US TSYS Curves Twist Flatter, Rate Cuts Cool As Recession Concerns Ease

• Treasuries are mostly firmer after the bell, curves flatter (2s10s -5.920 at -11.155) with the short end underperforming on a relatively quiet end to a hectic week with no scheduled data, Fed speak or Tsy supply Friday.
• Treasury futures spiked higher early in the week as recession concerns climbed following last Friday's employment data, 10Y futures surge to 115-03.5 high Monday, 10Y yield fall to 3.6653% low.
• Markets spent the rest of the week scaling back support as recession cares cooled.
• Tsy Sep'24 10Y futures currently trade +8 at 112-29, vs. 112-21, well below technical resistance at 114-03/115-03+ (High Aug 6 / 5 and the bull trigger).
• Projected rate cut pricing into year end were well off Monday's highs (*): Sep'24 cumulative -39.4bp (-54.3bp), Nov'24 cumulative -70.5bp (-95.9bp), Dec'24 -102.2bp (-128.1bp).
• Focus on next week's PPI, CPI, Retail Sales, Home sales data and UofM inflation expectations.

SOFR FIXES AND PRIOR SESSION REFERENCE RATES

SOFR Benchmark Settlements:

• 1M +0.00686 to 5.33352 (-0.01672/wk)
• 3M +0.00986 to 5.11269 (-0.11504/wk)
• 6M +0.02110 to 4.80597 (-0.20166/wk)
• 12M +0.03171 to 4.35628 (-0.23980/wk)

• Secured Overnight Financing Rate (SOFR): 5.34% (+0.01), volume: $2.196T
• Broad General Collateral Rate (BGCR): 5.33% (+0.00), volume: $816B
• Tri-Party General Collateral Rate (TGCR): 5.33% (+0.01), volume: $796B
• (rate, volume levels reflect prior session)

• Daily Effective Fed Funds Rate: 5.33% (+0.00), volume: $106B
• Daily Overnight Bank Funding Rate: 5.32% (+0.00), volume: $242B

FED Reverse Repo Operation:

RRP usage climbs to $312.198B from $303.159B Thursday -- compares to $286.660B on Wednesday -- the lowest since mid-May 2021. Number of counterparties climbs to 62 from 58 prior.

SOFR/TEASURY OPTION SUMMARY

SOFR and Treasury option trade remained mixed Friday, with a pick-up in call volume in both during the second half. Underlying futures firmer, curves flatter with the short end underperforming. Projected rate cut pricing into year end largely steady to marginally lower vs. early Friday levels (*): Sep'24 cumulative -39.4bp (-40.1bp), Nov'24 cumulative -70.5bp (-71.6bp), Dec'24 -102.2bp (-102.7bp).

• SOFR Options:
  • +10,000 SFRU4 95.25/96.25 call spds, 4.25 ref 95.14
  • -5,000 0QZ4 96.25/96.62/96.87 call flys, 11.5 ref 96.75
  • +7,000 SFRU4 94.62/95.00/95.50/95.87 Iron Condor 2.75 ref 95.15
  • +10,000 SFRZ4 95.12/95.25/95.37 put flys 1.0 ref 95.76
  • Block, 5,000 SFRV4 96.00/96.25/96.37 broken call flys 1.0 over 95.43/95.50 put spds
  • +4,000 SFRZ4 95.00 puts 1.25 ref 95.76
  • +5,000 SFRH6 95.00/96.00 2x1 put spd 9 ref 96.815
  • +10,000 SFRU4 94.68/94.93/95.31/95.56 call condor 22.75 ref 95.155
  • +8,000 SFRH6 95.00/96.00 2x1 put spds, 9.0
  • +3,000 0QZ4/3QZ4 97.00/97.50 call spd spd, 1.75 steepener
  • 2,400 SFRZ4 95.31/95.50 2x1 put spds ref 95.75
  • over -30,000 SFRZ4 95.50/95.68 2x1 put spds ref 95.75
  • Block/screen, 11,000 SFRV4 95.25/95.50/95.68 broken put flys, 3.5 ref 95.755
• Treasury Options:
  • 15,000 TYV4 118.5 calls ref 113-14.5
  • 2,000 TYU4 112.5 puts vs. 113.25/114.75 call spds ref 113-02
  • 5,000 TYV4 118.5 calls, 6 ref 113-17.5
  • 5,900 wk2 TY 113/113.5 call spds, 8 ref 113-01.5
  • 1,500 TUU4 102.75/103 put spds vs. 103.37/103.75 call spds
  • 3,500 TYU4 114.25/114.5 call spds
  • 2,000 TYX4 116/116.5 call spds

FOREX: Lower Core Yields Provide Moderate JPY Boost

• In stark contrast to the state of the week, currency markets have traded in a very subdued manner Friday, with lower core yields moderately boosting the likes of the Japanese Yen and Swiss Franc.
• USDJPY trades down 0.45% as markets very gradually reversed the swift gains following Thursday’s jobless claims data in the US. The pair fell just shy of 147.90 resistance overnight and continued to trade with a bearish tilt throughout the session, reaching as low as 146.27 before stabilising around 146.60 as we approach the close.
• Note that the USDJPY bear trend remains in an extreme oversold condition, and the latest recovery - a correction - is allowing this condition to unwind. Given the extreme volatility, technical levels of note include initial firm resistance at 151.57, the 20-day EMA and bear trigger support at 141.70, the Aug 5 low.
• In similar vein, the Swiss Franc traded on the front foot, rallying around 0.25% against its major G10 counterparts.
• EURUSD exhibited a 22pip range on the session as a lack of tier-one data and the aftermath of a busy week curtailed volatility.
• Mixed employment data from Canada (lower jobs change, lower unemployment rate) was unable to spur any momentum for the Canadian dollar, which also trades close to unchanged around 1.3725. Trend conditions in USDCAD remain bullish and recent gains reinforce this theme. The most recent retracement appears to be a correction and is allowing an overbought condition to unwind.
• Inflation data from the UK and US headline next week, with central bank decisions also scheduled in New Zealand and Norway.

FX OPTIONS: Expiries for Aug12 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0820-30(E1.7bln), $1.0860-70(E1.0bln), $1.0950(E871mln), $1.0990(E555mln
• AUD/USD: $0.6635(A$506mln)
• USD/CNY: Cny7.3000($1.1bln)

Late Equities Roundup: IT, Consumer Shares Lead Gainers

• Stocks remained mixed on narrow ranges late Friday, a quiet end to a hectic week that saw S&P Eminis see-saw off Monday's 3-month lows. Currently, the DJIA trades down 18.52 points (-0.05%) at 39427.53, S&P E-Minis up 11.25 points (0.21%) at 5359.5, Nasdaq up 53.9 points (0.3%) at 16713.99.
• Information Technology and Consumer Discretionary sectors led gainers in late trade, software and services shares outpaced semiconductor makers: Akamai Tech +11.0% after beating earnings estimates late Thursday, Palo Alto Networks +4.14%, Broadcom +2.43%.
• The Consumer Discretionary sector was supported by a mix of travel, auto and food related stocks: recovering from midweek lows, Expedia climbed 9.86% after beating earnings expectations late Thursday, Chipotle +2.14%, GM +1.78%.
• Conversely, Industrials and Materials sectors underperformed in the second half, transportation shares weighing on the former: Old Dominion -1.64%, Union Pacific -1.07%, Delta Air -1.06%. The Materials sector underperformed as container and construction stocks traded lower: Ball Corp -1.33%, Packaging Corp of America -1.21%, Martin Marietta Materials -1.2%.
• While the latest earnings cycle is approximately 82% complete, there are a number of announcements expected next week: Home Depot early Tuesday; Brinker Int, Samsonite and Cisco late Wednesday; Walmart, Applied Materials and Deere & Co on Thursday.

E-MINI S&P: (U4) Watching Resistance At The 50-Day EMA

• RES 4: 5721.25 High Jul 16 and Key resistance
• RES 3: 5600.75 High Aug 1
• RES 2: 5460.55 50-day EMA
• RES 1: 5385.25 Intraday high
• PRICE: 5360.00 @ 1430 ET Aug 9
• SUP 1: 5120.00 Low Aug 5
• SUP 2: 5185 50.76.4% retracement of the Apr 19 - Jul 16 bull leg
• SUP 3: 5092.00 Low May 2
• SUP 4: 5020 Low Apr 19 and a key support

S&P E-Minis traded lower on Aug 5 and this confirmed an extension of the bear cycle. The move down has resulted in a print below 5185.50, 76.4% of the Apr 19 - Jul 16 bear leg. A clear break of this level would open 5092.00 next, the May 2 low. Short-term gains are - for now - considered corrective and the 50-day EMA marks a firm resistance, at 5460.55. Clearance of this average is required to alter the picture.

COMMODITIES: Crude Gains Ground, Spot Gold Unchanged

• WTI is up around 4.5% on the week to its highest level since Aug 2. Ongoing Middle East tensions and an easing of US recession concerns have been supportive.
• WTI Sep 24 is up 0.8% at $76.8/bbl.
• A bear threat in WTI futures remains present despite this week’s recovery, a correction. Short-term gains are allowing an oversold condition to unwind.
• A resumption of weakness would again expose the next key support at $72.23, the Jun 4 low. Key resistance is seen at $78.88, the Aug 1 high.
• Spot gold is broadly unchanged at $2,428/oz on Friday, leaving the yellow metal 0.6% lower on the week.
• Recent weakness in gold appears to be a correction. A resumption of gains would open $2,483.7, the Jul 17 high.
• Support is seen at the 50-day EMA, at $2,379.6.
• Meanwhile, copper has pared gains later in today’s session, with the red metal currently up by 0.7% at $399/lb. The move leaves copper 2.8% lower over the week.
• A bear cycle in copper futures remains intact, with attention on $372.35, the Feb 9 low. Initial firm resistance is at $429.93, the 50-day EMA.

MONDAY DATA CALENDAR

Date	GMT/Local	Impact	Flag	Country	Event
12/08/2024	-	***		CN	Money Supply
12/08/2024	-	***		CN	New Loans
12/08/2024	-	***		CN	Social Financing
12/08/2024	1230/0830	*		CA	Building Permits
12/08/2024	1530/1130	*		US	US Treasury Auction Result for 13 Week Bill
12/08/2024	1530/1130	*		US	US Treasury Auction Result for 26 Week Bill
12/08/2024	1600/1200	***		US	USDA Crop Estimates - WASDE
12/08/2024	1800/1400	**		US	Treasury Budget