HIGHLIGHTS
- Treasuries look to finish higher after this morning's mixed November employment data reinforced the view of a resilient labor market despite gradual cooling.
- Markets welcomed the better than expected jobs gain (+227k vs. 220k est) announced in this morning's November employment report even as the unemployment rate inched up to 4.2% from 4.1%.
- That said, stocks trimmed early gains, profit taking/position squaring ahead the weekend after two of the three major averages climbed to new record highs this morning (SPX Eminis at 6,111.00 and the Nasdaq at 19,851.36, DJIA off late November highs).
MNI US TSYS: Sentiment Buoyed After Mixed November Jobs Data
- Treasuries look to finish near early session highs, curves steeper (2s10s +2.126 at 5.135) with short end rates outperforming after this morning's better than expected jobs gain (+227k vs. 220k est) even as the unemployment rate inched up to 4.2% from 4.1%. On net, the data reinforced the view of a resilient labor market despite gradual cooling - which in turn supported expectations of more rate cuts by the Federal Reserve.
- Steeper post-data curves buoyed projected rate cuts into early 2025 vs. pre-data (*) as follows: Dec'24 cumulative -22.2bp (-17.1bp), Jan'25 -29.7bp (-24.0bp), Mar'25 -46.6bp (-38.6bp), May'25 -56.4bp (-48.1bp).
- Meanwhile, the preliminary U.Mich consumer survey for December saw sentiment firm a little more than expected at 74.0 (cons 73.3) after 71.8. Components were mixed though, with a much stronger than expected increase in current conditions (77.7 vs cons 65.2 after 63.9) at the expense of expectations (71.6 vs cons 77.7 after 76.9).
- Reminder, the Federal Reserve enters their self-imposed blackout at midnight tonight through December 19, the day after the final FOMC policy announcement for 2024. Focus turns to next week's CPI and PPI inflation data on Wednesday and Thursday respectively.
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.00522 to 4.47730 (-0.05505/wk)
- 3M -0.00172 to 4.42672 (-0.04653/wk)
- 6M -0.00102 to 4.32942 (-0.05417/wk)
- 12M +0.00295 to 4.18079 (-0.07310/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.59% (+0.00), volume: $2.325T
- Broad General Collateral Rate (BGCR): 4.57% (-0.01), volume: $853B
- Tri-Party General Collateral Rate (TGCR): 4.57% (-0.01), volume: $822B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.58% (+0.00), volume: $109B
- Daily Overnight Bank Funding Rate: 4.58% (+0.00), volume: $280B
FED Reverse Repo Operation
RRP usage slips to a new multi-year low of $130.014B (May 3 2021 low of $129.724B) this afternoon from $131.964B on Thursday. The number of counterparties slips to 50 from 53 prior.
US SOFR/TREASURY OPTION SUMMARY
Option desks reported better call and outright vol structure sales after this morning's November employment data. Unwinds and positioning flow continued through midday as accounts migrated to the sidelines ahead of the weekend. Leading volume was a large out-of-the-money Dec'24 SOFR put trades/blocked overnight, over 52k SFRZ4 95.37 puts at cab, open interest of 263,039 coming into the session. Covering today's jobs data risk, the options also cover next week's CPI and PPI data before expiring next week Friday. Post-data rise in projected rate cuts into early 2025 vs. pre-data (*) as follows: Dec'24 cumulative -22.2bp (-17.1bp), Jan'25 -29.7bp (-24.0bp), Mar'25 -46.6bp (-38.6bp), May'25 -56.4bp (-48.1bp).
SOFR Options
over 15,000 SFRG5 95.12/95.37/95.62 put flys
-10,000 SFRU5 96.00/96.12/96.37/96.50 call condors, 2.25 ref 96.235
+5,000 0QF5 96.37/96.50 call spds 5.0 ref 96.37
+4,000 SFRZ4 95.37/95.50 put spds 0.375 ref 95.6325
-10,000 SFRH5 96.00 puts 20.0 ref 95.91
+5,000 SFRF5 95.43/95.68 put spds 1.0 ref 95.905
-5,000 SFRZ4 95.50/0QZ4 96.31 call spds 6.75
over -10,000 SFRH5 95.87 straddles 29.0 to 27.5
SRZ4 9562/9568cs -5K @2.25 (9563.25
-5,000 SFRZ4 95.62/95.68 call spds 2.25 ref 95.6325
-20,000 0QZ4 96.31/96.43 call spds 3.5 ref 9629
-10,000 0QZ4 96.37 calls 3.5 ref 96.29
-15,000 SFRF5 95.56/95.68 2x1 put spds, .5 ref 95.89
-10,000 SFRF5 95.68 puts, 1.25 vs. 95.895/0.14%
5,000 0QZ4 96.37/96.50 1x2 call spds ref 96.225
over 52,000 (35k blocked) SFRZ4 95.37 puts, cab (OI 263,039)
2,000 2QZ4 96.06/96.12/96.25 put flys
3,000 0QF5 97.87 calls, cab
over 5,000 SFRZ4 95.50 puts, 1.5 ref 95.585
2,800 0QZ4 96.18/96.37 call spds ref 96.205
2,500 2QZ4 96.62 calls, 1.0 ref 96.34
2,500 SFRF5 95.68/95.87/95.06 call flys ref 95.83
Treasury Options:
12,100 Wednesday wkly 10Y 110.5 puts, 10 ref 111-05
2,000 TYG5 109/110 put spds ref 111-04
2,500 TYG5 112.5 calls ref 111-02.5
2,000 TYF5 107 puts, 1 ref 111-04
4,000 wk1 TY 111.75/112 call spds ref 111-02.5 (expire today)
8,000 wk1 TY 110.5/110.75/111 put trees (expire today)
over 6,300 wk1 TY 110.5 puts, 4 ref 111-03.5 (expire today)
MNI BONDS: EGBs-GILTS CASH CLOSE: Modest Steepening, Tracking Treasuries
European yields moved in a fairly wide range but closed little changed Friday.
- Gilts and Bunds weakened in morning trade, with equities bid, and the space generally following the lead of US Treasuries for a second consecutive session.
- Core European FI rallied as the highly anticipated US employment report was taken favourably by rates markets, with aggregate payroll gains in line with expectations, but the unemployment rate moving a little higher than foreseen. But the move faded toward the cash close, again mirroring a modest pullback in Treasuries.
- The German curve marginally twist steepened on the day, with the UK's modestly bull steepening.
- After opening tighter to Bunds, OAT spreads retraced move of the initial move, widening throughout the session on continued political uncertainty after this week's government collapse. Periphery EGB spreads followed a similar path, finishing little changed on the day.
- Next week's highlight is the ECB meeting (a 25bp cut remains fully priced, little changed Friday) - we also get UK monthly activity data and an appearance by BoE's Ramsden.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 1.7bps at 2.001%, 5-Yr is down 1.7bps at 1.969%, 10-Yr is down 0.3bps at 2.108%, and 30-Yr is up 0.5bps at 2.316%.
- UK: The 2-Yr yield is down 1.3bps at 4.261%, 5-Yr is down 1.2bps at 4.133%, 10-Yr is down 0.6bps at 4.275%, and 30-Yr is down 0.3bps at 4.808%.
- Italian BTP spread down 0.2bps at 108.5bps / French OAT down 0.6bps at 76.8bps
MNI FOREX: US Dollar Ending Higher Following Mixed US Employment Report
- The greenback initially traded weaker as markets reacted to the higher-than-expected US unemployment rate, bolstering the case for the Federal Reserve cutting rates at its December meeting. However, while ignoring the lower front-end US yields, currency markets reversed course, and the USD index looks set to close the session with 0.35% gains.
- The short-term EURUSD bounce reached a three-week high of 1.0630 before substantially reversing course. Price action represents the fourth attempt above 1.0600, the prior breakdown point for the pair, and we are yet to have a daily close above this level, potentially bolstering the medium-term trend direction, which remains down.
- Markets will also be eyeing a false break of the 20-day EMA, having slipped back below the average in recent trade. Key levels on the downside are well established at 1.0461, the Dec 2 low and 1.0335, the Nov 22 low and the bear trigger.
- Antipodean FX is notably underperforming on the session with both AUD and NZD down comfortably over 1%. There was an element of concern that the appointment of David Perdue by Trump as the Ambassador to China is a strong signal of hawkish intent toward China under the Trump admin next year - which is certainly negative for both AUD and NZD. Resilience for both EURAUD and EURNZD over the French political developments may also be enhancing this dynamic.
- In Canada, a poor breakdown of full-time versus part time jobs created and a higher than expected unemployment rate has boosted USDCAD, as market participants see a second 50bp BOC cut firmly in their sights. The pair resides around 1.4150 ahead of the weekend close, near to cycle highs.
- Chinese inflation data crosses Monday before Wednesday’s release of US CPI. Several central banks have rate decisions, including the RBA, BOC, SNB and ECB.
MNI OPTIONS: Expiries for Dec09 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0600(E960mln), $1.0625(E602mln)
- USD/JPY: Y152.50($1.0bln)
- AUD/USD: $0.6425-40($595mln)
- USD/CAD: C$1.3980-00($585mln)
- USD/CNY: Cny7.1900($580mln)
MNI US STOCKS: Late Equities Roundup: Off Post-NFP Highs, Oil/Gas & Energy Lagging
- Stocks are holding near steady (SPX Eminis) to mixed in late trade, Nasdaq outperforming weaker DJIA. Stocks trimmed early gains ahead of the weekend after two of the three major averages climbed to new record highs this morning: SPX Eminis at 6,111.00 and the Nasdaq at 19,851.36, while the DJIA climbed to 44,886.32, was still off November 29 all-time high of 45,067.28.
- Stocks gapped higher earlier as the jobs data reinforced the view of a resilient labor market despite gradual cooling - that in turn supported expectations of steady rate cuts by the Federal Reserve. Currently, the DJIA is down 141.04 points (-0.32%) at 44623.79, S&P E-Minis up 6.25 points (0.1%) at 6095, Nasdaq up 129.7 points (0.7%) at 19830.69.
- Consumer Discretionary and Communication Services sectors continued to lead gainers in late trade, apparel stocks, auto and broadline retailers buoyed the Discretionary sector with Lululemon surging 16.8% on overseas strength and several upgrades, Ulta Beauty +9.26%. Meanwhile, AutoZone gained 3.2%, Amazon +1.91% while Tesla gained 1.83%.
- Interactive media and entertainment shares continued to support the Communication Services sector: Meta +2.32%, Netflix +1.10%, Alphabet +1.03% while Live Nation gained 0.93%.
- On the flip side, Energy and Utility sectors underperformed in late trade, oil & gas weighed on the former: Diamondback Energy -4.05%, Devon Energy -3.0%, Coterra -2.84%. Electricity and independent power shares weighed on the Energy sector: Eversource -2.89%, NRG Energy -2.28%, Consolidated Edison -2.01%.
MNI EQUITY TECHS: E-MINI S&P: (Z4) Trend Needle Points North
- RES 4: 6200.00 Round number resistance
- RES 3: 6184.00 1.000 proj of the Nov 4 - 11 - 19 price swing
- RES 2: 6145.26 1.236 proj of the Aug 5 - Sep 3 - 6 price swing
- RES 1: 6107.25 High Dec 5
- PRICE: 6092.75 @ 1435ET Dec 6
- SUP 1: 6000.00 20-day EMA
- SUP 2: 5905.97 50-day EMA
- SUP 3: 5855.00 Low Nov 19
- SUP 4: 5814.75 Low Nov 6
The S&P E-Minis contract maintains a bullish tone and price traded higher yesterday. This confirms a resumption of the uptrend and signals scope for a continuation near-term. Note that moving average studies are in a bull-mode set-up, highlighting a dominant uptrend and positive market sentiment. Sights are on 6145.26, a Fibonacci projection. Initial support to watch lies at 5990.65, the 20-day EMA.
MNI COMMODITIES: Crude Declines Amid Stronger USD, Gold Steady
- Crude futures are softer on the day and on the week, as OPEC+ still plans to bring back supplies to the market, albeit delayed as expected.
- Concerns that supply will still outstrip demand weighed on prices further, while a stronger US dollar also added pressure.
- The global oil market faces a heavy surplus in 2025 with an oversupply of more than 1mb/d, according to Macquarie.
- WTI Jan 25 is down by 1.3% at $67.4/bbl.
- The move narrows the gap to support at $65.74, the Oct 1 low.
- Meanwhile, gold remained steady today, as US employment data kept the door open to another Fed interest rate cut later this month.
- Spot gold is up by 0.1% to $2,634/oz on Friday, leaving the yellow metal 0.3% lower on the week.
- While gold continues to trade inside a range for now, the long-term trend condition remains bullish and the Oct 31 - Nov 14 bear leg appears to have been a correction.
- Resistance to watch remains at $2,721.4, the Nov 25 high. Clearance of this level would highlight a bullish short-term development. Key support to monitor is $2,536.9, the Nov 14 low.
- Silver has underperformed today, falling by 1.2% to $30.9/oz, to reduce total gains this week to +1.1%.
MONDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 09/12/2024 | 1300/1300 |  GB | BOE's Ramsden speech at OMFIF "Financial stability and the Bank of England's toolkit" | |
| 09/12/2024 | - |  JP | Economy Watchers Survey | |
| 09/12/2024 | - |  EU | ECB's Cipollone in Eurogroup meeting | |
| 09/12/2024 | 1500/1000 | ** |  US | Wholesale Trade |
| 09/12/2024 | 1630/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 09/12/2024 | 1630/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 10/12/2024 | 0330/1430 | *** |  AU | RBA Rate Decision |