HIGHLIGHTS
- Treasuries look modestly weaker, inside a narrow session range late Monday, two-way positioning ahead of this week's PPI & CPI inflation measures on Tuesday & Wednesday.
- PPI report will no doubt impact core PCE tracking before a greater convergence in analyst estimates after CPI on Wednesday.
- Quarterly earnings kicks off this week with Blackrock, Bank of NY Melon, Wells Fargo, JP Morgan, Goldman Sachs, Citigroup, US Bancorp, M&T Bank and PNC all reporting between January 15-16.
MNI US TSYS: Treasuries Hold Range, Focus on Upcoming PPI & CPI Inflation Data
- Treasuries held to a narrow session range Monday amid decent volumes (TYH5 over 1.5M contracts despite Japan out on extended holiday) ahead of this week's PPI and CPI inflation data on Tuesday and Wednesday respectively.
- Late session risk-on saw Tsys soften (TYH5 107-08, -4.5) while stocks climbed off lower lvls, SPX Eminis near steady, DJIA outperforming, Nasdaq weaker but well off lows, apparently reacting to chatter that an Israeli ceasefire-hostage deal may be reached by tomorrow.
- NY Fed consumer inflation expectations saw a mixed month for December, with the 1Y holding steady at 3.0%, the 3Y jumping 40bps to 3.0% and the 5Y falling 20bps to 2.7%. The 3Y measure is its highest since Nov 2023 and came amidst its highest uncertainty since May.
- Wednesday’s US CPI report headlines the weekly calendar, with Bloomberg consensus currently looking for a 0.2% M/M print for core CPI in what’s a close call with a 0.3% M/M. Indeed, our initial review of 13 unrounded analyst estimates sees these generally more detailed projections centered around 0.25% M/M for core CPI in December.
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M +0.00370 to 4.30624 (-0.01289 total last wk)
- 3M +0.01497 to 4.30198 (-0.00668 total last wk)
- 6M +0.03483 to 4.27941 (+0.00263 total last wk)
- 12M +0.06645 to 4.24478 (+0.01362 total last wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.30% (+0.00), volume: $2.204T
- Broad General Collateral Rate (BGCR): 4.29% (+0.01), volume: $853B
- Tri-Party General Collateral Rate (TGCR): 4.29% (+0.01), volume: $837B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $102B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $302B
FED Reverse Repo Operation
RRP usage inches up to $183.669B this afternoon from $178.800B on Friday. Compares to $98.356B on Friday, December 20 - the lowest level since mid-April 2021. The number of counterparties rises to 51 from 48.
US SOFR/TREASURY OPTION SUMMARY
Heavy SOFR & Treasury options reported Monday, call volume gaining in the second half as underlying futures drifted off midday lows. Focus on this week's PPI and CPI inflation measures (Wed & Thu respectively). Projected rate cuts through mid-2025 continue to retreat, current vs. late Friday levels* as follows: Jan'25 steady at -0.7bp, Mar'25 -4.9bp (-6.3bp), May'25 -8.4bp (-10.5bp), Jun'25 -16.3bp (-18.2bp), Jul'25 -18.7bp (20.2bp).
SOFR Options:
+10,000 SFRH5 95.68/95.75/95.81/95.87 call condors, .75 vs. 95.74/0.12%
Block, 10,000 0QH5 96.00/96.12/96.25 call trees, 3.5 net (2-legs over)
-8,000 SFRM5 95.62/95.75 put spds, 6.25 ref 95.815
-5,000 SFRU5 95.87/96.06 call spds vs 95.25 put, 0-.25 ref 95.86
25,000 0QH5 96.06/96.31 1x2 call spds, .25 ref 95.85
+5,000 SFRN5 96.00/96.37 call spds, 8.5 vs. 95.865/0.18%
+5,000 0QM5 96.25/96.37 call spds 1.0 over SFRM5 96.06/96.18 call spd
+10,000 0QH5 96.00/96.25/96.81 1x1x2 call trees, +3.25 net ref 95.865
+5,000 SFRZ5 95.50/96.00/96.50 call flys, 10.75 ref 95.885
5,000 SFRJ5 95.50/95.56 put spds ref 95.83
+10,000 SFRM5 95.56/96.12 strangle, 12.00 ref 95.83
-10,000 SFRU5 95.37/95.56 put spds vs 5,000 SFRM5 95.62/95.87 put spds, 5.75-6
-15,000 SFRU5 95.18/95.43 put spds v SFRZ5 95.87/96.06 put spds, 7.5-7.25
-4,000 SFRZ5 95.18 puts 0.5 over 96.12/96.62 call spds vs 95.88/0.38%
+4,000 SFRZ5 95.25 puts, 13.5 vs. 95.88/0.25%
8,800 0QN5 96.62/96.68 call spds ref 95.835
3,750 SFRG5 95.68/95.75 put spds ref 95.735
5,000 SFRG5/SFRH5 95.87/96.06 call spd spds
3,500 2QJ5 96.25/96.87 call spds ref 95.74
over 26,000 SFRU5 95.87/96.06 call spds vs. 95.25 puts ref 95.835
2,000 SFRU5 96.50/97.00 call spds ref 95.835
+10,000 SFRU5 95.50/95.62 put spds, 3.5 ref 95.835 to -.85
1,500 0QJ5/3QJ5 95.25 put spds
Block, 4,100 SFRU5 96.12 puts, 45.5 ref 95.85
Block, 3,156 0QU5 96.12 puts, 58.0 ref 95.80
5,200 0QG5 95.87/96.12/96.25 broken put trees ref 95.845
3,000 SFRM5 95.75 puts ref 95.82
2,000 SFRM5 96.12/96.37 call spds ref 95.825
Treasury Options:
+60,000 TYG5 116.75 calls, cab 7
4,500 TYG5 107.5/TYH5 105 put spds, 17
5,000 TYG5 106.5/TYH5 107.5 put spds, 51 net/March over
2,500 FVH5 105.5/105.75/106/106.25 call condors
over 6,300 TYG5 108.5 calls, 6 last
2,000 TYH5 106 puts, 28 last
3,000 TYH5 106/107 put spds ref 107-08.5
1,500 TYG5 107.5/109 put spds, 114 ref 107-08.5
over 4,700 FVH5 104.5 puts, 17 last
4,600 FVG5 105.5 puts, 24.5 last
4,400 FVH5 105 puts, 28 ref 105-11
3,500 FVZH5 101.75 puts ref 105-14
MNI BONDS: EGBs-GILTS CASH CLOSE: Gilts Underperform, Sell-Off Fades
Gilts underperformed Bunds and broader EGBs Monday, with pronounced bear flattening in the UK curve.
- Bonds remained under pressure overnight to start the week's trade, with Gilt and Bund yields nearing lastweek's multi-month and in some cases multi-year highs as the hawkish implications of Friday's solid US employment report continued to reverberate.
- The sell-off partially unwound over the course of the session, as dollar gains and equity losses consolidated with an eye on US and UK CPI Wednesday.
- The UK curve bear flattened, with Germany's bear steepening.
- Periphery EGB spreads to Bunds widened, with GGBs weakest as Greece announced a 10Y mandate likely to take place Tuesday (expectations had been it would occur next week).
- Tuesday's data calendar is largely second tier (Italian industrial production), though we get multiple central bank speakers including ECB's Lane and Holzmann, and BOE's Breeden.
- Also of note given fiscal considerations, new French PM Bayrou gives a key policy speech Tuesday afternoon.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 0.9bps at 2.293%, 5-Yr is up 1.7bps at 2.396%, 10-Yr is up 1.8bps at 2.613%, and 30-Yr is up 2bps at 2.81%.
- UK: The 2-Yr yield is up 6.2bps at 4.601%, 5-Yr is up 5.5bps at 4.602%, 10-Yr is up 4.7bps at 4.885%, and 30-Yr is up 3.2bps at 5.438%.
- Italian BTP spread up 3.6bps at 121bps / Greek up 4.1bps at 86bps
MNI OPTIONS: Mixed Euro Rates Trade Monday, Leaning Toward Upside
Monday's Europe rates/bond options flow included:
- OEH5 116.75/116.50ps, bought for 15 in 13k.
- RXG5 130/129ps, sold at 20 in 4k.
- ERG5 97.87/97.75/97.62p fly, bought for 0.75 in 2k.
- ERH5 97.4375/97.5625/97.6875, sold at 4.25 in 1k
- 0RG5 97.875/98.00/98.12c fly, bought for 1.75 in 4k.
- 0RG5 98.00/98.125/98.25c ladder, bought for 1 in 6k.
MNI FOREX: More Stable Equities Prompt Cross/JPY Recovery
- More stable equity markets since the European open have helped curtail the Japanese yen bid on Monday, with the push below 157.00 for USDJPY seeing a decent 60 pip reversal across the US session.
- In similar vein, the likes of EURUSD rising back above 1.02 and GBPUSD extending its bounce from the 1.21 handle have assisted a strong recovery for both EURJPY and GBPJPY.
- The trend condition in EURUSD remains bearish and recent short-term gains have proved to be a correction. The recent break of 1.0226 confirms a resumption of the downtrend and marks an extension of the price sequence of lower lows and lower highs. Sights are on 1.0138 next, a Fibonacci projection.
- For GBPJPY, early price action saw the cross briefly extend losses since Dec 30 to 4.5%, before 190.00 acted as decent support. We have seen the cross retrace the best part of 1% to levels around 191.75, despite remaining down on the session.
- Overall, the USD index is still holding on to moderate gains, with the post-NFP greenback impetus still present. The DXY printed a fresh cycle high at 110.17 before slipping back just below the 110 mark. Commodity currencies have traded with relatively contained ranges, whereas USDCHF had its first print above 0.9200 since May last year as the pair approaches key medium-term resistance at 0.9224/44.
- US PPI on Tuesday provides a warm-up for the main CPI data on Wednesday, when UK inflation data is also due.
MNI US STOCKS: Late Equity Roundup: Paring Losses, Oil & Gas Leading
- Stocks are still trading mixed but climbing off lows amid chatter of an impending Israeli ceasefire/hostage deal tomorrow that lent to late Monday risk-on tone. Narrow ranges persisted as focus remains on this week's PPI and CPI inflation measures on Tuesday and Wednesday respectively, as well corporate earnings that kick off this week.
- Currently, the DJIA trades up 267.83 points (0.64%) at 42205.15, S&P E-Minis down 3.25 points (-0.06%) at 5862.5, Nasdaq down 137.1 points (-0.7%) at 19022.49.
- Energy and Materials sectors continued to outperform in the second half, support for the former tied to gains in crude (WTI +2.40 at 78.97): Valero Energy +5.29%, Marathon Petroleum +3.56%, APA Corp +3.25%. Materials led by Mosaic +7.49%, CF Industries +7.37%, Steel Dynamics +6.22% while Albemarle gained 4.99%.
- Utility and Information Technology sectors continued to underperform, electricity providers weighed on the former: Edison International down nearly 12% amid investigations into whether electrical equipment operated by SoCal Edison sparked a blaze in Hurst. Elsewhere, Constellation Energy declined 6.15% despite several agency upgrades, PG&E -4.19% and AES Corp -3.33%.
- IT sector shares remained under pressure as the Biden administration looked to curb semiconductor exports to China: Super Micro Computer -4.79%, Micron -4.17%, Palantir -4.25, Nvidia -2.53%.
- Reminder, the next round of quarterly earnings kicks off this week with Blackrock, Bank of NY Melon, Wells Fargo, JP Morgan, Goldman Sachs, Citigroup, US Bancorp, M&T Bank and PNC all reporting between January 15-16.
MNI EQUITY TECHS: E-MINI S&P: (H5) Breaches Key Short-Term Support
- RES 4: 6178.75 High Dec 6 and key resistance
- RES 3: 6163.75 High Dec 16
- RES 2: 6068.25/6107.50 High Jan 6 / High Dec 26
- RES 1: 5966.50 50-day EMA and a pivot resistance
- PRICE: 5816.50 @ 14:41 GMT Jan 13
- SUP 1: 5809.00 Intraday low
- SUP 2: 5784.00 Low Nov 4
- SUP 3: 5698.25 50.0% retracement of the Aug 5 - Dec 6 bull leg
- SUP 4: 5658.00 Low Sep 12 ‘24
A bear threat in the S&P E-Minis contract remains present and the contract is trading lower today. The reversal from the Dec 26 high, confirms the end of the Dec 20 - 26 correction. 5866.00, the Dec 20 low and a key short-term support, has been cleared. This strengthens a bearish theme and sights are on 5784.00, the Nov 4 low and an important short-term support. Initial pivot resistance is seen at 5996.50, the 50-day EMA.
MNI COMMODITIES: Crude Extends Gains Amid Russia Sanctions, Precious Metals Decline
- Crude has extended gains from last week, with WTI at its highest level since last summer, supported by fresh sanctions from the US administration on Russia.
- WTI Feb 25 is up by 2.9% at $78.8/bbl.
- Crude curve backwardation has strengthened significantly after the announcement of the latest US sanctions on Russia risks global supplies.
- New US sanctions against Russia will be retaliated against, according to the Russian Foreign Ministry.
- The trend structure in WTI futures remains bullish and recent gains have resulted in a breach of key short-term resistance at $76.41, the Oct 8 high.
- Clearance of this hurdle strengthens a bull theme and opens $79.59, the Jul 5 ‘24 high, followed by $80.14, the Apr 12 ’24 high and a key medium-term resistance.
- Meanwhile, spot gold has fallen by 1.1% to $2,660/oz, the yellow metal’s first decline in five sessions.
- Last week’s gains in gold appear corrective for now, although a continuation higher would open $2,726.2, the Dec 12 high. On the downside, initial support is at $2,642.7, the 50-day EMA, followed by $2,583.6, the Dec 19 low.
- Silver is underperforming today, with the precious metal down by 2.7% to $29.6/oz.
- A bear cycle in silver that started Oct 23 remains in play for now, with initial support seen at $28.748, the Dec 19 low, followed by $28.446, a Fibonacci retracement.
TUESDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 14/01/2025 | 0735/0835 |  EU | ECB's Lane speech on Europe, Asia and the Changing Globe | |
| 14/01/2025 | 0830/0830 |  GB | BOE's Breeden speech on Financial Stability | |
| 14/01/2025 | 0900/1000 | * |  IT | Industrial Production |
| 14/01/2025 | 1000/1000 | * | GB | Index Linked Gilt Outright Auction Result |
| 14/01/2025 | 1000/1000 | * | GB | Index Linked Gilt Outright Auction Result |
| 14/01/2025 | 1100/0600 | ** |  US | NFIB Small Business Optimism Index |
| 14/01/2025 | - | *** |  CN | Money Supply |
| 14/01/2025 | - | *** | CN | Social Financing |
| 14/01/2025 | - | *** | CN | New Loans |
| 14/01/2025 | 1330/0830 | *** | US | PPI |
| 14/01/2025 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 14/01/2025 | 1500/1000 | US | Fed's Schmid | |
| 14/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 15/01/2025 | 0315/0415 | EU | ECB's Lane in fireside chat at GS global macro conference |