HIGHLIGHTS
- Treasuries drifted lower on Monday's Veterans Day Holiday, light volume as futures held to a narrow band by the close.
- Main focus is on this week's headline inflation dat, CPI and PPI on Wednesday and Thursday respectively.
- Fed-speak returns up in earnest on Tuesday with Waller, Barkin, Kashkari and Harker making appearance.
MNI US TSYS: Tsys Hug Lower/Narrow Range, Light Veterans Day Trade
- Treasury futures leaked lower on light volumes Monday, cash markets closed for the Veterans Day holiday. Dec'24 10Y slipped to 109-25.5 low after the open but recovered soon after - holding to a narrow 5-pt range through the rest of the session. TYZ4 trades 109-30.5 (-10.5) on total volume of 695,000 after the bell.
- No economic data or Fed speakers in observance of the Veterans Day holiday, the main focus is on this week's headline inflation dat, CPI and PPI on Wednesday and Thursday respectively. Fed-speak returns up in earnest on Tuesday with Waller, Barkin, Kashkari and Harker making appearance.
- Dec24 not fully pricing another 25bp cut: Projected rate cuts into early 2025 compared to early Monday levels (*): Dec'24 cumulative -16.3bp (-17.1bp), Jan'25 -24.3bp (-25.7bp), Mar'25 -37.6bp (-38.9bp), May'25 -45.0bp (-46.9bp).
- Cross market roundup: crude trades weaker (WTI -2.20 at 68.18, Gold -62.21 at 2,622.56, USD gaining - extending highs vs. EUR, GBP, ZAR, CHF, CNH, CAD, NOK and SEK.
US SOFR/TREASURY OPTION SUMMARY
SOFR and Treasury options remained mixed on net Monday, modest volumes due ti the Veterans Day holiday closure. SOFR options saw continued interest in upside calls targeting 50bp in rate cuts by March 2025 while Treasury options centered around 5- and 10Y puts. Underlying futures weaker, at/near recent lows. Dec24 not fully pricing another 25bp cut: Projected rate cuts into early 2025 compared to early Monday levels (*): Dec'24 cumulative -16.3bp (-17.1bp), Jan'25 -24.3bp (-25.7bp), Mar'25 -37.6bp (-38.9bp), May'25 -45.0bp (-46.9bp).
SOFR Options: Reminder, Nov serial options expire this Friday
+5,000 0QZ4/2QZ4 95.50 put spds, cab net/short Dec over
-5,000 SFRZ4 95.50 puts, 3.25 vs. 95.57/0.34%
+10,000 SFRH5 96.00/96.25/95.37 call flys, 3.5-3.75 ref 95.79
5,000 SFRH5 96.00/96.25/96.37 broken call flys
2,000 0QG 96.25/96.62 3x2 put spds
-5,000 0QX4 96.00/96.25/96.50 put flys, 11.0 vs. 96.155/0.32%
+11,000 SFRU5/3RU5 96.50/96.75/97.00/97.25 call condor spd, 2.0 net db/3RU5 over
-5,000 SFRH5 95.62/96.00 strangles, 20.0-19.5
18,500 SFRH5 96.06/96.18 call spds ref 95.785
6,500 SFRX4 95.50/95.56 put spds ref 95.565
3,000 SFRX4 95.62 calls
7,000 SFRZ4 95.37/95.43/95.50/95.62 broken put condors ref 95.565
6,500 SFRH5 96.06/96.18 call spds ref 95.79
2,000 SFRZ4 95.62/95.68/95.75 call trees ref 95.565
3,000 SFRH5 96.06/96.18 call spds ref 95.795
3,000 SFRZ4 95.81 calls ref 95.565
Treasury Options:
1,500 TYZ4 110.75/111.25/112.25/112.5 broken call condors
over 6,000 TYF5 108/109 put spds ref 110-04
over 6,500 TYZ4 108.5/109.5 put spds
+5,000 USZ4 120 calls, 17
5,000 TYZ4 113 calls, 1 last
3,000 FVZ4 106.25 puts ref 106-26.5
3,800 wk3 TY 109.5/110 put spds vs. 110.75 calls ref 110-04
MNI BONDS: EGBs-GILTS CASH CLOSE: German Short End Rallies Again On Growth Concerns
German yields continued to retreat Monday, with Bunds outperforming Gilts.
- With no major European releases and US cash bonds closed for holiday, the session saw last week's themes largely continued. Firstly, expectations of weaker Eurozone growth in the Trump era have seen ECB cuts increasingly priced in. OIS now sees 63bp of cuts through the next 2 meetings, 3bp more than seen Friday and 8bp more than pre-US election and helping boost the EGB short end/belly.
- Secondly, and related to broader growth considerations, risks are seen to the implementation of the ruling German government's supplementary Budget - though German Chancellor Scholz ruled out a confidence vote on Wednesday.
- Gilts traded without clear direction. The German curve closed bull steeper, with the UK's leaning bull flatter.
- Periphery EGB spreads tightened in spite of the advance in Bunds. Concerns over Spanish flood aid costs appeared to fail to impact SPGBs, though in fairness they failed to keep pace with periphery peers despite Fitch moving Spain's outlook to positive late on Friday.
- Tuesday brings German ZEW survey data while we also get multiple speakers from the ECB (Holzmann, Rehn, Centeno) and BoE (Pill); the main early focus is the UK labour market report - MNI's preview is here.
Closing Yields / 10-Yr Periphery EGB Spreads To Germany
- Germany: The 2-Yr yield is down 4.8bps at 2.137%, 5-Yr is down 4.8bps at 2.155%, 10-Yr is down 4bps at 2.327%, and 30-Yr is down 4.4bps at 2.562%.
- UK: The 2-Yr yield is down 1.2bps at 4.415%, 5-Yr is down 0.5bps at 4.316%, 10-Yr is down 1bps at 4.425%, and 30-Yr is down 2.7bps at 4.873%.
- Italian BTP spread down 2.4bps at 126.7bps / Greek down 1.7bps at 88bps
MNI EGB OPTIONS: Busier Session For Euro Rates
Monday's Europe rates/bond options flow included:
- ERZ4 97.25p, sold at 9.25 in 6.5k.
- ERZ4 97.12/97.25/97.37c fly sold at 2, multiple clips totalling 12.75k.
- ERZ4 97.25/97.12RR, sold the call at half in 29.75k (ref 97.17).
- ERH5 9800/98.25/98.50c fly sold at 2.5 in 4k
- ERH5 98.12/97.87/97.62/97.37p condor, bought for 13.25 in 4k
- ERM5 98.00/98.50cs vs 97.50/97.25ps, sold the cs at 12.25 in 5k (unwind)
- ERU5 98.12/97.62ps 1x2, sold the 1 at 7.75 in 5k
- 0RZ4 97.87p, bought for 4.75 in 18k vs 4.14k at 98.075 in ERZ5
- SFIZ5 95.75/95.50ps vs 96.00/96.50/97.00c fly, bought the fly for half in 2k
MNI FOREX: Greenback Rally Extends, EURUSD Approaches Yearly Lows
- Renewed demand for ‘Trump trades’ on Friday extended into this week, providing further strength for the greenback during Monday’s session. The Euro has continued to show relative underperformance across G10 in the aftermath of the US election, largely owing to Eurozone growth concerns and an escalating political crisis in Germany.
- Bearish technical conditions dominate for EURUSD, and spot has notably extended below 1.0666 on Monday, a key support for the pair. Lows of 1.0629 were traded today and this narrows the gap to 1.0611, the 38.2% retracement of the Sep ‘22 - Jul ‘23 bull cycle, just ahead of the year’s lows at 1.0601, printed back in April.
- For EURGBP, weakness has extended today, and the cross now cleared the bear trigger at 0.8295, the Oct 18 low. An initial target includes 0.8250, the Apr 14 ’22 low and below here another major support resides at 0.8203, the Mar 7 ‘22 low.
- The Japanese yen is the weakest performer today, with USDJPY rising 0.8% to 153.87, although we remain well off the post-election highs of 154.71. In contrast, USDCHF (+0.53%) has extended its short-term rally and printed above 0.8800 for the first time since late July.
- In emerging markets, the likes of MXN, HUF and PLN all came under substantial pressure, declining the best part of 1.5% against the dollar. In particular the South African Rand fell 2% to a two-month low.
- UK labour market data highlights on Tuesday, alongside German ZEW sentiment figures. Short-term focus will be on US CPI, scheduled on Wednesday.
MNI FX OPTIONS: Expiries for Nov11 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0600(E960mln), $1.0625(E680mln), $1.0665-75(E718mln), $1.0725(E1.3bln), $1.0740-50(E2.8bln), $1.0800(E691mln), $1.0890-00(E1.2bln)
- USD/JPY: Y150.55-58($1.2bln), Y155.00($1.0bln)
- USD/CNY: Cny7.2300($618mln)
EQUITIES
MNI US STOCKS: Late Equities Roundup: DJIA Continues to Outperform Eminis & Nasdaq
- After extending record highs early Monday, stocks have scaled back support in the second half, the DJIA is well in the green vs. near steady to mildly lower S&P Eminis and Nasdaq stocks late in late trade. Overall volumes were rather subdued on the Veterans Day holiday, while participants traded cautiously ahead this week's CPI and PPI data on Wednesday and Thursday respectively. Currently, the DJIA trades up 342.6 points (0.78%) at 44330.11, S&P E-Minis up 2.5 points (0.04%) at 6027.75, Nasdaq down 17.1 points (-0.1%) at 19269.8.
- Consumer Discretionary and Financials sectors lead gainers in the second half. Autos and a mix of consumer stocks continued to support the Consumer Discretionary sector with Tesla +8.6%, General Motors +3.35%, Ford +2.78% while Starbucks gained 3.41%, Wynn Resorts +3.16%.
- Banks and financial services stocks rebounded after trimming last week's gains last Friday, Charles Schwab +5.43%, PayPal +4.02%, Wells Fargo +3.51% while Prudential Financial gained 2.97%.
- Information Technology and Real Estate sectors underperformed in late trade. Semiconductors weighed on the tech sector, most notably Monolithic Power -18.76% amid power supply management concerns for Nvidia high-end AI chips -- which weighed on sentiment for other chip stocks today with Microchip Technology -4.97%, Intel -4.81%, Enphase -4.33%.
- Real estate investment trusts, particularly office and industrial REITs underperformed: American Tower -2.22%, Alexandria Real Estate -2.13, Iron Mountain -1.63%.
- The latest earnings cycle is nearly over with a few big names expected this week: Live Nation Entertainment after today's close followed by: Home Depot, Hertz, Occidental Petroleum, Skyworks Solutions, Cisco, Walt Disney, Applied Materials, Williams-Sonoma, Copart and Cogent Biosciences.
MNI EQUITY TECHS: E-MINI S&P: (Z4) Northbound
- RES 4: 6145.26 1.236 proj of the Aug 5 - Sep 3 - 6 price swing
- RES 3: 6103.88 1.500 projection of the Sep 6 - 17 - 18 price swing
- RES 2: 6070.16 1.382 projection of the Sep 6 - 17 - 18 price swing
- RES 1: 6053.25 Intraday high
- PRICE: 6035.25 @ 14:45 GMT Nov 11
- SUP 1: 5927.25 High Oct 17 and a recent breakout level
- SUP 2: 5863.50/5724.25 20-day EMA / Low Nov 4
- SUP 3: 5675.25 Low Sep 18
- SUP 4: 5658.00 Low Sep 13
Bullish conditions in S&P E-Minis remain intact and last week’s gains reinforce current conditions. A key short-term support has been defined at 5724.25, Nov 4 low. The move higher last week resulted in a breach of the bull trigger at 5927.25, Oct 17 high, confirming a resumption of the primary uptrend. The 6000.0 psychological handle has been pierced. Sights are on 6070.16, a Fibonacci projection. Initial support is at 5927.25, the Oct 17 high.
MNI COMMODITIES: WTI, Precious Metals Fall Amid Soft Chinese Data, USD Gains
- WTI fell towards its lowest close since Oct 29 as lacklustre Chinese economic data provides downside pressure.
- WTI Dec 24 is down by 3.3% at $68.0/bbl.
- The latest China stimulus decision disappointed markets as weak Chinese energy demand weighs on prices.
- Meanwhile, Saudi state-run Al Arabiya has reported that according to Lebanese Hezbollah, negotiations have begun to end the war with Israel.
- For WTI futures, a bearish theme in WTI futures remains intact, with the resumption of weakness exposing $65.99, the Oct 1 low, and $64.16, the Sep 10 low and key support.
- Elsewhere, spot gold has fallen by 2.4% to $2,619/oz, taking the yellow metal to its lowest level since October 10.
- Despite the move on the back of the strong US dollar, Deutsche Bank remains bullish on gold long-term, supported by a higher rate of central bank accumulation.
- From a technical standpoint, the trend condition in gold remains bullish and the latest pullback appears corrective.
- However, today’s sell-off has delivered a print below the 50-day EMA, at $2,646.2, turning attention to $2,604.9, the Oct 8 low.
- Silver has also fallen by a further 2.2% to $30.6/oz on Monday, narrowing the gap towards $30.269, a trendline support.
TUESDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 12/11/2024 | 0700/0800 | *** |  DE | HICP (f) |
| 12/11/2024 | 0700/0700 | *** |  GB | Labour Market Survey |
| 12/11/2024 | 0900/0900 | GB | BOE's Pill panellist at UBS conference on Reversing tightening | |
| 12/11/2024 | 1000/1100 | *** | DE | ZEW Current Conditions Index |
| 12/11/2024 | 1000/1100 | *** | DE | ZEW Current Expectations Index |
| 12/11/2024 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 12/11/2024 | 1100/0600 | ** |  US | NFIB Small Business Optimism Index |
| 12/11/2024 | 1200/1200 | GB | Asset Purchase Facility Quarterly Report | |
| 12/11/2024 | 1330/0830 | * |  CA | Building Permits |
| 12/11/2024 | 1400/1500 |  EU | ECB's Cipollone chairing policy panel on financial sanctions | |
| 12/11/2024 | 1500/1000 | US | Fed Governor Christopher Waller | |
| 12/11/2024 | 1515/1015 | US | Richmond Fed's Tom Barkin | |
| 12/11/2024 | 1600/1100 | ** | US | NY Fed Survey of Consumer Expectations |
| 12/11/2024 | 1630/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 12/11/2024 | 1630/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 12/11/2024 | 1800/1300 | * | US | US Treasury Auction Result for Cash Management Bill |
| 12/11/2024 | 1900/1400 | US | Minneapolis Fed's Neel Kashkari | |
| 12/11/2024 | 2130/1630 | US | New York Fed's Roberto Perli | |
| 12/11/2024 | 2200/1700 | US | Philly Fed's Pat Harker | |
| 13/11/2024 | 0030/1130 | *** |  AU | Quarterly wage price index |