risk reversal, 2.25 vs. 95.80/0.54%
+7,500 0QG 96.06 puts, 7.5 ref 96.02
13,300 0QN5 95.75 puts vs. 96.06/96.50 call spds, 0.0 net ref 96.04
2,500 SFRM5 95.81/95.93/96.18 2x3x1 call flys ref 95.82
4,000 SFRH5 95.62/95.68 put spds ref 95.71
1,750 SFRH5 95.68 puts vs. 95.75/95.81 call spds
2,500 SFRJ5 95.68/95.75/95.81 put flys ref 95.825
1,500 0QM5 96.25/96.50/96.75 call flys ref 96.05
Treasury Options:
-25,000 TYH5 109 puts, 28 (unwind of +20k from 18-20 yesterday)
6,000 TYH5 108.5 puts, 15 ref 108-31.5
3,500 TYK5 111/113 call spds ref 108-30.5
3,300 TYH5 106/107 put spds ref 108-30.5
3,850 TYH5 108.5/109.25 strangles, 36 ref 108-30
1,200 TYH5 107/108 2x1 put spds
4,300 FVH5 105.25/105.5 put spds
5,000 USH5 112 puts, 6 ref 114-26
2,000 TYH5 109.5/110.5 1x2 call spds
1,200 TYH5 107/107.5 3x2 put spds
2,200 TYJ5 107/108.5 put spds ref 109-01
MNI BONDS: EGBs-GILTS CASH CLOSE: Gilts Outperform As Supply, Energy Weigh On EGBs
Gilts outperformed Bunds Tuesday, with curves leaning bear steeper.
- Multiple factors weighed on European instruments starting in early trade. They included lingering US tariff concerns, higher oil and gas prices, and heavy sovereign supply (Italy the EU, the Netherlands, and Germany.)
- Not to be outdone on the latter, the UK saw a record-sized 10Y Gilt syndication and orderbook.
- BoE's Mann set a hawkish tone in the UK rates space by noting that her vote for a 50bp cut in February doesn't necessarily mean that she will vote for a 50bp cut in the upcoming meetings.
- The German curve bear steepened, with the UK's seeing underperformance in the 5-10Y segment.
- Periphery EGB spreads widened slightly in defiance of stronger equities, with BTPs underperforming.
- Wednesday's calendar includes Italian industrial production data, with appearances by BOE's Greene and ECB's Nagel - reminder that ECB's Elderson participates in an MNI Webcast. Global attention will be on US inflation data released in the European afternoon.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 5.8bps at 2.084%, 5-Yr is up 7bps at 2.212%, 10-Yr is up 6.8bps at 2.43%, and 30-Yr is up 7.7bps at 2.692%.
- UK: The 2-Yr yield is up 3.8bps at 4.184%, 5-Yr is up 5.1bps at 4.198%, 10-Yr is up 5.1bps at 4.508%, and 30-Yr is up 4.3bps at 5.099%.
- Italian BTP spread up 1.2bps at 110bps / French OAT up 0.6bps at 77.8bps
MNI EGB OPTIONS: Rates Call Condors Continue To Soar
Tuesday's Europe rates/bond options flow included:
- ERJ5 97.875/97.9375/98.00/98.0625c condor, bought for 2 in 8.5k total
- ERK5 97.68/62/56/43 broken p condor bought for half in 3k
- ERM5 98.00/98.25/98.62 broken c fly, bought for 4 in 3k
- ERM5 97.9375/98.0625/98.1875c fly, bought for 3 in 6.5k
- ERU5 97.87/98.00/98.12/98.25c condor, sold at 3.5 in 3k
- ERU5 98.125/98.25cs vs 97.625p, bought the cs for 1.5 in 10k
- SFIM5 96.15/96.25/96.35/96.45c condor, bought for 1 in 5k
MNI FOREX: EURJPY Extends Recovery Amid Higher Core Yields
- Pressure on core fixed income and the associated higher yields on Tuesday have supported a recovery for Cross/JPY, with USDJPY briefly rising to a high of 152.60 roughly 1% off the Monday lows. Spot has since moderated to ~152.30 amid a broader dollar offer, but is consolidating 0.3% gains as we approach the APAC crossover
- Plenty of room for USDJPY to correct further to the topside, given the powerful move lower last week and additional profit taking dynamics potentially in play ahead of tomorrow’s US CPI release. 152.89 (Jan 6 high) and 153.72 (Jan 27 low) are levels to watch on the topside.
- In similar vein, EURJPY has traded on the front foot following last week’s near 3% plunge. We have noted that the short-term trend is oversold, and today’s 0.6% advance is allowing this condition to unwind. Initial resistances are located at 157.97 (Feb 3 low) and 158.86 (Feb 6 high), however firm resistance is not seen until the 20-day EMA and the significant pivot level of 160.00.
- Firmer equity indices have weighed broadly on the US dollar, allowing the DXY to erode the moderate rally seen Monday - as markets shrug off the most recent announcement of US tariffs on steel and aluminium.
- Both the EUR and GBP are outperforming, rising roughly 0.4% against the dollar. Sterling has been buoyed by comments from BOE’s Mann whose relatively hawkish lean may have assisted GBP at the margin. More constructive AUD price action is seeing AUDUSD flirt with resistance at 0.6302, the 50-day EMA, of which a break would be a bullish development and place the immediate focus on 0.6331, the Jan 24 high and a key resistance.
- All attention turns to US CPI on Wednesday, where consensus sees core CPI inflation accelerating to a seasonally adjusted 0.3% M/M (unrounded 0.29%) in January.
MNI FX OPTIONS: Expiries for Feb12 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0200(E1.7bln), $1.0220-25(E1.2bln), $1.0250-70(E2.7bln), $1.0300(E1.9bln), $1.0325(E944mln), $1.0400-05(E1.1bln), $1.0430(E1.3bln), $1.0450(E968mln)
- USD/JPY: Y151.75($566mln), Y153.00-15($884mln), Y153.50-70($1.7bln), Y155.30($560mln)
- GBP/USD: $1.2450-60(Gbp579mln)
- AUD/USD: $0.6175(A$775mln), $0.6200(A$1.0bln), $0.6370-75(A$576mln), $0.6550(A$1.3bln)
- NZD/USD: $0.5725-40(N$664mln), $0.5760-70(N$591mln)
MNI US STOCKS: Late Equities Roundup: Narrowly Mixed Ahead Midweek Inflation Data
- Stocks trade mixed late Tuesday, inside narrow ranges as markets await the release of key CPI and PPI inflation data on Wednesday and Thursday respectively. Currently, the DJIA trades up 58.19 points (0.13%) at 44529.93, S&P E-Minis down 0.75 points (-0.01%) at 6088, Nasdaq down 57.7 points (-0.3%) at 19656.57.
- Consumer Discretionary and Health Care sectors underperformed in the second half, a mix of auto and travel related stocks weighed on the former: Marriott International -5.28%, Tesla -4.63%, Expedia -3.0% while Garmin Ltd declined 2.37%. Managed care and pharmaceuticals weighed on the Health Care sector in late trade: despite rising revenues Humana dropped 8.25% after missing earnings estimates, Molina Healthcare -3.92%, Regeneron Pharmaceuticals -3.10%.
- On the positive side, Materials and Energy sectors continued to outperform in the second half. Oil and gas shares continued to gain with ongoing support in crude (WTI +.92 at 73.27): Phillips66 +4.45%, ConocoPhillips +2.67% and Devon Energy +2.51%. Meanwhile chemical manufacturers buoyed the Materials sectors: DuPont de Nemours +8.55% after beating earnings estimates, as did Ecolab Inc +6.49% amid robust end user demand.
- Reminder, Tuesday afternoon earnings include: Upstart Holdings, Brighthouse Financial, Welltower, Confluent, DoorDash, Eversource Energy, Lyft, Zillow Group, Gilead Sciences and Edwards Lifesciences Corp.
MNI EQUITY TECHS: E-MINI S&P: (H5) Short-Term Reversal Threat
- RES 4: 6178.75 High Dec 6 and key resistance
- RES 3: 6162.25 High Jan 24
- RES 2: 6147.75 High Jan 31
- RES 1: 6123.25 High Feb 7
- PRICE: 6083.50 @ 1155 ET Feb 11
- SUP 1: 6014.00/5935.50 Intraday low / Low Feb 3
- SUP 2: 5892.37 76.4% retracement of the Aug 5 - Dec 6 bull leg
- SUP 3: 5842.50 Low Jan 14
- SUP 4: 5809.00 Low Jan 13 and a key resistance
The initial sell-off on Feb 3 in the S&P E-Minis contract and the breach of support at 5948.00, Jan 27 low, continues to highlight a possible S/T reversal threat. If correct, it suggests that the latest bounce is a correction. A resumption of weakness would open 5892.37, a Fibonacci retracement point. On the upside, a stronger rally would expose key resistance at 6178.75, the Dec 6 ‘24 high. Clearance of this hurdle would resume the primary uptrend.
WEDNESDAY
| Date | GMT/Local | Impact | Country | Event |
| 12/02/2025 | 0900/1000 | * |  IT | Industrial Production |
| 12/02/2025 | 1000/1000 | * |  GB | Index Linked Gilt Outright Auction Result |
| 12/02/2025 | 1000/1100 |  EU | ECB's Elderson in roundtable at the MNI Connect event | |
| 12/02/2025 | 1200/0700 | ** |  US | MBA Weekly Applications Index |
| 12/02/2025 | - | *** |  CN | Money Supply |
| 12/02/2025 | - | *** | CN | New Loans |
| 12/02/2025 | - | *** | CN | Social Financing |
| 12/02/2025 | 1330/0830 | *** | US | CPI |
| 12/02/2025 | 1330/0830 | ** | US | US CPI Annual Revised |
| 12/02/2025 | 1500/1000 | US | Fed Chair Jerome Powell | |
| 12/02/2025 | 1500/1500 | GB | BOE's Greene speech at Institute of Directors | |
| 12/02/2025 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 12/02/2025 | 1700/1200 | US | Atlanta Fed's Raphael Bostic | |
| 12/02/2025 | 1800/1300 | ** | US | US Note 10 Year Treasury Auction Result |
| 12/02/2025 | 1830/1330 |  CA | BOC Meeting Minutes | |
| 12/02/2025 | 1900/1400 | ** | US | Treasury Budget |
| 12/02/2025 | 2205/1705 | US | Fed Governor Christopher Waller |