HIGHLIGHTS
- Treasuries bounced off post election lows early Thursday as markets reevaluated the scope and breadth of a Trump administration next year.
- Treasury futures extended highs (TYZ4 110-13) after the expected 25bp cut to 4.5%-4.75% range -- unanimous 12-0 decision, before scaling back support to 110-08 (+22.5) after the bell.
- Select Fed Headlines: “Even with today’s cut, policy is still restrictive” and “our baseline expectation is to move down gradually to neutral”, but “nothing in the economic data suggests that the committee needs to be in a hurry to get [to neutral].”
MNI US TSYS: Rates Extend Post-Rate Cut Highs, Dovish Reaction To Powell Prsser
- Treasury futures gradually traded off Wednesday's post-election lows Thursday, eventually extending gains after the FOMC delivered an expected 25bp rate cut as Fed Chairman Powell's presser deemed dovish on net.
- Currently, Dec'24 10Y futures trade +23 at 110-08.5 vs. 110-13 high, below initial technical resistance at 110-21.5 (yesterday's high), 10Y yield at 4.3335% (-.0980).
- Powell called the 25bp rate cut a "further recalibration" of policy, saying again that the Committee is "not on any preset course. We will continue to make our decisions meeting by meeting". Overall Powell sounded relaxed about inflation, with very little to suggest that the Committee's outlook has changed very much since the last meeting.
- Powell again highlighted that the labor market is "essentially in balance" and "is continuing to cool, albeit at a modest rate, and we don't need further cooling, we don't think, to achieve our inflation mandate...we don't want the labor market to soften much from here".
- Fed Funds implied rates are 1-2bp lower out to mid-2025 following Powell’s press conference, leaving them little changed vs pre-decision levels. Cumulative cuts from an assumed 4.58% effective: 18bp Dec, 29bp Jan, 45bp Mar and 68bp June.
- Focus turns to Friday's UofM sentiment and inflation expectations.
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.01042 to 4.62214 (-0.02986/ wk)
- 3M -0.00063 to 4.52163 (-0.03266/wk)
- 6M +0.01398 to 4.41039 (-0.00159/wk)
- 12M +0.04714 to 4.24661 (+0.05557/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.81% (-0.01), volume: $2.128T
- Broad General Collateral Rate (BGCR): 4.81% (+0.00), volume: $797B
- Tri-Party General Collateral Rate (TGCR): 4.81% (+0.00), volume: $774B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.83% (+0.00), volume: $102B
- Daily Overnight Bank Funding Rate: 4.83% (+0.00), volume: $285B
FED Reverse Repo Operation:
RRP usage recedes to $159.002B from $177.871B Wednesday - this after usage fell to $143.243B on Tuesday -- the lowest since May 6, 2021. The number of counterparties at 56 from 57 prior.
US SOFR/TREASURY OPTION SUMMARY
SOFR & Treasury option volumes gradually improved Thursday, put flow turned two way while call volume gained as underlying futures extended highs after the FOMC cut rates by an expected 25bps. Projected rate cuts into early 2025: Dec'24 cumulative -18.7bp, Jan'25 -28.8bp, Mar'25 -45.5bp, May'25 -55.7bp.
SOFR Options:
Block, 5,000 SFRZ4 95.50/95.62 call spds 7.0 vs. 95.58/0.32%
appr -30,000 SFRU5 95.25/95.75 2x1 put spds, 2.0
-19,000 0QZ4 96.25 puts, 18.0 vs. 96.20/0.55%
-9,000 SFRM5 95.25/95.75 2x1 put spds, 5.5 tref 96.07
+35,000 SFRM5 97.25/98.25 call spds, 4.75 ref 96.07
2,100 SFRF5 95.37/95.50/95.62 put trees ref 95.875
+5,000 SFRZ5 93.00/93.50 put spds, 1.0 96.205/0.05%
-20,000 SFRF5 96.00/96.25 call spds 1.0-1.25 over SFRH5 95.12/95.37/95.62 put fly ref 95.86
Block, 5,000 SFRX4 95.31/95.37/95.43 put flys, cab
+4,000 SFRM5 97.00/97.50 call spds, 4.0 vs. 96.055/0.10%
+5,000 SFRZ4 95.43 puts, 1.5 ref 95.59
+4,000 SFRZ4 95.43/95.56 put spds vs SFRH5 95.62/95.75 put spd spd 0.75 net
-8,000 0QF5 96.25/96.50 put spds, 15.0 vs. 96.24/0.18%
+6,000 3QH5 95.00 puts, 3.5 ref 96.15
Block, 2,500 2QZ4/3QZ4 95.50/95.75 put spd strip, 4.5 total
+6,000 SFRX4 95.56/95.62 put spds, 2.75
+2,500 SFRX4 95.50/95.56 put spds, 1.25 ref 95.59 (total volume in 95.56 put over 12,600)
+4,500 SFRZ4 95.25/95.37/95.50 put flys, 2.0 ref 95.59
2,000 0QG5 95.56/95.81 put spds vs. 2QZ4 96.25/96.50/96.75 put flys
3,000 SFRM5 95.50/95.75 put spds ref 96.06 to -.055
2,000 SFRZ4 95.68/95.87 put spds ref 95.60
2,000 0QH5 96.50/96.75/97.00 call flys
3,700 SFRF5 95.50/95.68 put spds vs. 96.06/96.18 call spd ref 95.855
Treasury Options:
3,000 TYZ4 113 calls, 2 ref 110-05
appr 11,500 wk3 TY 111/111.75 call spds 3 ref 110-04, expires Nov 15
+5,900 TYZ4 108.5/112.5 strangles, 12
over 8,800 TYZ4 112 calls, 4 ref 109-25.5 to -26
5,000 FVF5 109.25/111.75 call spds ref 107-03.5
Block, 9,300 FVZ4 105.25/106.25 put spds, 9.5 ref 106-26
Block, 14,200 TYZ4 107.5/108.75 put spds, 11 ref 109-21.5
10,000 USZ4 110/113 put spds
4,000 TYZ4 107.5/108.5 put spds, 10 ref 109-14
2,500 FVZ4 109 calls ref 106-25.25
appr 6,500 wk2 TY 109 puts, 4 ref 109-19.5 (expire tomorrow)
-30,000 TYZ4 108.5/109.5 put spds, 20 ref 109-23.5
2,200 TYZ4 115/116/117 call flys ref 109-24
MNI FOREX: US Dollar Heads South Amid China Optimism & Yields Reversal
- The USD started the session poorly, and extended those moves through the US session, potentially as markets reassess the scope and breadth of a Trump administration next year, and as markets gear for a potential Chinese stimulus announcement as soon as tomorrow (coinciding with the end of the NPC Standing Committee meeting).
- Notable performers in G10, and benefitting from the ongoing surge for US equities, are AUD and NZD which are both up over 1.5% as we approach the APAC crossover. These pairs have not only eclipsed the initial losses following the election results, but have extended to near two-week highs.
- For AUDUSD (+1.65%), spot is testing firm resistance at 0.6684, the 50-day EMA - ahead of the close. A clear break of this level would alter the picture and highlight a possible reversal.
- The steady reversal lower for US yields is also boosting the Japanese yen, however, it is showing relative underperformance compared to the substantial moves higher for Antipodean FX and merging market currencies.
- USDJPY fell just short of the 155.20 resistance on Wednesday and following the sharp reversal, spot has slipped back below the 153.00 handle following the Fed, a level that marked last Friday’s close for the pair, and a short-term pivot.
- Multiple factors potentially leave the downside more vulnerable in the short-term, and we would highlight initial firm support at 151.29 (20-day EMA) as the first target which coincides with yesterday’s low. A break of this average would instead signal the start of a short-term corrective cycle. Support at the 50-day EMA, lies at 149.42.
- Also worth highlighting, that while remaining just -0.15% today, EURGBP did print a 0.8306 low, just 11 pips above key short-term support at 0.8295, the Oct 18 low. Canada employment data headlines the economic calendar Friday.
MNI US STOCKS: Late Equities Roundup: Media & IT Lead Stocks To New Record Highs
- Stocks remained bid in post-FOMC rate cut trade, S&P Eminis breaching psychological resistance of 6000.00 to a record 6013.0 high. Nasdaq also extending session highs (19,301.70) while the DJIA tapped 43,823.1 in late trade. Currently, the DJIA trades up 73.61 points (0.17%) at 43801.83, S&P E-Minis up 51.5 points (0.86%) at 6009.5, Nasdaq up 306.1 points (1.6%) at 19289.84.
- Communication Services and Information Technology sectors outperformed in late trade, interactive media and entertainment shares buoyed the Communication sector: Warner Brothers +11.16% despite missing estimates as investors focus record subscriber adds. Meanwhile, Take-Two Interactive Software gained 6.91% after beating earnings estimates, Meta +3.61% while Alphabet gained 2.35%.
- Meanwhile, Information Technology gained in the second half, led by semiconductor and hardware stocks: after beating earnings expectations this morning, EPAM Systems surged +14.42%, Super Micro Computer +13.04% as investors bought yesterday's lows, ANSYS Inc +5.06 while Intel gained 4.83%.
- Conversely, Financial and Energy sectors underperformed in the first half, banks weighing on the Financial sector as paper took profits after Wednesday's rally: Citizens Financial -4.14%, JP Morgan -4.05% after gaining over 10.5% yesterday, KeyCorp -3.96%. Oil and servicer shares weighed on the Energy sector: APA Corp -9.70% after missing earnings expectations late Wednesday, Halliburton -3.31%, Devon Energy -2.51%.
- Corporate earning expected after the close include Block Inc, Insulet Corp, Expedia Group, Fortinet, Akamai Technologies, Rivian Automotive, Mettler-Toledo, Cloudflare, Lucid Group, Sweetgreen Inc, Arista Networks, Dropbox Inc, DraftKings, Archer Aviation, Pinterest, Airbnb Inc, Axon Enterprise, Motorola Solutions, ADMA Biologics, Myriad Genetics and Monster Beverage.
MNI EQUITY TECHS: E-MINI S&P: (Z4) Northbound
- RES 3: 6028.44 1.236 projection of the Sep 6 - 17 - 18 price swing
- RES 2: 6013.00 Intraday high
- RES 1: 6012.75 1.00 projection of the Aug 5 - Sep 3 - 6 price swing
- PRICE: 6009.00 @ 1529 ET Nov 7
- SUP 1: 5829.92/5724.25 20-day EMA / Low Nov 4
- SUP 2: 5675.25 Low Sep 18
- SUP 3: 5637.60 38.2% retracement of the Aug 5 - Oct 17 bull cycle
- SUP 4: 5600.25 Low Sep 12
Bullish conditions in S&P E-Minis remain intact. A key short-term support has been defined at 5724.25, Nov 4 low. Price is trading above both the 20- and 50-day EMAs and this week’s gains have resulted in a breach of the bull trigger at 5927.25, Oct 17 high. Clearance of this level confirms a resumption of the primary uptrend and opens the 6000.0 psychological handle. A breach of 5724.25, the Nov 4 low is required to reinstate a bearish threat.
MNI COMMODITIES: Precious Metals, Copper Rise As Dollar Weakens
- Spot gold has risen by 1.2% to $2,692/oz on Thursday, unwinding some of yesterday’s losses when the yellow metal fell by over 3% in the aftermath of the US election.
- Citi analysts see gold trading weak in the near-term, but believe that structural drivers remain in place.
- The trend condition in Gold is still bullish and a continuation higher would refocus attention on the bull trigger at $2,790.1, the Oct 31 high.
- On the downside, attention is on a key support at $2,645.4, the 50-day EMA.
- Copper has also rebounded by 4.5% to $444/lb, aided by hopes of further Chinese stimulus measures and a softening of the dollar.
- Key short-term resistance has been defined at $449.30, the Nov 5 high. A break would be a bullish development.
- Meanwhile, WTI has climbed in US hours to the highest level since Oct 14, with no clear headline drivers. The market continues to weigh potential future supply risks – especially for sanctioned barrels - following the US election result.
- WTI Dec 24 is up by 0.9% at $72.4/bbl.
- For WTI futures, initial resistance is at $72.67, the Nov 5 high, which was pierced earlier today. A clear break would refocus attention on the key short-term resistance at $77.70, the Oct 8 high.
FRIDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 08/11/2024 | 0700/0800 | ** |  SE | Private Sector Production m/m |
| 08/11/2024 | 0745/0845 | * |  FR | Foreign Trade |
| 08/11/2024 | 0900/1000 | * |  IT | Industrial Production |
| 08/11/2024 | 0900/1000 |  EU | ECB's Cipollone moderating event on Italy and the World Bank Group | |
| 08/11/2024 | 1000/1100 | * | IT | Retail Sales |
| 08/11/2024 | 1110/0610 |  CA | BOC Deputy Gravelle speaks on panel at ECB conference. | |
| 08/11/2024 | 1215/1215 |  GB | BOE's Pill and Shortfall hold MPC Agency briefing | |
| 08/11/2024 | 1330/0830 | *** | CA | Labour Force Survey |
| 08/11/2024 | 1500/1000 | ** |  US | U. Mich. Survey of Consumers |
| 08/11/2024 | 1600/1100 | US | Fed Governor Michelle Bowman | |
| 08/11/2024 | 1700/1200 | *** | US | USDA Crop Estimates - WASDE |
| 08/11/2024 | 1930/1430 | US | St. Louis Fed's Alberto Musalem | |
| 09/11/2024 | 0130/0930 | *** |  CN | CPI |
| 09/11/2024 | 0130/0930 | *** | CN | Producer Price Index |