HIGHLIGHTS
- Treasuries see-sawed in weaker territory Wednesday while geopolitical tensions between Ukraine and Russia continued to simmer.
- Rates traded lower coming into the NY session amid chatter that Russia was open to a cease fire agreement with Ukraine.
- Reports that Ukraine fired another barrage of missiles at Russia, plus mildly hawkish comments from Fed Gov Cook saw rates bounce off lows.
- Fed Gov Bowman takes a typically hawkish stance toward monetary policy, in a speech titled "Approaching Policymaking Pragmatically"
MNI US TSYS: Geopol Tensions Continue to Buffet Rates, 20Y Bond Sale Tailed Again
- Treasuries held moderately weaker after the bell, off session lows as geopolitical tensions between Russia and Ukraine continued to buffet markets. After the bell, TYZ4 trades at 109-20.5 (-6.5), 10Y yield +.0138 ast 4.410%, inside the technicals: with resistance above at 110-12 (20-day EMA) vs. initial support at 108-30 (Low Nov 15).
- Curves flattened (2s10s -1.610 to 9.550) while projected rate cuts into early 2025 recede vs. late Tuesday levels (*) : Dec'24 cumulative -13.9bp (-14.8bp), Jan'25 -20.8bp (-21.2bp), Mar'25 -34.8bp (-35.6bp), May'25 -43.1bp (-42.5bp).
- Rates traded lower coming into the NY session amid chatter that Russia was open to a cease fire agreement with Ukraine. Reports that Ukraine fired another barrage of missiles at Russia, however, plus mildly hawkish comments from Fed Gov Cook, saw rates bounce off lows.
- What little support there was quickly reversed after the $13B 20Y bond auction (912810UD8) tailed again: 4.680% high yield vs. 4.649% WI; 2.34x bid-to-cover vs. prior month's 2.51x (lowest since May). Indirect take-up climbed to 69.47% vs. 67.87% last month; direct bidder take-up fell to new low of 7.92% vs. 17.64% prior; primary dealer take-up surged to 22.61% (highest since May 2021) vs. 14.48% prior.
- Equity markets eagerly await Nvidia's Q3 earnings after the close (around 1620ET). In the past five quarters, Nvidia sales have beaten consensus by an average of about $1.8 billion, according to data compiled by Bloomberg.
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.00408 to 4.59513 (-0.01532/wk)
- 3M -0.00635 to 4.51379 (+0.02266/wk)
- 6M -0.00721 to 4.42324 (+0.03133/wk)
- 12M -0.02297 to 4.26102 (+0.01859/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.57% (+0.00), volume: $2.275T
- Broad General Collateral Rate (BGCR): 4.56% (+0.00), volume: $812B
- Tri-Party General Collateral Rate (TGCR): 4.56% (+0.00), volume: $780B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.58% (+0.00), volume: $99B
- Daily Overnight Bank Funding Rate: 4.58% (+0.00), volume: $269B
FED Reverse Repo Operation
RRP usage climbs up to $217.793B this afternoon from $200.664B Tuesday. Compares to $144.243B on Tuesday, November 5 -- the lowest since May 6, 2021. The number of counterparties rises to 64 from 62 prior.
US SOFR/TREASURY OPTION SUMMARY
SOFR & Treasury options traded mixed Wednesday, leaning slightly towards upside call structures in Tsys. Still weaker in late trade , underlying futures drifted in the upper half of the day's range as geopol tensions between Ukraine and Russia continued. Curves bear flattened (2s10s -1.350 at 9.810), while projected rate cuts into early 2025 recede vs. late Tuesday levels (*) : Dec'24 cumulative -13.9bp (-14.8bp), Jan'25 -20.8bp (-21.2bp), Mar'25 -34.8bp (-35.6bp), May'25 -43.1bp (-42.5bp).
SOFR Options:
Block, 8,000 SFRF5 95.43/95.56/95.62 broken put trees, 1.25 net ref 95.76
+2,000 SFRZ5 95.75/96.50 strangles vs SFRM6 95.50 puts, 27.0 vs. 96.16/0.30%
+7,000 SFRZ4 96.00 calls, 0.5 ref 95.53
+5,000 SFRF5 95.75/95.81/95.87/95.93 put condors, 1.0 ref 95.765
-5,000 SFRH5 95.81 straddles 26.0 over 96.06 calls ref 95.76
+10,000 SFRZ4 95.50/95.56/95.62 call flys, 1.0 ref 95.53
-15,000 SFRZ4 95.37/95.43/95.50/95.56 put condor, 2.0 ref 95.53
Block/screen 20,500 SFRF5 95.75/95.81/95.87/95.93 put condors, 1.0 ref 95.795
3,100 SFRF5 95.62 puts
6,000 SFRZ4 95.25 puts, cab
Treasury Options: Reminder, Dec options expire Friday
over 21,100 TYZ4 109 puts, 1 ref 109-24
over 9,600 USF5 119 calls, 50 last ref 116-19
over 14,200 TYZ4 111 calls, 1 ref 109-24.5
3,500 TYZ4 111/112 call spds
2,500 FVZ4 106.5/107 1x2 put spds ref 106-23
6,000 TYF5 109.5 puts, 48 ref 109-29.5
4,700 TYZ4 110 calls, 5 last
3,200 TYF5 108/109 2x1 put spds ref 109-25.5
1,500 TYZ4 109/TYF5 108 put calendar spd
MNI BONDS: EGBs-GILTS CASH CLOSE: Gilts, OATs Underperform
Gilts underperformed core EGBs Wednesday, but OATs fared yet worse.
- Geopolitics played a key role in market movements for a 2nd consecutive session. A Reuters report suggesting Russia's Putin is open to discussing a Ukraine ceasefire deal with US President-Elect Trump weighed slightly on core FI ahead of the cash bond open.
- We then got a marginally firmer-than-expected UK CPI report, which helped translate into UK FI underperformance of peers on the day.
- In mid-afternoon, news that Ukraine fired a UK-made missile into Russia sparked a bounce in safe-haven FI. While the move subsided, periphery EGB spreads moved and remained wider.
- BoE's Ramsden was typically dovish in his comments toward the cash close; Gilt futures ticked up but overall there was little reaction.
- In data, Eurozone Q3 negotiated wages picked up as expected (5.4% Y/Y) though the ECB are likely to look through this uptick.
- The UK and German curves both twist steepened on the day. OAT spreads narrowed from session wides but still finished 1.6bp further outside Bunds (and underperforming periphery EGBs), on continued concerns around the 2025 budget.
- Thursday's schedule includes UK public sector finances and Euro consumer confidence, with several central bank speakers including BoE's Mann and ECB's Lane.
Closing Yields / 10-Yr Periphery EGB Spreads To Germany
- Germany: The 2-Yr yield is down 0.8bps at 2.131%, 5-Yr is up 0.7bps at 2.178%, 10-Yr is up 1.3bps at 2.351%, and 30-Yr is up 0.9bps at 2.55%.
- UK: The 2-Yr yield is down 0.4bps at 4.405%, 5-Yr is up 0.3bps at 4.323%, 10-Yr is up 2.7bps at 4.469%, and 30-Yr is up 5.2bps at 4.921%.
- Italian BTP spread up 1.4bps at 122.8bps / Spanish up 0.4bps at 71.1bps
MNI OPTIONS: Call Structures Targeting Upside Dominate Wednesday
Wednesday's Europe rates/bond options flow included:
- DUG5 107.20/107.60cs 1x1.5, bought for 6.5 in 15k.
- DUH5 107.20/107.70cs 1x1.5, bought for 9.5 in 10k.
- ERH5 97.75/98.00cs 1x1.5, bought for 5 up to 5.25 in 26k.
- ERM5/ERU5/ERZ5 99.50c strip, bought for 4 in 2k.
MNI FOREX: Greenback on Front Foot, USD Index Rises 0.5%
- After two sessions of declines to start the week, the greenback traded on a much firmer footing on Wednesday. The Ice dollar index has risen half a percent, and its recovery bolsters the underlying bullish trend for the greenback, seen both in the lead up to the election and gathering momentum in its aftermath.
- While the Scandinavian currencies are the weakest in G10, the Euro weakness has been most notable across the majors. EURUSD topside has been capped at the prior breakdown point of 1.06 and todays steady grind lower saw the pair come within 10 pips of the post-election lows at 1.0497. While the pair remains vulnerable to further downside, the 2023 lows at 1.0448 will remain a short-term focus, especially ahead of Friday’s Eurozone PMI data.
- Additionally, EURCAD continued its decline following Tuesday’s Canada inflation data. The cross is now approaching the post-election lows at 1.4712 and further downside momentum would turn the focus to the June lows around the 1.4600 mark. Retail sales data in Canada is also scheduled on Friday.
- GBP weakness through to the London close picked up slightly, with GBPUSD touching a new pullback low, but perhaps more notably GBP/JPY erasing the entirety of the day's early gains at the close to trade flat. BOE’s Ramsden comments erred dovish, however were broadly in line with his expected stance, keeping him in the 'gradual' MPC camp for now, but seeing a risk of a requirement for faster cuts.
- USDJPY extended its recovery off the Tuesday lows, reaching an intra-day peak of 155.89. However, softer equity markets prompted a pullback towards 155.25 ahead of the APAC crossover. Moving average studies are in a bull-mode position highlighting a dominant uptrend and sights are on 156.75 and 156.88 next, a Fibonacci projection.
MNI OPTIONS: Expiries for Nov21 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0500-15(E1.2bln), $1.0535-50(E1.8bln), $1.0600-10(E2.1bln), $1.0650(E1.3bln)
- AUD/USD: $0.6450(A$2.0bln), $0.6490-00(A$592mln)
- USD/CAD: C$1.4000($1.1bln), C$1.4025-40($1.2bln), C$1.4175($1.0bln)
- USD/CNY: Cny7.2500($781mln)
MNI US STOCKS: Late Equities Roundup: IT Underperforms Ahead Nvidia Earnings
- Stocks remain in negative territory after reversing early Wednesday gains, inside a the session range after reacting negatively to headlines that Ukraine has fired up to 12 Anglo-French Storm Shadow long-range missiles into Russia. Markets had reacted positively to wires reporting the Kremlin was open to discussing a cease fire with Ukraine.
- Currently, the DJIA trades down 55.82 points (-0.13%) at 43211.56, S&P E-Minis down 33 points (-0.56%) at 5905.5, Nasdaq down 162 points (-0.9%) at 18824.38.
- The Information Technology sector led laggers in late trade, semiconductor shares weighing (Qualcomm -6.75%, Monolithic Power -5.83%) while markets eagerly await Nvidia's Q3 earnings after the close (around 1620ET). In the past five quarters, Nvidia sales have beaten consensus by an average of about $1.8 billion, according to data compiled by Bloomberg.
- Consumer Discretionary and Staples sectors underperformed in late trade, auto makers weighing on the former with Tesla -2.2%, Ford -3.89%. The Consumer Staples sector was weighed down by distribution and retail shares, most notably Target -21.53% after misses both EPS and revenue figures, while guiding lower on its Q4 EPS. Meanwhile, Dollar Tree traded -3.58%, Dollar General traded down 3.70%.
- On the flip-side, Health Care and Energy sectors continued to outperform in the second half, pharmaceuticals and insurance names rebounding after several days of trading lower on Trump's choice of RFK Jr to run the Dept of Health & Human Services. Eli Lilly +2.50%, Bio-Techne +3.25%, Humana +4.51%. Oil and gas shares buoyed the Energy sector: EQT Corp +4.65%, Halliburton +2.0% while Coterra gained 0.95%.
MNI EQUITY TECHS: (Z4) Outlook Remains Bullish
- 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: 5974.25/6053.25 High Nov 15 / 11 and the bull trigger
- PRICE: 5910.75 @ 1445 ET Nov 20
- SUP 1: 5855.00 Low Nov 19
- SUP 2: 5834.60 50-day EMA
- SUP 3: 5724.25 Low Nov 4 and a key support
- SUP 4: 5675.25 Low Sep 18
The latest move lower in the S&P E-Minis contract appears corrective. Medium-term trend signals such as moving average studies, continue to highlight a dominant uptrend. The contract has traded through the 20-day EMA. The next key support to monitor is 5834.60, the 50-day EMA. A clear break of this level would signal scope for a deeper retracement. A resumption of gains would refocus attention on the bull trigger at 6053.25, Nov 11 high.
MNI COMMODITIES: WTI Slides, Gold Further Extends Recovery
- WTI erased earlier gains to lose ground on the day, as pressure from a small build in US crude inventories offset concerns over escalations in the Russia-Ukraine war.
- WTI Dec 24 is down by 0.7% at $68.9/bbl.
- With a bearish theme in WTI futures still intact, attention remains on $65.74, the Oct 1 low, and $63.90, the Sep 10 low and key support.
- Meanwhile, Henry Hub has held most of its gains during today’s rally. Gains are driven by a cooling temperature trend at the end of the month and into early December, supported further by rising LNG export flows.
- US Natgas Dec 24 is up by 6.6% at $3.19/mmbtu.
- Elsewhere, spot gold has risen by another 0.8% to $2,652/oz on Wednesday, marking a third session of gains.
- The move comes amid the further increase in geopolitical tensions as Ukraine launched another long-range missile attack into Russia.
- Despite heightened geopolitical risk, analysts at Standard Chartered believe that macro factors, including the US dollar and rate-cut expectations, are likely to set the tone in the near term.
- The long-term trend condition in gold remains bullish, with the yellow metal piercing the 20-day EMA at $2,651.3 today.
- A clear break above it would highlight a possible reversal and signal the end of the recent bearish corrective cycle, opening $2,710.4, the Nov 11 high.
THURSDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 21/11/2024 | 0700/0700 | *** |  GB | Public Sector Finances |
| 21/11/2024 | 0745/0845 | ** |  FR | Manufacturing Sentiment |
| 21/11/2024 | 0830/0930 |  EU | ECB's Cipollone at ECRB meeting | |
| 21/11/2024 | 1100/0600 | *** |  TR | Turkey Benchmark Rate |
| 21/11/2024 | 1100/1100 | ** | GB | CBI Industrial Trends |
| 21/11/2024 | 1330/0830 | *** |  US | Jobless Claims |
| 21/11/2024 | 1330/0830 | * |  CA | Industrial Product and Raw Material Price Index |
| 21/11/2024 | 1330/0830 | ** | US | Philadelphia Fed Manufacturing Index |
| 21/11/2024 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 21/11/2024 | 1345/0845 | US | Cleveland Fed's Beth Hammack | |
| 21/11/2024 | 1400/1400 | GB | BOE Mann fireside chat with Brown Brothers Harriman | |
| 21/11/2024 | 1500/1600 | ** | EU | Consumer Confidence Indicator (p) |
| 21/11/2024 | 1500/1000 | *** | US | NAR existing home sales |
| 21/11/2024 | 1500/1000 | * | US | Services Revenues |
| 21/11/2024 | 1530/1030 | ** | US | Natural Gas Stocks |
| 21/11/2024 | 1530/1630 | EU | ECB's Lane in panel on macroeconomic effects of geopolitical uncertainty | |
| 21/11/2024 | 1530/1630 | EU | ECB's Elderson at the University of Cyprus | |
| 21/11/2024 | 1600/1100 | ** | US | Kansas City Fed Manufacturing Index |
| 21/11/2024 | 1630/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 21/11/2024 | 1630/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 21/11/2024 | 1730/1230 | US | Chicago Fed's Austan Goolsbee | |
| 21/11/2024 | 1800/1300 | ** | US | US Treasury Auction Result for TIPS 10 Year Note |
| 21/11/2024 | 2140/1640 | US | Fed Vice Chair Michael Barr | |
| 22/11/2024 | 2200/0900 | *** |  AU | Judo Bank Flash Australia PMI |
| 22/11/2024 | 2330/0830 | *** |  JP | CPI |
| 22/11/2024 | 0001/0001 | ** | GB | Gfk Monthly Consumer Confidence |
| 22/11/2024 | 0030/0930 | ** | JP | Jibun Bank Flash Japan PMI |