HIGHLIGHTS
- Treasuries reverse midmorning gains, look to finish near session lows as tariff and Mid-East headline risk capped sentiment Monday
- Focus turns to to Federal Reserve Chairman Powell's Senate Banking testimony tomorrow at 1000ET, House Financial Services testimony same time on Wednesday.
- Details of President Trump's reciprocal tariff implementation appear to be delayed until later in the week.
MNI US TSYS: Headline Risk Tempers Early Sentiment, Focus on Powell Senate Testimony
- Treasuries look to finish mostly lower Monday, lower half of the range, curves steeper with the short end outperforming (2s10s +2.075 at 22.410). Mar'25 10Y futures trade 109-05 after the bell (-2.5) after climbing to 109-13.5 high midmorning, well below initial technical resistance at 110-00 (High Feb 7).
- Headlines continue to rattle markets & squelch sentiment: Tsys & stocks had gapped lower on the overnight open after President Trump announced 25% tariffs on all imported steel and aluminum into the U.S. Market recovered from early overnight lows as details on last Friday's vague reciprocal tariff implementation appear to be delayed until later in the week.
- Risk off sentiment reemerged as Israeli/Hamas hostage transfers appear to have hit a snag with both sides accusing each other for breaching ceasefire/transfer agreements.
- The USD index is holding onto 0.2% gains on Monday, as the initial reaction to a Trump announcement of tariffs on steel and aluminium bolstered the greenback. Aside from the Japanese yen, G10 currency ranges have remained subdued as markets await the key US CPI data due on Wednesday.
- Focus turns to Fed Chairman Powell's testimony to the Senate Banking committee tomorrow at 1000ET (text, Q&A)
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M +0.00328 to 4.31847 (+0.00213 total last wk)
- 3M +0.01075 to 4.31469 (+0.00169 total last wk)
- 6M +0.02121 to 4.27893 (+0.00941 total last wk)
- 12M +0.04061 to 4.21972 (+0.01881 total last wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.35% (-0.01), volume: $2.336T
- Broad General Collateral Rate (BGCR): 4.34% (+0.00), volume: $929B
- Tri-Party General Collateral Rate (TCR): 4.34% (+0.00), volume: $901B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $107B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $286B
FED Reverse Repo Operation
RRP usage inches up to $99.653B this afternoon from Friday's $95.248B - compares to last Wednesday's $78.788B -- lowest level since mid-April 2021. The number of counterparties rebounds to 41 from 33 prior.
US SOFR/TREASURY OPTION SUMMARY
Option desks report a pick-up in SOFR call trade in the second half, decent volumes with one account unwinding large out-of-the-money call spds, limited upside call fly buyers and at the money vol sellers. Underlying futures mildly mixed, curves steeper with short end rates outperforming. Projected rate cuts through mid-2025 look steady to mildly higher vs. this morning's levels (*) as follows: Mar'25 at -1.6bp (-1.9bp), May'25 steady at -7.3bp, Jun'25 at -15.9bp (-15.5bp), Jul'25 at -21.1bp (-20.1bp).
SOFR Options:
+15,000 0QU5/0QZ5 96.12/96.62/97.12 call fly strip, 16.5-17.5
-40,000 0QZ5 97.00/98.00 call spds 8.0 to 8.25 vs. 96.08/0.14% (unwind of buys from Dec 26-Jan 7 from 9.0 to 10.0 vs. 95.905 to 96.005)
+5,000 0QK5 96.31/96.62/96.93 call flys, 3.75
+15,000 SFRN5 95.25/95.37/95.62 2x3x1 broken put flys, 0.75/wings over and bid
-5,000 SFRU5 9593 straddles 39.5 ref 95.945
-8,000 0QJ5 9550 puts, 2.0 vs 96.08/0.10%
+8,000 SFRK5 95.62/95.68/95.75 put flys 1.75
+10,000 SFRK5 95.68/95.75/95.81 put flys 1.5-1.75
+2,500 SFRM5/SFRU5 95.68/97.00 call spd strip 43.00
+4,000 SFRM5 95.50/95.62 put spds, 0.5 vs. 95.85/0.06%
-6,000 SFRM5 96.31/96.50 call spds .25 over SFRM5 95.50/95.62 put spds ref 9583.5
+10,000 0QM5 95.12/95.50 put spds 4.0 ref 96.065
+2,500 0QM5 95.12/95.50 put spds, 4.0
1,500 SFRM5 95.62/95.75/95.87 put flys ref 95.825
5,000 2QH5 95.87/96.25 strangle or combo ref 96.05
2,000 SFRK5 95.62/95.75/95.81/95.87 put condors ref 95.815 to -.82
Treasury Options:
-6,000 TYJ5 108/111 strangles, 39, appr implied vol 5.94%
3,400 TYH5 106/107 put spds ref 109-09.5
6,000 TYK5 111/113 call spds ref 109-06.5
2,000 TYK5 105/107 put spds vs. 111/113 call spds ref 109-05
-45,000 FVH5 106/107.5 put over risk reversals, 7.5 cr
1,400 FVH5/FVJ5 105.5/106/106.5 put tree strip
Block: +10,000 TYH5 107.5 puts, 3.0 w/ +30,000 TYH5 108.5 puts, 13, 42 db for the strip vs. -30,000 TYJ5 107.5/108.5 put spds, 20, 18 net package
+10,000 TYH5 108.5 puts, 13 ref 109-07/0.29%
+7,000 TYH5 106/107 put spds, 1 ref 109-13/0.22%
+10,000 TYJ5 107.5/108.5 put spds, 19 ref 109-05.5 to -06/0.15%
1,000 USH5 110/111 2x1 put spds ref 115-17
MNI BONDS: EGBs-GILTS CASH CLOSE: Gilts Modestly Outperform
Gilts modestly outperformed Bunds Monday.
- Core European bonds faded slightly in the post-weekend re-open, with EGBs weighed down by higher gas prices, and only a fairly muted reaction to US President Trump's declaration of steel and alluminium tariffs.
- With no Tier 1 data on Monday's schedule, Bund and Gilt yields drifted lower in afternoon trade amid a modest pickup in market bids though no clear headline catalyst - all within last week's ranges.
- ECB's Lagarde reiterated in her remarks to the EU Parliament that inflation remains on track to reach 2% but that "greater friction in global trade would make the euro area inflation outlook more uncertain.”
- The UK and German curves moderately bull steepened on the day. Front-ends were boosted by an extension of central bank cut pricing (ECB end-2025 to 90bp vs 87bp Friday, BoE to 65bp from 60bp).
- Periphery EGB spreads were mostly tighter, with Greece's widening slightly (BTPs saw little reaction to an Italy syndication 15Y syndication announcement, which had been anticipated by MNI).
- Tuesday's agenda includes pricing of the syndication of the new 4.50% Mar-35 gilt and scheduled comments from BoE’s Bailey & Mann (see MNI's Gilt Week Ahead for more, PDF), while ECB's Schnabel speaks on a panel.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 2.2bps at 2.026%, 5-Yr is down 1.1bps at 2.142%, 10-Yr is down 1bps at 2.362%, and 30-Yr is down 0.6bps at 2.615%.
- UK: The 2-Yr yield is down 2.2bps at 4.146%, 5-Yr is down 2.6bps at 4.147%, 10-Yr is down 1.9bps at 4.457%, and 30-Yr is unchanged at 5.056%.
- Italian BTP spread down 0.6bps at 108.8bps / French OAT up 0.5bps at 72.4bps
MNI EGB OPTIONS: Call Condor Buying In Decent Size Monday
Monday's Europe rates/bond options flow included:
- OEH5 117.25/118.25 RR, bought the call for 4.5 in 4k.
- RK5/ERM5 98.0625/98.3125cs spread, bought for 0.25 in 4k.
- ERK5/ERM5 98.0625c calendar, bought for 0.75 in 10k.
- ERK5 97.875/97.9375/98.00/98.0625c condor, bought for 1.5 in 4k
- ERM5 97.875/97.9375/98.00/98.0625c condor, bought for 1.5 in 2.5k.
- ERM5 97.9375/98.00/98.0625c fly vs 97.50p, bought the fly for flat in 10k.
- SFIM5 95.95/96.05/96.15/96.25c condor, bought for 2.5 and 2.75 in 28k total.
MNI FOREX: USD Index Holds Moderate Advance, JPY Remains Volatile
- The USD index is holding onto 0.2% gains on Monday, as the initial reaction to a Trump announcement of tariffs on steel and aluminium bolstered the greenback. Aside from the Japanese yen, G10 currency ranges have remained subdued as markets await the key US CPI data due on Wednesday.
- The Japanese Yen traded in a relatively volatile manner and remains weaker on Monday. USDJPY briefly extended its recovery from Friday’s lows to around 150 pips, printing a 152.54 session high during the European session. Overall, this recovery for Cross/JPY appeared to be very much a correction to the broader developing theme we saw last week, and across the US session these moves did reverse.
- USDJPY backtracked across US hours alongside a broader bid in core FI on light volumes. As such, the pair trades around 151.75 as we approach the APAC crossover. Renewed weakness would keep the focus on 150.93, the Feb 07 low, a break of which would open up 149.69, the Dec 9 low. In similar vein, EURJPY resides around 90 pips off the session highs of 157.42.
- EURUSD printed a 1.0280 low overnight and moving average studies remain in a bear-mode position, highlighting a dominant downtrend. 1.0272, the Feb 04 low is the immediate support level of note.
- In emerging markets, USDMXN is on the front foot as tariff concerns continue to linger. The pair is 0.53% higher at 20.67, with the pair edging closer to the mid-week highs from last week around 20.71.
- Speeches from BOE’s Mann and Governor Bailey will headline the Tuesday calendar, before Fed Chair Powell is due to deliver testimony on the Semiannual Monetary Policy Report to Congress.
MNI US STOCKS: Late Equities Roundup: Extending Highs, Headline Risk Remains
- Stocks have recovered from this morning's headline risk (risk off on tariff and middle-East tensions), extending highs in late Monday trade. Currently, the DJIA trades up 144.68 points (0.33%) at 44447.84, S&P E-Minis up 40.5 points (0.67%) at 6089.75, Nasdaq up 209 points (1.1%) at 19732.73.
- Headlines aside, Energy and Information Technology sectors continued to lead gainers in late tradde. Middle east tensions supported a rise in crude prices (WTI +1.45 at 72.45) in turn buoyed oil and gas stocks with APA Corp +5.49%, EQT Corp +4.34%, ONEOK +3.75% while Devon Energy gained 3.47%.
- Semiconductor and hardware makers supported the tech sector with Super Micro Computer +14.42 (won't annc earnings until Feb 28), Western Digital +5.83%, Dell +5.71% and Broadcom up 4.48%.
- On the flipside, Financial and Health Care sectors continued to underperform, banks weighing on the former: Wells Fargo -1.73%, JP Morgan -1.41%, PNC Financial -1.30%. Pharmaceuticals weighed on the Health Care sector: Incyte Corp -6.33%, Bio-Techne -3.61%, Thermo Fisher -3.32%.
- Earnings expected to be announced early Tuesday include: Leidos Holdings, Coca-Cola, DuPont de Nemours, Carlyle Group, Ecolab Inc, Fidelity National Information, WESCO International, Carrier Global Corp, Humana Inc, Marriott International and S&P Global.
MNI EQUITY TECHS: E-MINI S&P: (H5) Short-Term Reversal Threat
- RES 4: 6178.75 High Dec 6 and key resistance
- RES 3: 6162.25 High Jan 24
- RES 2: 6147.75 High Jan 31
- RES 1: 6123.25 High Feb 7
- PRICE: 6081.25 @ 14:15 GMT Feb 10
- SUP 1: 6014.00/5935.50 Intraday low / Low Feb 3
- SUP 2: 5892.37 76.4% retracement of the Aug 5 - Dec 6 bull leg
- SUP 3: 5842.50 Low Jan 14
- SUP 4: 5809.00 Low Jan 13 and a key resistance
The initial sell-off on Feb 3 in the S&P E-Minis contract and the breach of support at 5948.00, Jan 27 low, continues to highlight a possible S/T reversal threat. If correct, it suggests that the latest bounce is a correction. A resumption of weakness would open 5892.37, a Fibonacci retracement point. On the upside, a stronger rally would expose key resistance at 6178.75, the Dec 6 ‘24 high. Clearance of this hurdle would resume the primary uptrend.
TUESDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 11/02/2025 | 0700/0800 |  NO | GDP | |
| 11/02/2025 | 0845/0845 |  GB | BOE's Mann lecture on Economic Prospects | |
| 11/02/2025 | 1100/0600 | ** |  US | NFIB Small Business Optimism Index |
| 11/02/2025 | 1215/1215 | GB | BOE Bailey's speech on changes in financial markets | |
| 11/02/2025 | - | *** |  CN | Money Supply |
| 11/02/2025 | - | *** | CN | New Loans |
| 11/02/2025 | - | *** | CN | Social Financing |
| 11/02/2025 | 1330/0830 | * |  CA | Building Permits |
| 11/02/2025 | 1350/0850 | US | Cleveland Fed's Beth Hammack | |
| 11/02/2025 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 11/02/2025 | 1500/1000 | US | Fed Chair Jerome Powell | |
| 11/02/2025 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 11/02/2025 | 1700/1200 | *** | US | USDA Crop Estimates - WASDE |
| 11/02/2025 | 1700/1800 |  EU | ECB's Schnabel in Nuremberg Talk Series' panel | |
| 11/02/2025 | 1800/1300 | *** | US | US Note 03 Year Treasury Auction Result |
| 11/02/2025 | 2030/1530 | US | New York Fed's John Williams | |
| 11/02/2025 | 2030/1530 | US | Fed Governor Michelle Bowman | |
| 12/02/2025 | 0030/1130 | ** |  AU | Lending Finance Details |