HIGHLIGHTS
- Treasuries bounced off 3M lows early Thursday, knock-on support from EGBs after soft flash-PMI European data.
- US Rates pared early gains after this morning's lower than expected weekly claims, followed by higher than expected flash PMI and New Home Sales data.
- Yields rejected the brief bounce with Treasuries climbing to new session highs ahead midday - 10s back near late Tuesday levels in late trade.
MNI US TSYS: Off Data Driven Lows, Still Not Far From Late July Lows
- Treasuries looked to finish higher Thursday, taking cues from EGB flash PMI data overnight. German composite PMI remained in contractionary territory for the fourth consecutive month while French flash October PMIs were weaker than expected for the second consecutive month.
- Early Treasury support evaporated after US Data: Initial jobless claims were notably lower than expected for a second week running, at 227k (sa, cons 242k) in the week to Oct 19 after a marginally upward revised 242k (initial 241k) held onto much of last week’s surprise lower. New home sales were stronger than expected as they increased to an annualized 738k in September (cons 720k) from a downward revised 709k (initial 716k).
- Meanwhile, October flash PMIs fared better than expected across the main sectors as both manufacturing and services indexes increased. The S&P Global press release notes the survey signaling “a further solid rise in business activity to mark a robust start to the fourth quarter”.
- The morning reversal (TYZ4 fell to a session low of 111-03) was short lived, however, the 10Y contract climbing to 111-13.5 by late morning before settling around 111-08.5 (+7.5). Curves bull flattened: 2s10s -3.374 at 12.968, 5s30s -1.861 at 44.115. There were no obvious headline or flow related drivers for the bounce as Treasuries hold near late July levels.
- Look ahead: Friday focus on Durables/Capital Goods and University of Michigan's sentiment/inflation outlook. Next week Friday see's the latest round of employment data for October.
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.00574 to 4.73759 (-0.02147/wk)
- 3M -0.00889 to 4.62587 (-0.00576/wk)
- 6M -0.00294 to 4.45486 (+0.01115/wk)
- 12M +0.00919 to 4.16561 (+0.03330/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.83% (+0.00), volume: $2.129T
- Broad General Collateral Rate (BGCR): 4.82% (+0.00), volume: $808B
- Tri-Party General Collateral Rate (TGCR): 4.82% (+0.00), volume: $773B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.83% (+0.00), volume: $99B
- Daily Overnight Bank Funding Rate: 4.83% (+0.00), volume: $259B
FED Reverse Repo Operation: Second New Multi-Year Low of the Week
RRP usage falls to a new multi year low for the second time this week: to $202.798B from $270.839 yesterday. This after usage fell to $237.760B Tuesday -- lowest since mid-May 2021. Number of counterparties fall to 53 after surging to 84 yesterday.
US SOFR/TREASURY OPTION SUMMARY
Option desks report better SOFR & Treasury put volume on net Thursday, the latter ties to November expiry flow ahead of Friday's expiration. Underlying futures trading firmer, off 3M lows after soft European flash PMIs overnight, while rejecting this morning's firmer US flash PMI. Current projected rate cuts into early 2025 have gained momentum vs. late Wednesday levels (*): Nov'24 cumulative -23.6bp (-22.3bp), Dec'24 -42.9bp (-41.0bp), Jan'25 -60.1bp (-57.1bp), Mar'25 -81.0bp (-76.6bp). Highlight trade includes:
SOFR Options:
Block: -12,232 SFRX4 95.25/95.50/95.75 call flys, 10.0 vs. 95.665/0.05%
+12,000 SFRZ4 96.25/97.25 call spds, 1.0 vs. 95.64/0.05%
+15,000 SFRZ4 95.06/95.12 put spds, 0.25 ref 95.625
Block, 6,000 SFRM5 96.00/0QM5 96.25 put spds, 8.5 cvrd
10,500 2QZ4 96.00 puts ref 96.495
3,000 0QZ4 96.25/96.50 put spds ref 96.505
-4,000 SFRF5 95.75/95.81/95.93 broken put flys 1.75 over SFRF5 96.43/96.56 call spds ref 95.985
-17,000 SFRF5 96.06/96.25/96.37/96.50 broken put condors, 2.5db ref 95.98
3,500 SFRZ4 95.68 puts, 5.5
5,000 SFRX4 95.31/95.37 put spds ref 95.605
Treasury Options: Reminder, November options expire Friday
8,000 TYG5 108.5/110 put spds ref 111-20 to -19.5
over 11,000 TYX4 111.25/111.75 put spds, 31 ref 111-09.5
over 12,600 USZ4 115 puts, 47-52 ref 118-17 to -19
over 10,000 TYZ4 108/108.5/109.5/110 put condors
+70,000 TYZ4 106/107.5 put spds 5 ref 111-07 to -06.5
6,000 USZ4 121/124 1x2 call spds, 18-19 ref 118-23
7,600 TYZ4 110.5/112 strangles 1-28 ref 111-11.5
2,000 TYX4 111.75/112/112.25 call flys, 1 ref 111-11.5
2,000 FVZ4 107.5 puts, 36.5 ref 107-28.25
+3,650 wk1 TY 110.75/111.25 put spds 4 over 112.5 calls ref 111-12 (expire Nov 1)
MNI BONDS: EGBs-GILTS CASH CLOSE: Gilts Clear Underperformer On Fiscal Plans
- Gilts have been a clear underperformer today, with 10Y yields rising 3.6bps vs mostly 3.8-4.7bp declines across EGBs owing to idiosyncratic fiscal factors around Chancellor Reeves’ rule amendments.
- See here, here and here plus initial analysis here about how the news outweighed dovish comments from the BoE’s Bailey.
- EGBs meanwhile have been supported by a sharp rolling over in oil futures and equities also fading.
- In data, the German PMIs were stronger than consensus but the underlying details were still weak, keeping focus on tomorrow's IFO survey. The French PMI was weaker than expected, while the rest of the Eurozone once again outperformed the region's two largest economies.
- It meant the Eurozone services PMI was slightly softer than expected at 51.2 (cons 51.5) after 51.4 vs a stronger but a still depressed manufacturing PMI of 45.9 (cons 45.1) after 45.0, netting out for little change for the composite PMI.
- In latest ECBspeak, Lane noted that backward-looking components are still playing out but the disinflation process is well on track with inflation set to return to target in the course of 2025. Muller isn’t worried about falling behind the curve and sees the best policy choice being measures rate cuts.
- Closing Yields / 10-Yr Periphery EGB Spreads To Germany:
- Germany: The 2-Yr yield is down 2.7bps at 2.076%, 5-Yr is down 3.4bps at 2.079%, 10-Yr is down 3.8bps at 2.266%, and 30-Yr is down 3.8bps at 2.587%.
- UK: The 2-Yr yield is up 4.9bps at 4.143%, 5-Yr is up 5.1bps at 4.09%, 10-Yr is up 3.7bps at 4.237%, and 30-Yr is up 3.3bps at 4.764%.
- Italy / German 10-Yr spread 0.8bps tighter at 120.8bps
MNI FOREX: Greenback Loses Ground as US Yields Slip Off Recent Highs
- US yields have reversed a small portion of this week’s march higher and accordingly, the USD index is roughly 0.3% lower on the session. Given the ongoing sensitivity of the Japanese Yen to movements in core yields, USDJPY has also sold off on Thursday, dipping 0.7% to trade back below 152.00 as we approach the APAC crossover.
- The pair remains roughly 1.5% higher on the week and given the strong rally across October, initial support is not found until 150.50, Tuesday’s low and firm support remains much further down at 147.77, the 50-day EMA.
- Yen volatility is likely to remain the clear focus for currency markets as the primary driver for sentiment remains core yields and next week’s busy calendar includes snap legislative elections in Japan, the BOJ decision and key growth & employment data prints in the US.
- Broad dollar weakness was a consistent theme across the rest of G10, with the likes of EURUSD and GBPUSD rising between 0.25-0.30%. While a bearish theme continues to dominate for cable, today’s positive session sees the pair break a losing streak of three consecutive sessions this week. As such, EURGBP continues to hover just above the multi-year support level of 0.8300.
- USDCAD bucks the trend and has seen a solid move higher today following the BOC meeting yesterday. USDCAD has probed the week’s high of 1.3863 in recent trade and the technical set-up continues to lean bullish with firmer clearance here opening a key resistance at 1.3946 (Aug 5 high) after which lies the psychological 1.4000 mark.
- Friday’s data highlight is Canadian retail sales, although German IFO and Eurozone M£ money supply data is also due, as well as US durable goods.
MNI FOREX OPTIONS: Expiries for Oct25 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0800-20(E1.6bln), $1.0885-00(E1.0bln)
- USD/JPY: Y151.95-00($535mln)
- AUD/USD: $0.6650-55(A$856mln)
- USD/CAD: C$1.3455($1.3bln), C$1.3830($503mln), C$1.3850-55($1.2bln)
MNI US STOCKS: Late Equities Roundup: Awaiting More Corporate Results
- Stocks remain mixed in late Thursday trade, the Dow still weaker vs. modest gains in SPX eminis while Nasdaq shares outperformed as traders awaited another heavy round of corporate results after the close. Currently, the DJIA trades down 205.15 points (-0.48%) at 42310.64, S&P E-Minis up 5 points (0.09%) at 5842.75, Nasdaq up 110.7 points (0.6%) at 18386.77.
- A list of expected earnings announcements after the bell includes: Union Pacific Corp, Capital One Financial, Skechers, Digital Realty Trust, Healthpeak Properties, Dexcom Inc, L3Harris Technologies, Universal Health Services, Texas Roadhouse Inc, Arthur J Gallagher, Weyerhaeuser Co, Mohawk Industries, Western Digital Corp, Deckers Outdoor Corp, Edwards Lifesciences.
- Consumer Discretionary, Health Care and Real Estate sectors continued to outperform in late trade. Molina Healthcare +20.18% and West Pharmaceutical +15.56% -- both after beating estimates, Tesla +20.63% after beating late Wednesday, while CBRE Group gained 8.99%.
- On the flipside, Materials, Utilities and Industrials sectors underperformed in late trade. Individual laggers include Newmont Corp -9.06%, Teradyne Inc -11.57%, Carrier -7.88%, IQVIA -7.18% while IBM fell -6.50%.
MNI EQUITY TECHS: E-MINI S&P: (Z4) Pullback Considered Corrective
- RES 4: 6012.75 1.00 projection of the Aug 5 - Sep 3 - 6 price swing
- RES 3: 6000.00 Psychological handle
- RES 2: 5961.00 1.00 projection of the Sep 6 - 17 - 18 price swing
- RES 1: 5927.25 High Oct 17 and the bull trigger
- PRICE: 5851.00 @ 1526 ET Oct 24
- SUP 1: 5801.00/5742.01 Low Oct 23 / 50-day EMA
- SUP 2: 5724.00 Low Oct 2
- SUP 3: 5675.25 Low Sep 18
- SUP 4: 5658.00 Low Sep 13
S&P E-Minis traded lower yesterday and the contract remains below its recent highs. Short-term weakness is considered corrective and the uptrend remains intact. Price has traded through the 20-day EMA, at 5831.56, but is - for now - trading above this EMA today. A clear break of this average would open 5745.75, the 50-day EMA. A stronger resumption of gains would refocus attention on 5961.00, a Fibonacci projection.
MNI COMMODITIES: Gold Bull Cycle Remains Intact, Crude Sells-Off
- Spot gold has risen by 0.8% to $2,736/oz on Thursday, aided by a softening of the dollar today and continued safe haven demand that has driven the yellow metal to record highs this week.
- With gold bulls still in the driver’s seat, sights remain on $2767.1 next, a Fibonacci projection point, ahead of the $2800.0 handle.
- Meanwhile,WTI is maintaining the earlier sell off in US hours, likely sparked my Axios reports of a renewed ceasefire push between Israel and Hamas in Gaza. Focus is now shifting to concerns about oversupply.
- WTI Dec 24 is down by 0.7% at $70.3/bbl.
- EIA data yesterday showed US crude inventories rose by 5.47mbbl on the week, supported by an increase in imports and with production holding at record levels of 13.5mb/d, to more than offset an unexpected increase in refinery runs.
- WTI futures have recovered from their recent lows. However, A bearish theme in WTI futures remains intact with attention on $65.99, the Oct 1 low, and $64.16, the Sep 10 low and a key support.
- In contrast, Henry Hub is now extending gains from yesterday to the highest since Oct 15, with colder weather expected in western areas and a dip in production set against curtailed LNG export flows and a near-average EIA storage build.
- US Natgas Nov 24 is up by 7.8% at $2.52/mmbtu.
FRIDAY DATA CALENDAR
| Date | ET | Impact | Period | Release | Prior | Consensus | |
| 25/10/2024 | 0830 | ** | Sep | Durable Goods New Orders m/m | 0.0 | -1.0 | % |
| 25/10/2024 | 0830 | ** | Sep | Durable New Ords (x-trnsp) m/m | 0.5 | -0.1 | % |
| 25/10/2024 | 0830 | ** | Sep | Previous Durable Goods New Orders Ex Transportation Revised SA m/m percent change | -- | -- | % |
| 25/10/2024 | 0830 | ** | Sep | Previous Durable Goods New Orders Revised SA m/m percent change | -- | -- | % |
| 25/10/2024 | 1000 | ** | Oct | U. Mich Consumer Expectations | 72.9 | -- | |
| 25/10/2024 | 1000 | ** | Oct | U. Mich Consumer Sentiment | 68.9 | 69.5 | |
| 25/10/2024 | 1000 | ** | Oct | U. Mich Current Economic Conditions | 62.7 | -- |