HIGHLIGHTS:
- Treasuries traded sharply lower in the aftermath of Tuesday's election, TYZ4 tapped 109-07 low, 10Y yield 4.4768% high.
- Futures see-sawed off lows in the second half while curves bear steepened (2s10s +6.962 at 15.971; 5s30s +4.734 at 33.120).
- Projected rate cuts into early 2025 recede while a 25bp rate cut at Thursday's FOMC rate announcement remains expected.
MNI US TSYS: Kamala Concedes, Focus Turns To Thursday's FOMC
- Treasuries look to finish broadly weaker but off lows in heavy post-election trade (TYZ4>3.8M). Vice President Harris reportedly called Trump to concede and is expected to address the nation later this evening.
- The Dec'24 10Y contract tapped 109-07 low (10Y yld 4.4768% high) before see-sawing to session high of 109-23.5 high briefly after a strong $25B 30Y Bond auction stopped 2.2bp through (4.608% high yield vs. 4.630% WI; 2.64x bid-to-cover vs. 2.50x in the prior month).
- Spot gold has fallen by 2.8% to $2,666/oz today, reflecting the impact of higher US yields and associated greenback strength, as well as heavy positioning, following the outcome of the US election.
- Some late session volatility amid headlines that German Chancellor Scholz has asked the president to dismiss the Christian Ludner, the current finance minister.
- Focus turns to Thursday's FOMC policy announcement. While chances of a a 25bp cut hold steady, projected rate cuts into early 2025 have cooled vs. late Tuesday levels (*): Nov'24 cumulative steady at -24.6bp, Dec'24 -42.7bp (-44.2bp), Jan'25 -52.7bp (-57.7bp), Mar'25 -68.4bp (-74.6bp).
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M +0.00248 to 4.63256 (-0.01944/ wk)
- 3M -0.00040 to 4.52226 (-0.03203/wk)
- 6M +0.01611 to 4.39641 (-0.01557/wk)
- 12M +0.04832 to 4.19947 (+0.00843/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.82% (+0.00), volume: $2.235T
- Broad General Collateral Rate (BGCR): 4.81% (-0.01), volume: $803B
- Tri-Party General Collateral Rate (TGCR): 4.81% (-0.01), volume: $778B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.83% (+0.00), volume: $96B
- Daily Overnight Bank Funding Rate: 4.83% (+0.00), volume: $230B
FED Reverse Repo Operation:
RRP usage bounces to $177.871B from Tuesday's $143.243B -- the lowest since May 6, 2021. The number of counterparties rise to 57 from 50 prior.
US SOFR/TREASURY OPTION SUMMARY
Put buying turned more two-way in addition to some chunky call structure buying as underlying futures see-sawed off session lows in the second half. While chances of a a 25bp cut hold steady, projected rate cuts into early 2025 have cooled vs. late Tuesday levels (*): Nov'24 cumulative steady at -24.6bp, Dec'24 -42.7bp (-44.2bp), Jan'25 -52.7bp (-57.7bp), Mar'25 -68.4bp (-74.6bp).
SOFR Options:
+40,000 SFRZ5 95.50/95.75 put spds 7.75 vs. 96.155/0.08%
5,000 SFRM5 95.25/95.75 2x1 put spds
+10,000 SFRG5 95.12/95.37/95.62 put flys 3.5
-10,000 SFRU5 96.00/96.50 put spds w/ SFRZ5 96.00/96.50 put spd strip 55.5
-10,000 2QX4 96.00/96.25 put spds 10.0 ref 96.165
+6,000 2QH5/3QH5 96.50 call spds 2.0
+22,500 SFRZ5 98.75 calls 2.5
7,400 SFRG5 95.12/95.37/95.62put flys ref 95.85
Screen/Pit +100,000 SFRZ4 95.62/95.68 call spds, 2.5 vs. 95.585/0.16%
Block/pit, -20,000 2QX4 96.00/96.25 put spds, 10.0
Block, 15,000 SFRM5 95.50/96.00/96.50 put flys, 15.0 vs. 95.985/0.05%
Block, 6,000 0QZ4 95.50/95.75/96.00 put flys, 3.5 ref 96.195
Block, 6,000 2QZ4 95.50/95.75/96.00 put flys, 3.0 vs. 96.23/0.08%
5,000 SFRM5 95.25 puts vs. 96.37/96.62 call spds ref 96.045
Block/screen 5,000 SFRU5 96.25/96.62 3x2 put spds ref 96.15
5,000 SFRF5 95.25/95.50 put spds vs. 2,500 SFRZ4 95.50/95.62 put spds
4,500 0QZ4 96.37/96.62/96.75 broken call flys ref 96.17
8,000 2QM5 97.00/97.25 call spds ref 96.19
11,000 2QX4 96.43/96.68 1x2 call spds ref 96.215
4,000 2QZ4 95.50/95.75/96.12 broken put flys ref 96.25
7,000 0QZ4 95.87/96.00/96.12 put flys ref 96.22
appr 21,000 0QZ4 95.93/96.12 put spds vs. 96.43 calls ref 96.205 to -.20
Block/screen 12,000 2QM5 97.00/97.25 call spds, 4.0
4,000 0QX4 95.75/96.00/96.12 broken put trees
3,250 SFRH5 96.62/96.00/96.12 broken put trees ref 95.87
Block, 8,000 0QF5 96.18/96.31/96.43/96.56/96.68 (call tree roll-down?)
2,000 SFRZ4 95.56/95.62/95.68/95.75 call condors ref 95.59
4,500 0QF5 95.87/96.12 put spds ref 96.195
2,500 SFRM5 95.50/95.75 put spds, 7.5
2,400 0QZ4 95.75/95.81 put spds ref 96.13
2,000 SFRF5 95.68/95.81 put spds vs. SFRH5 95.56/95.68 put spds
3,000 2QH5 96.62/96.75/96.87/97.00 call condors ref 96.23 to -.205
Treasury Options:
BLOCK: -17,000 TYZ4 109.5 puts, 46 vs. 109-12/0.54%
+11,000 TYZ4/TYF5 107.5 put calendar spread, 20.0
+10,000 wk2 TY 109.25 puts, 17 ref 109-13.5
Block, -10,000 USZ4 115 puts, 103 vs. 115-18/0.42%
Block, -16,000 TYZ4 109.5 puts, 52 vs. 109-08.5/0.56%
5,000 TYZ4 107/108 put spds ref 109-24.5
+18,000 TYZ4 112.5 calls, 4 -- after multiple TYZ4 112.5 call trades from 14-3, total volume over 80,000
-30,000 TYZ4 113 calls, 3-2
5,000 TYZ4 107/108 put spds, 8 ref 109-22.5
over 11,500 TYZ4 107 puts, 6
3,000 TYZ4 111.75/113.5 call spds ref 109-12.5
2,000 TYZ4 110.75/112.5 1x2 call spds ref 109-10.5
2,500 TYZ4 111/112.75 1x2 call spds ref 109-18
appr 10,000 TYZ4 111/112/113.25 broken call trees, 8 ref 109-19
5,500 TYZ4 107 puts, 7 ref 109-23.5 to -21.5
2,750 wk2 TY 111/111.75 call spds ref 110-14.5
EGBS
MNI BONDS: EGBs-GILTS CASH CLOSE: German Curve Twist Steepens On US Election Impact
Bunds outperformed Gilts Wednesday in the wake of the US election, with periphery EGB spreads widening sharply.
- With the election delivering an apparent "Republican Sweep" of the presidency and US Congress, EGBs began pricing in the negative impact on Eurozone growth from Trump administration policies (including tariffs) and relatively higher economic growth/inflation in the US. This translated into more aggressive ECB cut pricing, leading to a rally at the short end of core EGB curves.
- ECB's de Guindos said the bank would need time to incorporate the trade policy shifts into its projections. Even so, December cut pricing extended 4bp to ~32bp (28% prob of a 50bp cut) but pared that slightly to 30bp by the close. Still, there has now been 17bp of cuts added to the ECB cut path through Sept 2025 (133bp of cuts now seen vs 116bp at Tuesday's close).
- Gilts were relatively less affected, with the UK seen as less impacted by US post-election policy than the Eurozone.
- Stronger-than-expected German factory orders data was shrugged off in comparison to the post-election macro concerns for growth.
- Both the UK and German curves twist steepened. Despite the move in ECB implied, risk-off sentiment in Europe dominated for periphery EGBs, with BTPs leading spread widening (10Y/Bund +8bp).
- Thursday's schedule is highlighted by central banks, including the BoE (preview here) and Fed. We would be very surprised by anything other than a 25bp cut from the BoE (and Fed) Thursday, but we will be eying whether the Bank's inflation forecasts come in higher than expected.
Closing Yields / 10-Yr Periphery EGB Spreads To Germany
- Germany: The 2-Yr yield is down 12.7bps at 2.176%, 5-Yr is down 8.5bps at 2.207%, 10-Yr is down 2bps at 2.405%, and 30-Yr is up 4.1bps at 2.65%.
- UK: The 2-Yr yield is down 0.3bps at 4.51%, 5-Yr is up 1.1bps at 4.445%, 10-Yr is up 3.3bps at 4.563%, and 30-Yr is up 5.5bps at 5.013%.
- Italian BTP spread up 8.1bps at 132.7bps / Spanish up 4.5bps at 74.8bps
MNI EGB OPTIONS: Large Euribor Put Selling Features Wednesday As ECB Cut Pricing Rises
Wednesday's Europe rates/bond options flow included:
- RXZ4 131.50/133.00cs 1x2, bought for 24 in 2k.
- RXG5 130.50 put paper paid 64.5 on 5K
- ERZ4 97.00/97.125/97.25c fly, sold at 6.25 in 8.5k.
- ERZ4 97.12p, bought for 2.25 in 29k vs 7.54k at 97.19
- 0RX4 98.25c, sold at 1 in 20k
- 0RH5 98.50c, sold at 5.5 in 5k
- SFIH5 95.75/96.00/96.25c fly, bought for 4.25 in 2k.
MNI FOREX: USD Index Consolidating 1.65% Advance Following US Election
- The substantial victory for Donald Trump in the US election has prompted a surge of greenback strength. The USD index is currently 1.65% higher on the session, and the most notable underperformers are the Euro and the Japanese yen, reacting to the significant hawkish repricing in US rates.
- Today's EURUSD (-1.78%) slide is the largest since the onset of COVID, and the pickup in downside momentum has resulted in a break of a long-held trendline support drawn off the October '23 low (crossing at 1.0774 today).
- Below here, attention turns to 1.0666, the June 26 low and a key support. Protracted weakness would place focus on 1.0611, the 38.2% retracement of the Sep ‘22 - Jul ‘23 bull cycle.
- The USDJPY trend needle continues to point north, and today’s rally reinforces current conditions. The pair has extended above 153.88, the Oct 28 high, to highlight a resumption of the uptrend.
- A continuation higher would open 155.27, a Fibonacci projection. This level matches closely to the July 30 high of 155.22, a level traded one day prior to the BOJ hike and ensuing sharp move lower for USDJPY across early August.
- Central bank’s headline the G10 calendar on Thursday, with the Riksbank, Norges Bank, the BOE and the Fed all deciding on rates. The FOMC is on course to cut the Fed funds rate by 25bp as it takes another step in paring back restraint.
MNI OPTIONS: Copy - Expiries for Nov07 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0750($550mln), $1.0800(E1.3bln), $1.0950-70(E1.0bln), $1.1040-50(E567mln)
- USD/JPY: Y151.00($1.3bln), Y153.50($729mln)
- AUD/USD: $0.6675(A$555mln) $0.6855(A$1.1bln)
- USD/CAD: C$1.3750($524mln)
MNI US STOCKS: Post-Election Rally Forges New All-Time Highs
- Stocks continue to mark new all-time highs late Wednesday - a Trump presidency seen as positive for business, credit risks waning. Currently, the DJIA trades up 1426.58 points (3.38%) at 43649.52, S&P E-Minis up 139.25 points (2.4%) at 5951.5, Nasdaq up 517.7 points (2.8%) at 18956.76.
- Financials and Energy sectors continued to lead gainers in late trade, banks and financial services outperforming: Synchrony +18.41%, Discover +18.16%, Capital One +14.03%. Meanwhile, Goldman Sachs gains 12.94%, Wells Fargo +11.92%, Morgan Stanley +12.32% and JP Morgan +10.55%. Oil & gas services shares continued to support the Energy sector: Baker Hughes +11.35%, Schlumberger +8.87%, EQT Corp +7.81% while Halliburton gains 7.33%.
- Real Estate and Consumer Staples sectors lagged the post-election rally: investment trusts, particularly specialized and Health Care REITS underperformed: Iron Mountain -9.16%, American Tower -7.14%, Public Storage -5.26%. A mix of broadline retail and personal product makers weighed on Staples: Dollar Tree -7.89%, Brown-Forman -4.62%, Colgate-Palmolive -3.9%.
- With over 75% of of the S&P reporting earnings already, a large backlog of earnings announcements expected after today's close include: Corteva, Albemarle, Energy Transfer, Take-Two Interactive Software, Duolingo, Gilead Sciences, APA Corp, McKesson Corp, Williams Cos, Dutch Bros, Match Group, Lyft, Core Scientific, Permian Resources, Zillow Group, Guardant Health, Fair Isaac, QUALCOMM, AMC Entertainment, Coherent, Wolfspeed.
MNI COMMODITIES: Precious Metals, Copper Slump As USD Rallies
- Spot gold has fallen by 2.8% to $2,666/oz today, reflecting the impact of higher US yields and associated greenback strength, as well as heavy positioning, following the outcome of the US election.
- Despite these pressures on gold, analysts at IG Asia say that this will be balanced with potential safe-haven demand in the event of any trade tensions arising from a Trump presidency.
- From a technical perspective, the trend condition in gold remains bullish and the latest pullback is considered corrective.
- However, an extension lower would signal scope for a deeper correction, towards $2,643.6, the 50-day EMA.
- Meanwhile silver has also fallen by 4.4% to $31.2/oz, its lowest level since Oct 15.
- Bullish conditions in silver remain intact and the bear cycle that started on Oct 23 is considered corrective, for now. However, a clear breach of the 50-day at $31.64, which has been pierced today, would signal scope for a deeper retracement towards $30.211, a trendline support.
- Copper has also fallen by 5.2% to $424/lb, its lowest since Sept 18.
- The sharp sell-off has resulted in a break of $429.15, the Oct 17 low, cancelling a recent bullish signal and highlighting potential for a continuation lower near-term.
- This has opened $415.93, a Fibonacci retracement point.
- After regaining some ground, WTI has reversed to approach the close trading lower. The stronger dollar is weighing against concern of disrupted production in the Gulf of Mexico.
- WTI Dec 24 is down by 0.1% at $71.9/bbl.
THURSDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 07/11/2024 | 0700/0800 | ** |  DE | Trade Balance |
| 07/11/2024 | 0700/0800 | ** | DE | Industrial Production |
| 07/11/2024 | 0700/0800 |  SE | Flash CPI | |
| 07/11/2024 | 0800/0900 | ** |  ES | Industrial Production |
| 07/11/2024 | 0810/0910 |  EU | ECB's Schnabel remarks at Money Market conference | |
| 07/11/2024 | 0830/0930 | *** | SE | Riksbank Interest Rate Decison |
| 07/11/2024 | 0830/0930 | ** | EU | S&P Global Final Eurozone Construction PMI |
| 07/11/2024 | 0900/1000 | *** |  NO | Norges Bank Rate Decision |
| 07/11/2024 | 1000/1100 | ** | EU | Retail Sales |
| 07/11/2024 | 1045/1145 | EU | ECB's Elderson in panel on climate leadership | |
| 07/11/2024 | 1200/1200 | *** |  GB | Bank Of England Interest Rate |
| 07/11/2024 | 1200/1200 | *** | GB | Bank Of England Interest Rate |
| 07/11/2024 | 1230/1230 | GB | BoE Press Conference | |
| 07/11/2024 | - | *** |  CN | Trade |
| 07/11/2024 | 1330/0830 | *** |  US | Jobless Claims |
| 07/11/2024 | 1330/0830 | ** | US | Preliminary Non-Farm Productivity |
| 07/11/2024 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 07/11/2024 | 1330/1430 | EU | ECB's Lane speech on Public Debt | |
| 07/11/2024 | 1400/1400 | GB | Monthly Decision Maker Panel Data | |
| 07/11/2024 | 1400/0900 |  CA | BOC Deputy Mendes gives opening remarks before a lecture. | |
| 07/11/2024 | 1430/1530 | EU | ECB's Lane in panel on Lesson Learnt in Past Crises | |
| 07/11/2024 | 1500/1000 | ** | US | Wholesale Trade |
| 07/11/2024 | 1530/1030 | ** | US | Natural Gas Stocks |
| 07/11/2024 | 1630/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 07/11/2024 | 1630/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 07/11/2024 | 1900/1400 | *** | US | FOMC Statement |
| 07/11/2024 | 2000/1500 | * | US | Consumer Credit |
| 08/11/2024 | 2330/0830 | ** |  JP | Household spending |
| 08/11/2024 | 0001/0001 | ** | GB | KPMG/REC Jobs Report |
| 08/11/2024 | 0230/0230 | GB | BOE's Breeden at Singapore Fintech Festival |