HIGHLIGHTS
- Treasuries experienced a moderately bumpy ride Thursday: quickly reversing a knee-jerk sell-off on largely in-line PPI inflation data.
- Rates held modestly higher levels until a hawkish reaction to prepared remarks for Chairman Powell made the round at the closing bell.
- Markets recovered slightly from the knee-jerk reaction as Chairman Powell answered questions from the Dallas Fed event, while curves remained near lows: 2s10s -7.911 at 8.215.
- Chairman Powell didn't convey anything "new", but by the same token there is nothing dovish here, which may help explain the hawkish market reaction.
MNI US TSYS: Surprising Hawkish React to Chair Powell Prepared Comments
- Treasury futures (and stocks as well) traded weaker as prepared text from Chairman Powell's comments on economy from Dallas aired. Powell Q&A underway with futures bouncing slightly.
- Curves flattened sharply with 2s-10s leading the sell-off: 2s10s -7.150 at 8.976 vs. 17.491 high this morning.
- Flattening has in turn sapped projected rate cuts into early 2025 that had moderated slightly from Wednesday highs earlier. Current levels vs. this morning (*) : Dec'24 cumulative -16.4bp (-19.8bp), Jan'25 -23.9bp (-27.8bp), Mar'25 -38.2bp (-42.4bp), May'25 -43.8bp (-49.9bp).
- The Dec'24 10Y contract trades -2.5 at 109-11 vs. 109-04 low earlier - through technical support of 109-04 (76.4% of Apr - Sep bull cycle (cont)). Next support level at 109-00 followed by 108-27+ (Low Jun 3 (cont)).
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M +0.00119 to 4.61048 (-0.00600/wk)
- 3M -0.03807 to 4.48539 (-0.03078/wk)
- 6M -0.01534 to 4.38573 (-0.01534/wk)
- 12M -0.07225 to 4.24454 (+0.02582/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.59% (-0.01), volume: $2.233T
- Broad General Collateral Rate (BGCR): 4.58% (+0.00), volume: $820B
- Tri-Party General Collateral Rate (TGCR): 4.58% (+0.00), volume: $788B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.58% (+0.00), volume: $105B
- Daily Overnight Bank Funding Rate: 4.58% (+0.00), volume: $287B
FED Reverse Repo Operation:
RRP usage recedes to $214.509B from $238.106B Wednesday. Compares to $144.243B on Tuesday, November 5 -- the lowest since May 6, 2021. The number of counterparties falls to 51 from 66 prior.
US SOFR/TREASURY OPTION SUMMARY
Moderate two-way SOFR and Treasury options reported overnight, bullish tone carries over from Wednesday after in-line CPI inflation data rekindled dovish policy expectations. Underlying futures steady to mixed ahead PPI and weekly jobless claims 0830ET. Projected rate cuts into early 2025 have moderated vs. late Wednesday levels (*) : Dec'24 cumulative -19.8bp (-20.6bp), Jan'25 -27.8bp (-29.1bp), Mar'25 -42.4bp (-43.5bp), May'25 -49.9bp (-50.4bp).
SOFR Options:
-10,000 SFRZ5 95.37/95.50 2x1 put spds 1.25 ref 95.595
+10,000 SFRM5 96.12/96.62/97.12 call flys 1.75-2.0 over 95.37/95.62 put spds ref 96.02
-5,000 SFRH5 96.12/96.37 put spds 21.0 vs 95.84/0.12%
+7,000 SFRZ4 95.75 puts, 18.5 vs. 95.57/0.90%
-4,000 SFRH5 95.56/95.75/95.81/96.00 put condors, 4.75 ref 95.84
+4,000 0QZ4 96.00/96.25/96.50 call flys, 6.5 ref 96.135
-8,000 SFRZ4 95.62/95.68 call spds, 1.75 ref 95.585
-10,000 SFRF5 95.62/95.75 put spds, 4.25 ref 95.82
Block/screen, 15,000 SFRG5 95.62/95.75 put spds, 4.75 ref 95.85
Block/screen, -30,000 SFRH5 95.12/95.37/95.62 put flys, 3.25
over 7,000 SFRZ4 95.56/95.62/95.68 call flys
-26,000 SFRG5 95.12/95.37/95.62 put flys, 3.25-2.75 ref 95.83 to -.85
4,000 SRF5 96.25/0QF5 96.68 call spds
10,000 SFRM5 96.50/97.00 call spds ref 96.01
5,400 2QH5 95.00/95.50 put spds ref 96.13
2,100 SFRZ4 95.56/95.62/95.68 call flys ref 95.605
Treasury Options:
+5,000 TYZ4 110.75 calls, 5 ref 109-24.5
+10,000 wk3 TY 109 puts, 2 ref 109-18.5, total volume over 30,300 expire Friday
2,000 FVH5 106 puts, 43.5 ref 106-22.5
2,000 TYF5 106/106.5 put spds ref 109-14.5
6,500 TYZ4 110/111 call spds ref 109-09.5
MNI BONDS: EGBs-GILTS CASH CLOSE: Rate Cut Pricing Ratchets Up
EGBs and Gilts enjoyed a late rally Thursday, with modest early weakness giving way.
- While there was relatively little in the way of European macro developments (Eurozone industrial production and Q3 GDP were not market movers), and the US data leaned hawkish (above-expected PPI, below-expected jobless claims), EGBs and Gilts rallied late to close stronger as the US dollar moved from session highs and US equities retraced.
- Rate cut expectations ratcheted up: vs Wednesday's close, there's now 10bp more ECB cuts projected through September 2025 (a cumulative 144bp from current levels) and 6bp more for the BOE (63bp from current levels).
- The belly outperformed on a twist-steepeniUK curve, with the German curve bull steepening.
- Periphery EGB spreads fell sharply, with the move accelerating into the close as European equities held on to early gains.
- BOE's Bailey speaks after the cash close. Friday's early highlight is UK monthly activity data, with appearances later in the session by ECB's Lane and Panetta.
Closing Yields / 10-Yr Periphery EGB Spreads To Germany
- Germany: The 2-Yr yield is down 6.3bps at 2.102%, 5-Yr is down 5.1bps at 2.168%, 10-Yr is down 4.9bps at 2.341%, and 30-Yr is down 0.7bps at 2.566%.
- UK: The 2-Yr yield is down 6.3bps at 4.423%, 5-Yr is down 6.6bps at 4.345%, 10-Yr is down 3.7bps at 4.483%, and 30-Yr is up 0.8bps at 4.919%.
- Italian BTP spread down 3.6bps at 120.4bps / Spanish down 1.9bps at 70.7bps
MNI OPTIONS: ECB Rate Cut Plays Dominate Thursday
Thursday's Europe rates/bond options flow included:
- DUH5 107.20/107.40/107.80/108.00c condor, bought for 4.25 in 5k
- ERZ4 97.375/97.50/97.625c fly, bought for 1.25 in another 5k, 20k total now
- ERF5 97.87/98.00cs, bought for 4 in 8k.
- ERH5 97.87/98.12/98.37c fly, bought for 4.25 in 4k
- ERH5 98.00/98.125/98.25c fly, bought for 1.5 in 5k
- ERM5 97.75/98.00/98.25c fly, bought for 4.75 in 6.5k.
- 0RM5 98.25/98.625/99.00c fly, bough for 5.25-5.5 in 10k
MNI FOREX: EURUSD Briefly Pierces Below 1.05 Mark Before Recovering
- Sentiment early Thursday matched that of recent sessions, with the greenback extending its most recent rally and EURUSD making steady progress towards the 1.05 mark. Following a brief print at 1.0497, sentiment reversed course, and the single currency traded on a more positive footing for the remainder of the session, trading close to unchanged around 1.0560 as we approach the APAC crossover.
- It was a similar story across the major pairs, with Scandinavian FX outperforming and JPY and CHF the moderate laggards.
- For USDJPY, we reached as high as 156.24 as the bull cycle extends. This week’s gains have resulted in a breach of resistance at 154.71, the Nov 07 high, to confirm a resumption of the uptrend and maintain the price sequence of higher highs and higher lows. Sights are on 156.67, a Fibonacci retracement.
- BoJ policy and the FX approach of the Japanese authorities becomes key here, with markets re-entering levels at which the Japanese authorities intervened in currency markets.
- USDCAD is also a standout, having extended above the psychological 1.4000 level. The persistence of greenback strength in the aftermath of the softer US supercore CPI did prompt USDCAD to rise above the 2022 highs on Wednesday, a breach of key medium-term resistance. Immediate attention is on 1.4034, the 1.00 projection of the Oct 17 - Nov 1 - 6 price swing. Further topside momentum would place the focus on 1.4188, 2.0% 10-dma envelope.
- Chinese activity data is due overnight before UK GDP and US retail sales headline the Friday data calendar.
MNI OPTIONS: Expiries for Nov15 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0500(E2.4bln), $1.0540-50($655mln), $1.0600(E1.9bln), $1.0650(E1.0bln), $1.0700(E3.7bln), $1.0800(E1.9bln)
- USD/JPY: Y151.00($1.5bln), Y154.00($591mln)
- AUD/USD: $0.6510-30(A$1.3bln)
- NZD/USD: $0.5980-00(N$880mln)
- USD/CAD: C$1.4000($635mln), C$1.4035-50($632mln)
- USD/CNY: Cny7.1880($593mln), Cny7.2000($1.1bln)
MNI US STOCKS: Late Equities Roundup: Industrials, EVs Remain Under Pressure
- Stocks are drifting in moderately lower territory late Thursday, amid light profit taking as indexes remain near record highs tapped earlier in the week. Currently, the DJIA trades down 125.89 points (-0.29%) at 43832.74, S&P E-Minis down 23.75 points (-0.39%) at 5992, Nasdaq down 78.2 points (-0.4%) at 19151.79.
- Industrials and Consumer Discretionary sectors underperformed in late trade, commercial and professional services weighed on the Industrials sector: despite winning US Army defense contract this week, Leidos Holdings -12.34%, Amentum -11.27%, Jacobs Solutions -5.59%.
- Parts and auto makers weighed on Consumer Discretionary sector: while recall issues continued to plague the Cybertruck, Tesla -5.35% after agreeing with the incoming Trump cabinet to do away with the current $7,500 EV tax credit.
- On the flipside, Utilities and Information Technology sectors outperformed in late trade, electricity providers supporting the Utility sector with AES Corp +5.14%, NextEra +2.46%, Eversource Energy +1.69%. Meanwhile, the IT sector continued to gyrate this week, semiconductor shares mostly higher: Enphase +8.18%, First Solar +6.74% Qualcomm +2.59%.
- Conversely, Super Micro Computer weighed on the group: -11.07% after the Nasdaq posted on thier site: "Super Micro faces a critical deadline on November 16th to either file the delayed report or submit a plan for regaining compliance. If it fails to do so, the company risks being delisted from the Nasdaq."
MNI EQUITY TECHS: E-MINI S&P: (Z4) Uptrend Remains Intact
- 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 High Nov 11
- PRICE: 5983.00 @ 1504 ET Nov 14
- SUP 1: 5927.25 High Oct 17 and a recent breakout level
- SUP 2: 5904.02/5817.53 20- and 50-day EMA values
- SUP 3: 5724.25 Low Nov 4 and a key support
- SUP 4: 5675.25 Low Sep 18
The trend condition in S&P E-Minis remains bullish and the contract is trading just below its recent highs. A key short-term support has been defined at 5724.25, the Nov 4 low. The latest rally 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 Edges Higher As IEA Upgrades Demand Outlook
- After previously falling into losses following a higher-than-expected US crude build, WTI has regained ground to trade up on the day. Crude is likely supported by the IEA’s upgraded 2024 demand outlook.
- WTI Dec 24 is up by 0.4% at $68.7/bbl.
- The IEA forecasts global demand to grow by 921,000 bpd in 2024, up from 862,000 bpd previously, largely due to stronger-than-expected gasoil deliveries in OECD countries.
- For WTI futures, a bearish theme is still intact, with attention on $65.99, the Oct 1 low. Initial firm resistance is at $72.88, the Nov 7 high.
- Meanwhile, Henry Hub front month has plummeted today after a slightly larger than normal weekly injection into US natural gas storage.
- US Natgas Dec 24 is down by 7.0% at $2.77/mmbtu.
- After piercing $2,547.0, the Sep 18 low, earlier in the session, spot gold has recovered as the US dollar gave up some of its gains on the day, with the yellow metal now 0.1% higher at $2,577/oz.
- The long-term trend condition in gold remains bullish, and the recent pullback appears corrective.
- However, recent weakness has resulted in a breach of the 20- and 50-day EMAs, signalling scope for a deeper retracement. Below $2,547, next support is seen at $2511.1, the Sep 12 low.
FRIDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 15/11/2024 | 0700/0800 | ** |  SE | Unemployment |
| 15/11/2024 | 0700/0700 | ** |  GB | UK Monthly GDP |
| 15/11/2024 | 0700/0700 | *** | GB | GDP First Estimate |
| 15/11/2024 | 0700/0700 | ** | GB | Index of Services |
| 15/11/2024 | 0700/0700 | *** | GB | Index of Production |
| 15/11/2024 | 0700/0700 | ** | GB | Output in the Construction Industry |
| 15/11/2024 | 0700/0700 | ** | GB | Trade Balance |
| 15/11/2024 | 0730/0730 | GB | DMO to publish FQ4 (Jan-Mar) gilt operations calendar | |
| 15/11/2024 | 0745/0845 | *** |  FR | HICP (f) |
| 15/11/2024 | 0800/0900 | * |  CH | CH Flash GDP |
| 15/11/2024 | 0900/1000 | ** |  IT | Italy Final HICP |
| 15/11/2024 | 1330/0830 | ** |  US | Import/Export Price Index |
| 15/11/2024 | 1330/0830 | ** |  CA | Monthly Survey of Manufacturing |
| 15/11/2024 | 1330/0830 | ** | CA | Wholesale Trade |
| 15/11/2024 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 15/11/2024 | 1330/0830 | *** | US | Retail Sales |
| 15/11/2024 | 1330/0830 | ** | US | Empire State Manufacturing Survey |
| 15/11/2024 | 1400/0900 | * | CA | CREA Existing Home Sales |
| 15/11/2024 | 1415/0915 | *** | US | Industrial Production |
| 15/11/2024 | 1500/1000 | * | US | Business Inventories |
| 15/11/2024 | 1500/1600 |  EU | ECB's Lane at seminar on Fragmenting Trading System | |
| 15/11/2024 | 1515/1615 | EU | ECB's Cipollone in discussion on productivity |