HIGHLIGHTS
- Treasuries extended session lows and highs in the seconds after the release of higher than expected CPI vs. weekly Jobless claims.
- Rates see-sawed higher in the short end, curves twisted steeper (2s10ss +5.343 at 10.027) as markets took in mixed Fed speak (Chicago Fed Goolsbee in total agreement with Chairman Powell, Atl Fed Bostic could see a pause in November).
- Focus turns to Friday's PPI and University of Michigan inflation expectations, as well as the start of the latest earning cycle with several banks reporting before the open: Wells Fargo, JP Morgan, Bank of NY Mellon and Blackrock.
US TSYS
MNI US TSYS: Curves Twist Steeper, Projected Rate Cuts Consolidate
Treasuries look to finish mixed after a volatile first half. Markets are still digesting this morning's higher than expected CPI and weekly jobless claims while Fed speak came out mixed: Atlanta Fed Bostic saying the door is open to skipping a rate cut at the next November, while NY Fed Williams sees a solid U.S. labor market and inflation is closing in on 2% over time.
- Initial jobless claims for the six states most heavily impacted by Hurricane Helene saw non-seasonally adjusted claims rise to 35.5k vs closer to the 20k or even a little below that is typical for the time of year.
- The upside surprise in September CPI (headline 0.18% M/M vs 0.08% expected, Core 0.31% vs 0.25% expected) was driven by multiple factors - which may not be translated into the Fed's preferred PCE gauge, potentially mitigating the upside surprise from a market perspective.
- Short end disconnected as Tsy curves twisted steeper (2s10ss +5.147 at 9.831), while projected rate cuts have scaled back from this morning's post-data highs (*): Nov'24 cumulative -20.7bp (-22.7bp), Dec'24 -44.2bp (-46.5bp), Jan'25 -63.9bp (-68.9bp).
- Strong 30Y Bond auction reopen traded through: 4.389% high yield vs. 4.405% WI; 2.50x bid-to-cover vs. 2.38x in the prior month. Indirect take-up surged to new all-time high of 80.47% vs. 68.68% prior; direct bidder take-up 7.37% vs. 15.66% prior; primary dealer take-up 12.16% vs. 15.66% prior.
- Focus turns to Friday's PPI and University of Michigan inflation expectations, as well as the start of the latest earning cycle with several banks reporting before the open: Wells Fargo, JP Morgan, Bank of NY Mellon and Blackrock.
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.01903 to 4.80396 (-0.04162/wk)
- 3M -0.00238 to 4.65590 (+0.07192/ wk)
- 6M +0.00291 to 4.44872 (+0.16773/wk)
- 12M +0.01948 to 4.14742 (+0.28160/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.83% (-0.01), volume: $2.220T
- Broad General Collateral Rate (BGCR): 4.82% (-0.01), volume: $808B
- Tri-Party General Collateral Rate (TGCR): 4.82% (-0.01), volume: $768B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.83% (+0.00), volume: $94B
- Daily Overnight Bank Funding Rate: 4.83% (+0.00), volume: $239B
FED Reverse Repo Operation
RRP usage recedes to $322.587B this afternoon from $343.448B prior. Compares to $239.386B on Monday September 16 2024 -- the lowest level since early May 2021. Number of counterparties at 68 from 71 prior.
US SOFR/TREASURY OPTION SUMMARY
Option desks reported heavier volumes Thursday, ongoing downside puts countered by a pick-up in upside call structure buying for the first in a week it seems as markets contended with higher then expected CPI and weekly claims, as well as mixed Fed speak (Goolsbee in total agreement with Powell, Bostic could see a pause in November). Not a lot of conviction trading heading into Friday's PPI while curves twist steeper (2s10s +5.291 at 9.975). That said, projected rate cuts have scaled back from this morning's post-data highs (*): Nov'24 cumulative -20.7bp (-22.7bp), Dec'24 -44.2bp (-46.5bp), Jan'25 -63.9bp (-68.9bp). Highlight trade includes:
SOFR Options: (Reminder, October options expire tomorrow)
+10,000 SFRF5 95.62/95.75 put spds, 2.5 ref 96.09
-10,000 SFRV4 95.68 puts, 2.5 ref 95.68
+5,000 0QH5 95.37/95.50/95.75 put flys, 1.5 vs. 96.69/0.03%
+5,000 SFRX4/SFRZ4 95.68 put spds, 2.0 ref 95.685
-7,000 SFRM5 96.50 calls, 29.5-29.0 vs. 96.35 to -34.5/0.40%
-5,000 0QX4 96.18/96.43 put spds, 6.25 ref 96.60
+5,000 SFRZ4 95.25/95.37/95.50 put trees, 1.5 ref 95.69
+10,000 SFRG5 95.62/95.75 put spds, 3.75 ref 96.04
Block, 6,500 SFRX4 95.50/95.62 put spds, 2.75 vs. 95.69/0.22%
Block, 13,500 SFRZ4 97.50 calls, 0.5 ref 95.685
Update, over 10,000 SFRZ4 95.56/95.62/95.68/95.75 put condors, 2.0 ref 95.645 to -.68
over 10,000 SFRZ4 95.56/95.62/95.68 call flys ref 95.68
Block, 5,000 SFRX4 95.62/95.68/95.75/95.81 call condors
Block, 5,000 SFRZ4 95.50/95.62 put spds 4.5 vs.
Block/cont, SFRM5 95.75/96.75 call over risk reversals, 5.0 vs. 96.255/0.60%
5,000 SFRX4 96.31/96.50 call spds ref 95.645
4,000 SFRX4 96.25/96.50 call spds ref 95.65
9,600 SFRX4 95.31/95.37/95.43/95.50 put condors ref 95.65
7,000 SFRX4 95.25/95.37/95.50/95.62 call condors ref 95.655
Block, 4,000 SFRZ4 95.25/95.50 put spds, 3.5 ref 95.65
Block/screen, 19,000 SFRZ4 95.43/95.56 put spds, 3.5 ref 95.65
Block, 10,000 SFRM5 95.50/95.75 put spds, 5.25/splits ref 96.30 to -.295
4,000 SFRZ4 95.75/95.87 call spds, ref 95.65
Treasury Options:
6,000 TYX4 112/113 call spds, 22 ref 112-02.5
8,600 TYX4 117 calls, 1 ref 112-01.5
2,500 Wednesday wkly 10Y 110.25/110.75 2x1 put spds ref 112-00.5
2,500 USZ4 128/132 call spds, 9 ref 120-04
6,000 wk2 TY 112.5/112.75 call spds 1 ref 112-01.5
2,000 TYX4 115.5/116.5/116.75/118 broken call condors ref 112-02.5
26,500 TYZ4 109.5/111 put spds, 23 ref 112-05
+25,000 FVZ4 110/111/112 call flys, 4.5 vs. 108-08.5/0.05%
7,500 TYX4 111.25 puts, 16 total volume over 44k
3,000 TYX4 110.5 puts, 6 ref 112-00
3,900 FVX4 109/110 call spds, 7 ref 108-09.75
Block/screen, over 20,000 TYZ4 111/112.5 3x2 put spds, 37 ref 112-03 to -03.5
2,000 USZ4 112/132 strangles ref 120-18
2,000 TUX4 102.75/103.12 put spds ref 103-10.75
5,500 TYX4 111.25/112 2x1 put spds ref 112-03.5
EGBS
BONDS: EGBs-GILTS CASH CLOSE: Twist Steepening, Long-End Gilts Underperform
Short-end core yields and periphery EGBs outperformed Thursday, with Gilts notably underperforming.
- US CPI, the week's main event, initially saw core global FI sell off on higher-than-expected readings, but the move reversed as the details looked more benign and the jobless claims report that came out alongside showed unexpected (potentially hurricane-related) weakness.
- The German and UK curves both twist steepened, with yields falling at the short end of the curve.
- Indeed, implied BoE and ECB cuts jumped after the US data, reversing a pullback earlier in the session, with cumulative cuts by mid-2025 upped 2bp and 4bp respectively on the day (25bp cuts at the respective upcoming meetings remained over 90% priced).
- But Gilts underperformed at the long end, with uncertainty over the new government's budget a lingering theme.
- Periphery EGB spreads tightened after the US data, mirroring the move in central bank cut pricing.
- Friday brings UK monthly activity data, final German September CPI, and a speech by ECB's Holzmann.
Closing Yields / 10-Yr Periphery EGB Spreads To Germany
- Germany: The 2-Yr yield is down 2.7bps at 2.233%, 5-Yr is down 1.3bps at 2.112%, 10-Yr is down 0.1bps at 2.256%, and 30-Yr is up 0.6bps at 2.548%.
- UK: The 2-Yr yield is down 0.2bps at 4.187%, 5-Yr is up 1.7bps at 4.081%, 10-Yr is up 3bps at 4.21%, and 30-Yr is up 3.3bps at 4.751%.
- Italian BTP spread down 2.3bps at 127.7bps / Spanish down 1.9bps at 73.6bps
FOREX
MNI FOREX: EURUSD Reaches Two-Month Low Following US Inflation Data
- Stronger-than-expected September inflation data in the US was released alongside higher-than-expected weekly jobless claims and while prompting immediate volatility across currency markets, the mixed figures have left the USD index close to unchanged on Thursday.
- An initial blip higher on the CPI figures was immediately reversed, echoing the move lower for front end yields in the US. Understandably, this was most notable for USDJPY which after printing 149.55, quickly traded down to fresh session lows of 148.30.
- While some intra-day volatility remained, this immediate post-data range held in place for USDJPY throughout the remainder of the session. Topside sights are on 150.76, the 50% retracement for the Jul 3 - Sep 16 bear leg.
- EURUSD’s reaction was not as significant and despite some two way action, the bias remains tilted to the downside for the pair. Late comments from Fed’s Bostic, who effectively closed the door on a 50bp cut in November, assisted EURUSD to the lowest level in two months.
- The pair briefly reached 1.0900 with 1.0881 marking the next support point, the 76.4% retracement of the Aug 1 - Sep 25 bull leg.
- Haven demand amid some moderate weakness for equities places the Swiss franc at the top of the G10 leaderboard today, as EURCHF edged back below 0.9400 and sits close to 0.9350 mas we approach the APAC crossover.
- UK GDP and Canadian employment data headlines the calendar on Friday. US PPI is also set for release.
MNI OPTIONS: Expiries for Oct11 NY cut 1000ET (Source DTCC) - USD/JPY: Y149.00($521mln), Y149.50($903mln), Y149.80-00($1.5bln)
- AUD/USD: $0.6760-75(A$1.1bln)
- USD/CAD: C$1.3595-00($1.3bln), C$1.3650($1.4bln)
- USD/CNY: Cny7.0500($674mln)
EQUITIES
MNI US STOCKS: Late Equities Roundup: Session Lows, But Still Well Bid for Week
- Stocks are looking moderately weaker late Thursday, near the bottom of the session range. Late session levels are still not far from the week highs as markets continue to digest this morning's mixed data while contemplating Friday's PPI. Currently, the Dow trades 170.85 points (-0.4%) at 42341.56, S&P E-Minis down 24.5 points (-0.42%) at 5816.75, Nasdaq down 41.1 points (-0.2%) at 18251.91.
- Energy and Materials sectors continued to lead gainers in late trade, a rebound in crude prices (WTI +2.65 at 75.89) underpinned oil and gas stocks: Valero +2.63%, Devon Energy +2.40%, Marathon Petroleum +2.28%. The Materials sector was supported by a mix of chemical (Mosaic +3.08%, Albemarle +1.0%) and mining stocks (Newmont +1.23%, Freeport-McMoRan +1.21%), the latter likely underpinned by a rise in Gold on the session (+21.18 at 2628.95).
- On the flipside, Real Estate and Consumer Staples sectors continued to underperform, estate management shares weighing on the former: CBRE Group -1.31%, CoStar Group -1.0%. Meanwhile, Retail distributors weighed on the Consumer Staples sector: Kroger -1.96%, Costco -1.81%, Walmart -1.00%.
- Reminder, the latest earning cycle picks up Friday with several banks reporting before the open: Wells Fargo, JP Morgan, Bank of NY Mellon and Blackrock.
COMMODITIES
MNI COMMODITIES: Crude Climbs, Gold Rises For First Session In Seven
- WTI has found support today, as the lack of clarity around Israel’s anticipated retaliatory strike on Iran keeps the market on edge. There is an ongoing lull in Israeli media regarding the retaliation, clouding the view to the potential impacts.
- WTI Nov 24 is up by 3.5% at $75.8/bbl.
- For WTI futures, the trend outlook remains bullish, with attention on $77.40, the 76.4% retracement of the Jul 5 - Sep 10 bear leg.
- On the downside, initial firm support to watch is $71.99, the 20-day EMA.
- Spot gold has risen by 0.7% to $2,626/oz on Thursday, marking what be the first gain in seven sessions.
- The yellow metal has pierced firm support at $2,615.9, the 20-day EMA, this week and a clear break would signal scope for a deeper retracement to $2,584.9, the Sep 20 low.
- On the upside, a continuation of gains would refocus attention on $2,690.2, a Fibonacci projection.
- Meanwhile, copper has rallied by 1.0% to $444/lb, a first gain in four sessions.
- Copper futures remain in a short-term retracement mode, which for now is considered corrective. Key support is seen at $436.32, the 50-day EMA, while near-term resistance is at $479.00, the Sep 30 high.
FRIDAY DATA CALENDAR
| Date | ET | Impact | Period | Release | Prior | Consensus | |
| 11/10/2024 | 0830 | *** | Sep | Final Demand PPI ex. food and energy y/y | 2.4 | 2.7 | % |
| 11/10/2024 | 0830 | *** | Sep | Final Demand PPI ex. food, energy, and trade services y/y | 3.3 | -- | % |
| 11/10/2024 | 0830 | *** | Sep | Final Demand PPI m/m | 0.2 | 0.1 | % |
| 11/10/2024 | 0830 | *** | Sep | Final Demand PPI y/y | 1.7 | 1.6 | % |
| 11/10/2024 | 0830 | *** | Sep | PPI ex-food, energy, trade m/m | 0.3 | -- | % |
| 11/10/2024 | 0830 | *** | Sep | PPI ex. food and energy m/m | 0.3 | 0.2 | % |
| 11/10/2024 | 1000 | ** | Oct | U. Mich Consumer Expectations | 74.4 | -- | |
| 11/10/2024 | 1000 | ** | Oct | U. Mich Consumer Sentiment | 70.1 | 70 | |
| 11/10/2024 | 1000 | ** | Oct | U. Mich Current Economic Conditions | 63.3 | -- | |
| 11/10/2024 | 1200 | *** | 15/16 | Corn Ending Stocks current year | -- | -- | (m) |
| 11/10/2024 | 1200 | *** | 15/16 | Corn Production current year | -- | -- | (m) |
| 11/10/2024 | 1200 | *** | 15/16 | Corn yield per acre current year | -- | -- | |
| 11/10/2024 | 1200 | *** | 15/16 | Cotton Ending Stocks current year | -- | -- | (m) |
| 11/10/2024 | 1200 | *** | 15/16 | Cotton Production current year | -- | -- | (m) |
| 11/10/2024 | 1200 | *** | 15/16 | Soybeans - Ending Stocks current year | -- | -- | (m) |
| 11/10/2024 | 1200 | *** | 15/16 | Soybeans Production current year | -- | -- | (m) |
| 11/10/2024 | 1200 | *** | 15/16 | Soybeans yield per acre current year | -- | -- | |
| 11/10/2024 | 1200 | *** | 15/16 | Wheat - Ending Stocks current year | -- | -- | (m) |
| 11/10/2024 | 1200 | *** | 15/16 | Wheat Production current year | -- | -- | (m) |