HIGHLIGHTS
- Treasuries look to finish mixed, curves twisting flatter with bonds outperforming weaker short end rates ahead of Friday's November jobs report.
- Projected rate cuts into early 2025 have cooled slightly, current levels vs. this morning (*) as follows: Dec'24 cumulative -17.5bp (-18.5bp), Jan'25 -24.5bp (-24.4bp), Mar'25 -39.6bp (-39.2bp), May'25 -49.6bp (-50.2bp).
- Initial jobless claims were higher than expected at 224k (sa, cons 215k) in the week after an upward revised 215k (initial 213k). Continuing claims on the other hand fell more than expected to 1871k (sa, cons 1904k) after a downward revised 1896k (initial 1907k).
MNI US TSYS: Markets Hold Narrow Ranges Ahead Friday's Key Jobs Report, Fed Blackout
- Treasury futures look to finish mixed Thursday, well off early session lows as markets consolidate ahead Friday morning's key employment data for November (Bbg survey est +218k vs. +12k prior). Stocks also reversed early gains as accounts took profits in SPX Eminis climbed to a new record high of 6107.25 earlier.
- Reminder, the Federal Reserve enters their self-imposed blackout period at midnight Friday through December 19, the day after the final FOMC policy annc for 2024.
- Tsy curves twisted flatter (2s10s -1.829 at 3.009) as short end rates underperformed, meanwhile projected rate cuts into early 2025 have cool slightly, current levels vs. this morning (*) as follows: Dec'24 cumulative -17.5bp (-18.5bp), Jan'25 -24.5bp (-24.4bp), Mar'25 -39.6bp (-39.2bp), May'25 -49.6bp (-50.2bp).
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.02488 to 4.48252 (-0.04983/wk)
- 3M -0.01573 to 4.42844 (-0.04481/wk)
- 6M -0.02247 to 4.33044 (-0.05315/wk)
- 12M -0.02828 to 4.17784 (-0.07605/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.59% (-0.05), volume: $2.265T
- Broad General Collateral Rate (BGCR): 4.58% (-0.02), volume: $836B
- Tri-Party General Collateral Rate (TGCR): 4.58% (-0.02), volume: $808B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.58% (+0.00), volume: $99B
- Daily Overnight Bank Funding Rate: 4.58% (+0.00), volume: $261B
FED Reverse Repo Operation
RRP usage falls to new multi-year low of $131.964B (early May 2021 lows) this afternoon from $162.886B on Wednesday. The number of counterparties falls to 53 from 65 prior.
US SOFR/TREASURY OPTION SUMMARY
Trading desks reported two-way positioning and outright position squaring in SOFR and Treasury options Thursday as trading accounts migrated to the sidelines ahead of Friday morning's key jobs report for November while the Federal Reserve enters blackout at midnight Friday. Underlying futures are trading weaker but well off early lows, curves reversing midweek steepening with 2s10s -2.022 at 2.816. Projected rate cuts into early 2025 have cooled slightly, current levels vs. this morning (*) as follows: Dec'24 cumulative -17.5bp (-18.5bp), Jan'25 -24.5bp (-24.4bp), Mar'25 -39.6bp (-39.2bp), May'25 -49.6bp (-50.2bp).
SOFR Options:
-25,000 SFRZ4 95.56/95.62/95.68 call flys, 2.0 ref 95.5975
+5,000 0QZ4 96.37 calls 3.5 ref 96.21
+3,000 SFRH5 96.00/96.25 1x2 call spds 1x2 0.75 ref 95.84
+15,000 SFRZ5 98.00/98.50/99.00 call flys 1.25 ref 96.23
+10,000 SFRM5 95.37/95.62 put spds 4.25 ref 96.03
-10,200 2QZ4 96.50 puts, 19.5 ref 96.325
2,750 0QF5 95.93/96.12/96.25 broken put trees
Block, 4,000 SFRZ4 95.56/95.68 call spds 5.75
7,600 0QH5 96.25 puts, 22.5 ref 96.30
-4,000 SFRZ4 95.62/95.68/95.75 2x1x1 call trees, 3.5
3,500 SFRZ4 95.37/95.50/95.62/95.75 put condors, 9 ref 95.595
Block/screen, 9,000 SFRF5 96.00/96.25 call spds, 2.75
Block/screen, 11,500 SFRH5 95.50/95.75/95.87/96.00 broken put condors, 1.25
Block, 7,500 0QZ4 96.62/96.87 call spds, 0.5
1,500 SFRZ4 95.62/95.68/95.75 2x1x1 put trees ref 95.5925
1,200 SFRF5 95.75/95.81/95.87 put flys ref 95.5925
Treasury Options:
3,440 FVF5 105.75/106.75 2x1 put spds ref 107-15.75
11,000 TYF5 105/106.5/108 put trees, 1 ref 111-01.5
10,000 wk1 TY110.25/110.50/110.75 put trees ref 111-00 (expire Fri)
+20,000 TYG5 113 calls, 22 vs. 111-03/0.07%
2,300 TYG5 113.5/TYH5 113 call spds
1,100 FVF5 104.75/105.75 put spds vs. 109 calls
1,500 TYG5 108/TYH5 109 3x2 put calendar spd ref 111-02
-10,000 TYF5 109 puts, 6 ref 111-01
+2,000 TYG5 107/108.5/109.5 2x3x1 broken put flys, 16
6,000 wk2 TY 109.5 puts, 3 ref 111-05 to -04
2,000 TYG5 107/107.5/109/109.5 put condors, ref 111-05
6,000 TYG5 108.5 puts 14 ref 111-04.5
MNI BONDS: EGBs-GILTS CASH CLOSE: BTP And OAT Spreads Continue To Tighten
Bunds and Gilts weakened Thursday, with BTPs and OATs outperforming.
- EGBs largely shrugged off the collapse of the French government which occurred after the cash close Wednesday, with the outcome looking to have been priced in.
- Periphery EGBs and OATs were the outperformers, the former seeing the tightest close to 10Y Bunds since October 2021.
- Weakness in US Treasuries led Bunds lower throughout the day, with Gilts slightly outperforming their German counterparts. The German and UK curves bear flattened.
- ECB cut pricing was pared about 10bp through late 2025, though a December 25bp rate cut remains very much fully priced.
- Eurozone data was mixed: industrial production in France was the weak side but Spain beat expectations, while German factory orders were solid and Euro retail sales were soft.
- After the cash close, French President Macron is due deliver a televised address (2000CET). Friday sees German industrial production data, and the final reading of Q3 Euro GDP.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 6.7bps at 2.018%, 5-Yr is up 6.9bps at 1.986%, 10-Yr is up 5bps at 2.111%, and 30-Yr is up 2.4bps at 2.311%.
- UK: The 2-Yr yield is up 3.8bps at 4.274%, 5-Yr is up 3.3bps at 4.145%, 10-Yr is up 3.2bps at 4.281%, and 30-Yr is up 3.6bps at 4.811%.
- Italian BTP spread down 6.8bps at 108.7bps / French OAT down 5.6bps at 77.4bps
MNI OPTIONS: Mixed Trade In Sonia, Largely Upside In Euribor
Thursday's Europe rates/bonds options flow included:
- RXG5 135 puts paper paid 60 up to 62 on 7.3K
- ERZ4 97.12/97.25/97.37c fly, bought for 2.5 in 2k.
- ERH5 97.62/97.50/97.37p fly 1x3x2, bought for 0.25 in 5k.
- ERZ5 97.25/96.25ps, bought for 4.25in 5k (ref 98.23).
- SFIZ4 95.45/95.50cs x2 vs 95.30p sold the cs at 0.1 in 5k.
- SFIM5 96.00/96.50cs vs 95.70/95.45ps, bought the cs for 5 in 2k.
MNI FOREX: US Dollar Loses Ground as Jobless Claims Rise, Equities Gain
- Major equity benchmarks have consolidated solid gains this week, keeping the greenback on the backfoot Thursday. The USD index is down 0.42% on the session, with the weakness extending after the release of higher-than-expected weekly jobless claims in the US. The poorer data adds a moderately negative tilt leading into tomorrow’s key US employment report.
- The Euro and Swiss Franc lead gains in G10, slightly outpacing the DXY adjustment. EURUSD has remained unfazed by political developments in France, and following the US figures, the pair rose to a high of 1.0590 before reversing 30 pips lower ahead of the APAC crossover.
- EURJPY price action was most notable over the course of Thursday trade, with the higher front-end yields in the US also weighing on the Yen. EURJPY rose to a session high of 159.39, almost 200 pips off the lows. Expectations for the December BOJ meeting continue to stoke JPY volatility, with the market split between whether the bank will hike on December 19.
- Elsewhere, GBPUSD has established itself back above 1.2700 and trades closer to 1.2750 in late trade. Recent gains are considered corrective, and the move higher is allowing an oversold trend condition to unwind. Initial firm resistance at 1.2716, the 20-day EMA, has been pierced. A clear break of the average would signal scope for a stronger recovery and expose the 50-day EMA, at 1.2843.
- Friday’s release of the US employment report will be the data highlight of the week, a key input for the Fed ahead of its final decision of 2024. Non-farm payrolls is expected to bounce sharply to 215k in November in a reversal of October’s strike and weather-related weakness.
MNI OPTIONS: Expiries for Dec06 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0500(E2.1bln), $1.0550(E701mln), $1.0600-05(E814mln), $1.0650(E889mln)
- USD/JPY: Y151.00($551mln)
- USD/CAD: C$1.4000($637mln), C$1.4200($912mln)
MNI US STOCKS: Late Equities Roundup: Profit taking Ahead Friday Jobs Data
- Stocks have turned mildly lower in late Thursday trade, profit taking and position squaring ahead of Friday morning's headline employment data for November. Current Bloomberg survey estimate of +218k jobs compares to +12k in October. Reminder, the Federal Reserve also enters it's blackout period at midnight Friday through December 19, the day after the final FOMC policy announcement for 2024.
- Currently, the DJIA trades down 175.28 points (-0.39%) at 44837.89, S&P E-Minis down 4 points (-0.07%) at 6094.5 compared to new record high of 6107.25 tapped earlier, Nasdaq down 2.6 points (0%) at 19732.6.
- Consumer Discretionary and Energy sectors led gainers in the second half, autos and travel related shares supporting the former as Tesla gained 2.84%, Marriott Int +1.48%, Expedia +1.46%. Oil and gas stocks buoyed the Energy sector even as crude prices looked to settle lower (WTI -0.10 at 68.44): Kinder Morgan +2.81%, Williams Co +2.56%, Targa Resources +1.71%.
- On crude prices, OPEC+’s confirmed that it will delay the 2.2m b/d voluntary cut unwinding until April has added support. Meanwhile, there was some pressure on crude from news that Druzhba pipeline flows of Russian crude to the Czech Republic will resume tomorrow.
- Meanwhile, Materials and Health Care sectors underperformed in late trade. A mix of metals/mining, chemical and packaging stocks weighed on the Materials sector: Ball Corp -7.04%, FMC -3.80%, Mosaic -3.71% while Nucor declined 3.13%.
- Health Care equipment and services stocks trade weaker: UnitedHealth Group -4.51%, Align Technology -3.54%, Dexcom -2.78%.
MNI EQUITY TECHS: E-MINI S&P: (Z4) Bulls Remain In The Driver’s Seat
- RES 4: 6261.64 1.236 proj of the Nov 4 - 11 - 19 price swing
- RES 3: 6200.00 Round number resistance
- RES 2: 6184.00 1.000 proj of the Nov 4 - 11 - 19 price swing
- RES 1: 6106.36 0.764 proj of the Nov 4 - 11 - 19 price swing
- PRICE: 6095.50 @ 1445 ET Dec 5
- SUP 1: 5990.65 20-day EMA
- SUP 2: 5898.51 50-day EMA
- SUP 3: 5855.00 Low Nov 19
- SUP 4: 5814.75 Low Nov 6
The S&P E-Minis contract maintains a bullish tone and traded higher yesterday. This confirms a resumption of the uptrend and signals scope for a continuation near-term. Note that moving average studies are in a bull-mode set-up, highlighting a dominant uptrend and positive market sentiment. Sights are on the 6106.36 next, a Fibonacci projection. Initial support to watch lies at 5990.65, the 20-day EMA.
MNI COMMODITIES: WTI Crude Edges Lower As OPEC+ Confirms Output Cut Extension
- WTI is headed for the close trading marginally lower on the day, despite OPEC+ confirming that it is delaying the 2.2m b/d voluntary cut unwind until April.
- WTI Jan 25 is down by 0.1% at $68.4/bbl.
- OPEC+ will extend additional voluntary adjustments of 2.2m b/d until the end of March 2025, before unwinding the output cuts gradually until the end of September 2026.
- For WTI futures, attention remains on $65.74, the Oct 1 low. Initial firm resistance to watch is unchanged at $72.41, the Nov 7 high.
- Meanwhile, spot gold has fallen by 0.8% to $2,629/oz on Thursday, unwinding gains from the previous two session, ahead of tomorrow’s US payrolls data.
- Macquarie still thinks that gold has scope to push higher next year, likely hitting a record, as the Fed cuts rates and central banks continue purchases of the yellow metal.
- Our technical analyst continues to note that the long-term trend condition for gold remains bullish, with resistance to watch at $2,721.4, the Nov 25 high. Key support to monitor is $2,536.9, the Nov 14 low.
- Silver is also down by 0.4% at $31.2/oz, keeping the gold-silver ratio around its lowest level since Nov 20.
- Silver has pierced the 50-day EMA, at $31.154. A clear break of the average would highlight a possible reversal, opening $33.125 next, the Nov 1 high.
FRIDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 06/12/2024 | 0700/0800 | ** |  DE | Industrial Production |
| 06/12/2024 | 0700/0700 | * |  GB | Halifax House Price Index |
| 06/12/2024 | 0745/0845 | * |  FR | Foreign Trade |
| 06/12/2024 | 1000/1100 | * |  EU | Employment |
| 06/12/2024 | 1000/1100 | * |  IT | Retail Sales |
| 06/12/2024 | 1000/1100 | *** | EU | GDP (final) |
| 06/12/2024 | 1330/0830 | *** |  US | Employment Report |
| 06/12/2024 | 1330/0830 | *** |  CA | Labour Force Survey |
| 06/12/2024 | 1415/0915 | US | Fed Governor Michelle Bowman | |
| 06/12/2024 | 1500/1000 | ** | US | U. Mich. Survey of Consumers |
| 06/12/2024 | 1530/1030 | US | Chicago Fed's Austan Goolsbee | |
| 06/12/2024 | 1700/1200 | US | BOE's Greene at Financial Times Live | |
| 06/12/2024 | 1700/1200 | US | Cleveland Fed's Beth Hammack | |
| 06/12/2024 | 1800/1300 | US | San Francisco Fed's Mary Daly | |
| 06/12/2024 | 2000/1500 | * | US | Consumer Credit |