HIGHLIGHTS
- Treasuries tracked lower EGB sovereigns Monday, incoming issuance and higher crude prices cited.
- No meaningful economic data, focus on home sales flash PMIs, weekly claims, durables and UofM sentiment later this week.
- No reaction to MN Fed Kashkari townhall event, says rates will surge if the U.S. deficit "goes to the moon", said tariffs are hard to analyze if they fall into a "vicious cycle".
MNI US TSYS: Tsys Drift Near Session Lows, Bonds Underperforming
- Treasuries trade sideways near session lows after the bell - holding to a narrow range through the second half. Rates initially took cues from lower EGBs as sovereign debt and higher crude prices (WTI +1.37 at 70.59) weighed.
- The Dec'24 10Y futures contract trades -22 at 111-17 after the bell, nearing technical support at 111-14 (50.0% retracement of the Apr - Sep bull cycle (cont)). Curves steepened: 2s10s +2.605 at 15.849, while 5s30s held near steady: +.021 at 51.270.
- No meaningful economic data, focus on home sales flash PMIs, weekly claims, durables and UofM sentiment later this week.
- No reaction to MN Fed Kashkari townhall event, says rates will surge if the U.S. deficit "goes to the moon", said tariffs are hard to analyze if they fall into a "vicious cycle".
- U.S. balance sheet normalization can run on as the Federal Reserve lowers rates toward a more neutral level, and reserve balances are more than ample to ensure rate control, Dallas Fed President Lorie Logan said Monday.
- Projected rate cuts recede vs. this morning's levels (*): Nov'24 cumulative -22.3bp (-23.0bp), Dec'24 -40.1bp (-42.7bp), Jan'25 -57.6bp (-60.1bp).
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.01445 to 4.74461
- 3M -0.00537 to 4.62626
- 6M -0.00615 to 4.43756
- 12M -0.01206 to 4.12025
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.84% (-0.01), volume: $2.168T
- Broad General Collateral Rate (BGCR): 4.82% (-0.02), volume: $824B
- Tri-Party General Collateral Rate (TGCR): 4.82% (-0.02), volume: $785B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.83% (+0.00), volume: $98B
- Daily Overnight Bank Funding Rate: 4.83% (+0.00), volume: $254B
FED Reverse Repo Operation
RRP usage inches up to $261.044B this afternoon from $259.892B prior. Compares to $239.386B on Monday September 16 2024 -- the lowest level since early May 2021. Number of counterparties at 59, up from 52 on Friday.
US SOFR/TREASURY OPTION SUMMARY
Option desks reported consistently better downside SOFR and Treasury puts Moday. Underlying futures holding narrow range near second half lows after tracking EGBs lower earlier, curves steeper with bonds underperforming. Projected rate cuts recede vs. this morning's levels (*): Nov'24 cumulative -22.3bp (-23.0bp), Dec'24 -40.1bp (-42.7bp), Jan'25 -57.6bp (-60.1bp). Highlight trade includes:
SOFR Options:
+35,000 2QZ4 96.00/96.25 put spds, 5.0-5.25
5,900 3QM5 95.00/95.50/96.00 put flys ref 96.415
Block, 5,000 0QZ4 96.00/96.12/96.37 broken put flys ref 96.54
4,000 SFRM5 96.62/97.00/97.12/97.50 call condors ref 96.28
3,500 SFRH5 95.87/0QH5 96.25 put spds
Block, +10,000 SFRZ4 95.37/95.62/95.87 put flys, 11.0
3,000 SFRH5 95.12/95.50 put spds vs. 2QH5 95.50/96.00 put spds
Block, 12,000 SFRZ4 95.06/95.18 put spds, 0.25
Treasury Options:
5,000 TYX4 110.5/111.0/111.25/111.50 broken put condors, 2 ref 111-17.5
+50,000 TYX4 111.75 puts, 26 ref 111-17.5
3,000 TYX4 111.25/111.5/112 put trees, 12 ref 111-18
+12,000 TYX4 111/111.5 put spds 11 vs. 111-17/0.25%
2,000 TYX4 111.75/112.25 2x1 put spds ref 111-19
over 4,000 TYX4 112 puts, 26 ref 111-21.5
3,600 USZ4 116 puts, 60 ref 119-05
over 11,600 TYZ4 110.5 puts, 34 ref 111-25
4,000 TYX4 111.5/112 put spds, 14 ref 111-24.5
4,500 USX4 116.5 puts, 1 ref 119-10
2,000 TYZ4 110/112 put spds, 45 ref 111-25.5
2,000 USZ4 118/119 put spds, 29 ref 119-11
4,300 TYX4 111.5 puts, 6
6,000 FVX4 107.5/107.75 2x1 put spds, 0.5 ref 108-10
3,700 FVX 108.5 calls
FOREX
MNI USDJPY Extends Rally Above 150.50 Amid Higher Core Yields
- With the moves in currency markets being driven by higher core yields on Monday, it is unsurprising to see both the US dollar outperforming and consistent pressure on the Japanese Yen. USDJPY (+0.80%) has extended through last week’s recovery high, and has reached an initial target of 150.76 (50% of the Jul 3 - Sep 16 bear leg) as we approach the APAC crossover.
- The pair maintains a firmer tone and bullish signals remain intact with price trading above the 50-day EMA. The recent break of this average marked a bullish development highlighting a stronger reversal. Sights are now on 151.94, the Jul 25 low.
- As a result of the USD strength, EURUSD has failed in it's attempt to retake the 200-dma resistance, which held well at 1.0872 in not just Asia-Pac trade - but also on intraday rallies across Thursday and Friday. Spot has narrowed the gap substantially to the cycle lows at 1.0811.
- The move down has exposed 1.0778, the Aug 1 low and the next key support. Clearance of this level would strengthen a bearish theme.
- GBP has been among the poorer performers in G10 Monday, alongside the firmer dollar. GBPUSD (-0.50%) has slipped back below the 1.3000 handle, narrowing the gap to last week’s low at 1.2974.
- Last Wednesday’s break lower confirmed a resumption of the current bear cycle and an important support at 1.3002, the Sep 11 low, has been breached, reinforcing the current theme. Price action initially targets 1.2959, a Fibonacci retracement point, and below here markets will turn their focus to 1.2890, the Aug 18 low.
- A quiet Tuesday calendar will keep the focus on any comments from BOE Governor Bailey and Wednesday’s Bank of Canada decision.
MNI FX OPTIONS: Fade Off Highs in EUR/USD Opens Gap With Largest Expiry of the Day
Fade in EUR/USD spot off the day's highs opens a gap with the most notable option expiry set to roll off at today's cut - E2.1bln at $1.0885-00, which could limit declines in the pair should news and dataflow remain subdued. Other sizeable expiries today include:
- EUR/USD: $1.0775(E535mln), $1.0885-00(E2.1bln)
- AUD/USD: $0.6825-40(A$2.3bln)
- USD/CAD: C$1.3800($715mln)
- USD/CNY: Cny7.1500($644mln)
EQUITIES
MNI US STOCKS: Late Equities Roundup: Off Lows Ahead Heavy Earnings Docket
- Still weaker, stocks bounced off late morning lows in the second half amid cautious two-way positioning. Focus on this week's heavy corporate earnings schedule.
- Approximately 15% of the S&P 500 reporting this week (the largest week so far), focus shifts from financials to more notable reports across consumer discretionary, industrials and healthcare. Highlights in the coming week include General Electric, Coca-Cola and Tesla, while IBM and Texas Instruments provide first real look at Tech performance for the quarter.
- Current index levels are still within last week's trading ranges: the Dow trading down 373.94 points (-0.86%) at 42902.94, S&P E-Minis down 22 points (-0.37%) at 5884.25, Nasdaq down 8.3 points (0%) at 18481.19.
- Real Estate and Health Care sectors continued to underperform in late trade, industrial and office REITs weighing on the former: Prologis -3.76%, Extra Storage Space -3.73%, BXP Inc -2.98%. Pharmaceutical companies weighed on the Health Care sector: Biogen -3.0%, IQVIA Holdings -2.29%, Zoetis -1.82%.
- On the flipside, Information Technology and Energy sectors led gainers ahead midday, semiconductor makers buoyed the former: Nvidia +3.01%, Super Micro Computer +2.26%, Arista Networks +1.20%. Petroleum services companies supported the Energy sector as crude prices gained (WTI +1.45 at 70.67): Schlumberger +1.99%, Occidental +0.46%, Hess +0.42%.
MNI EQUITY TECHS: E-MINI S&P: (Z4) Trend Needle Points North
- RES 4: 6012.75 1.00 projection of the Aug 5 - Sep 3 - 6 price swing
- RES 3: 6000.00 Psychological handle
- RES 2: 5961.00 1.00 projection of the Sep 6 - 17 - 18 price swing
- RES 1: 5927.25 High Oct 17
- PRICE: 5900.50 @ 14:32 BST Oct 21
- SUP 1: 5816.87/5729.25 20-and 50-day EMA values
- SUP 2: 5724.00 Low Oct 2
- SUP 3: 5675.25 Low Sep 18
- SUP 4: 5658.00 Low Sep 13
S&P E-Minis trend conditions are unchanged and bulls remain in the driver’s seat. Fresh cycle highs confirm a resumption of the primary uptrend and maintain the bullish price sequence of higher highs and higher lows. Note that moving average studies are in a bull-mode setup, highlighting a dominant uptrend. Sights are on 5961.00, a Fibonacci projection. Initial support to watch is 5816.87, the 20-day EMA.
MNI COMMODITIES: WTI Climbs, Spot Gold Registers Another All-Time High
- WTI has climbed today, although it remains within Friday’s trading range. The Middle East conflict continues to be monitored closely as it prepares for Israel’s retaliation against Iran.
- WTI Nov 24 is up 2.0% at $70.6/bbl.
- For WTI futures, initial resistance is seen at $72.07, the 50-day EMA. A continuation of gains would refocus attention on the key short-term resistance at $78.46, the Oct 8 high.
- On the other hand, an extension lower would threaten the recent bullish theme and expose support at $66.33, the Oct 1 low.
- Meanwhile, spot gold has edged down by 0.1% to $2,719/oz today, having risen to a fresh record high of $2,740.6 earlier in the session.
- There was no obvious headline for the pullback from the highs, as higher Treasury yields and the bid in the dollar started to reassert themselves.
- Technicals remain bullish, with sights on $2,767.1 next, the 3.236 projection of the Jul 25 - Aug 2 - Aug 5 price swing.
- Copper has also fallen by 0.6% today, to $436/lb, unwinding most of the gain from Friday’s session.
- The red metal remains 9% below the end-September high, amid uncertainty over the strength of Chinese demand.
- Copper futures remain in a short-term bear-mode condition and a clear breach of the 50-day EMA, at $436.66, would signal scope for a deeper retracement and open $415.93, a Fibonacci retracement point.
TUESDAY DATA CALENDAR
| Date | ET | Impact | Period | Release | Prior | Consensus | |
| 22/10/2024 | 0830 | ** | Oct | Philadelphia Fed Nonmfg Index | -6.1 | -- | |
| 22/10/2024 | 0855 | ** | 19-Oct | Redbook Retail Sales y/y (month) | 5.6 | -- | % |
| 22/10/2024 | 0855 | ** | 19-Oct | Redbook Retail Sales y/y (week) | 5.6 | -- | % |
| 22/10/2024 | 1000 | ** | Oct | Richmond Fed Mfg Index | -21 | -- | |
| 22/10/2024 | 1130 | * | 25-Oct | Bid to Cover Ratio | -- | -- |