HIGHLIGHTS
- Treasury curves reversed course, twisting steeper (2s10s +8.412 at 16.731 vs. 5.586 low) after in-line CPI inflation data spurred return of dovish policy expectations.
- Core CPI was exactly as expected at 0.35%, and basically unchanged from September (0.35%). However, supercore (core services ex housing) came in on the soft side at 0.31% vs 0.39% expected, 0.40% prior.
- While most of the contributions to PCE come from the CPI report, the bulk of the remainder (including healthcare services, airfares, and portfolio management) will come in Thursday's PPI report.
MNI US TSYS: Curves Reverse Course After In-Line October CPI, Supercore Softer
- Treasuries reversed course early Wednesday as in-line October CPI inflation data rekindled dovish policy expectations into early 2025. Curves twisted steeper, 2s10s bouncing off early low of 5.586 to 16.573 (+8.254) in late trade.
- Tsy Dec'24 10Y futures are currently steady at 109-13.5 in late trade after initially climbing to 109-30.5 high this morning. Short end rates outperformed as projected rate cuts into early 2025 gained vs. early Wednesday levels (*) : Dec'24 cumulative -20.6bp (-15.5bp), Jan'25 -29.1bp (-23.0bp), Mar'25 -43.5bp (-35.1bp), May'25 -50.4bp (-41.3bp).
- Core CPI was exactly as expected at 0.35%, and basically unchanged from September (0.35%). However, supercore (core services ex housing) came in on the soft side at 0.31% vs 0.39% expected, 0.40% prior. While most of the contributions to PCE come from the CPI report, the bulk of the remainder (including healthcare services, airfares, and portfolio mgmt) will come from Thu's PPI report.
- More Fed speak: St. Louis Fed President Alberto Musalem said Wednesday he supports further interest rate cuts if inflation keeps falling, but added the risks that it doesn't have risen even as the labor market stays healthy.
- Dallas Fed Logan on said the central bank will most likely need more rate cuts to finish the journey to sustainably deliver both maximum employment and stable prices, but it’s difficult to be sure how many cuts may be needed and how soon they may need to happen.
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.00879 to 4.60769 (-0.03552 total last wk)
- 3M +0.00063 to 4.51680 (-0.03812 total last wk)
- 6M +0.01153 to 4.41260 (-0.01091 total last wk)
- 12M +0.02088 to 4.23960 (+0.02768 total last wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.60% (+0.00), volume: $2.298T
- Broad General Collateral Rate (BGCR): 4.58% (+0.01), volume: $822B
- Tri-Party General Collateral Rate (TGCR): 4.58% (+0.01), volume: $788B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.58% (+0.00), volume: $101B
- Daily Overnight Bank Funding Rate: 4.58% (+0.00), volume: $294B
FED Reverse Repo Operation:
RRP usage climbs back over $200B to $238.106B from $178.814B Tuesday. Compares to $144.243B on Tuesday, November 5 -- the lowest since May 6, 2021. The number of counterparties rises to 66 from 59 prior.
US SOFR/TREASURY OPTION SUMMARY
Decent two-way SOFR and Treasury options traded with a bullish tone after this morning's in-line CPI inflation data rekindled dovish policy expectations. Underlying futures reversed course in the short end, curves twisting steeper (2s10s +8.451 at 16.770 vs. 5.586 low) as projected rate cuts into early 2025 gained vs. early Wednesday levels (*) : Dec'24 cumulative -20.6bp (-15.5bp), Jan'25 -29.1bp (-23.0bp), Mar'25 -43.5bp (-35.1bp), May'25 -50.4bp (-41.3bp).
SOFR Options:
-12,000 SFRZ4 95.62/95.68 call spds 2.25 ref 95.605
Block 5,880 0QZ4 95.68/95.87 put spds 3.0
-5,000 SFRX4/SFRZ4 95.68 put spds, 1.25 ref 95.605
+8,000 SFRJ5 95.31/95.43/95.68/95.81 put condor, 3.5 ref 95.995
Block/screen, 6,500 SFRF5 95.62/95.75 put spds, 3.75 ref 95.84
-12,000 SFRF5 95.37/95.43/95.50 put flys, 0.75
Block, 12,000 SFRZ4 95.37/95.43/95.50 put flys, 0.75 ref 95.60
Block/screen, -20,000 SFRM5 95.50/95.62/95.87 put flys, 7.5 ref 95.89
Block/screen, 20,000 SFRH5 95.62/95.75 put spds 4.5 over 96.25/96.43 call spds ref 95.755 to -.75
8,600 2QH5 94.62/95.38/96.00 broken put flys ref 96.155
20,000 SFRM5 95.37 puts, 3.25
4,000 0QZ4 96.25/96.50 vs. 95.62 puts
-20,000 SFRM5 95.75 puts, 20.0-20.5 ref 95.90 to -.895
2,500 SFRX4 95.62/SFRZ4 95.75 call spds ref 95.555
2,000 0QZ4 96.25/2QZ4 96.37 call spds
5,000 SFRZ4 95.50 puts, 4.25 ref 95.55
1,000 3QM5 94.75/95.50 3x2 put spds ref 96.17
+3,600 SFRM5 96.75/97.00 call spds, 2.5 ref 95.95/0.05%
2,000 SFRX4 95.62/95.68 2x1 put spds, 2.25
Treasury Options:
+28,000 FVF5 107.25/109 call spds, 23.5 ref 106-25.5
10,000 USZ4 121 calls, 3 ref 117-06
-16,500 TYZ4 108 puts, 4 ref 109-24 to -27, total volume >33,900
+15,700 TYZ4 110 calls, 16-15 ref 109-16.5 to -15
-20,000 TYG5 106.5 puts, 19 ref 109-20
9,900 Wednesday wkly 10Y 109.25 puts, 8-9 ref 109-15 to -14.5 (expire today)
2,000 Wednesday wkly 10Y 109/109.25 put spds, 5 ref 109-16.5
+19,200 TYG5 107.5/108.5 put spds, 20 ref 109-17
+15,000 TYF5 112.5 calls, 11 ref 109-17
2,000 TYZ4 110.75 calls ref 109-15.5
2,500 FVZ4 107/107.25/107.5/107.75 call condors ref 106-14
+2,000 TYZ4 110/110.75/111.5 call flys, 7 ref 109-15.5/0.11%
MNI BONDS: EGBs-GILTS CASH CLOSE: Bunds Underperform Gilts, UK Short End Gains
Bunds underperformed Gilts Wednesday, with periphery EGB spreads tightening.
- Core EGBs traded with little clear direction in the morning session. Gilts and Bunds jumped alongside Treasuries in the early European afternoon on a slightly softer-than-expected US CPI report.
- But that would mark the high point of the day, with European yields rising again as the US dollar gained ground on speculation president-elect Trump would install a more pro-tariff Treasury Secretary than had previously been anticipated. Bund and Gilt futures hit session lows after the cash close.
- The UK short-end was a notable outperformer across the curves, with about 1-2bp of BOE cuts added to the path over the next year, despite BoE hawk Mann earlier stressing that inflation has not been vanquished.
- ECB speakers Nagel and Villeroy noted the negative impact US tariffs would have on Eurozone growth.
- The German curve leaned bear flatter, with underperformance in the belly; the UK curve twist steepened. Periphery EGB spreads tightened led by BTPs, as equities regained ground late in the session.
- Thursday's calendar includes the second reading of Eurozone Q3 GDP (including productivity data), with appearances by BoE's Bailey and Mann, and ECB's Guindos and Schnabel, along with the accounts of the ECB's October meeting.
Closing Yields / 10-Yr Periphery EGB Spreads To Germany
- Germany: The 2-Yr yield is up 3.3bps at 2.165%, 5-Yr is up 3.5bps at 2.219%, 10-Yr is up 2.8bps at 2.39%, and 30-Yr is unchanged at 2.573%.
- UK: The 2-Yr yield is down 1.2bps at 4.486%, 5-Yr is up 0.6bps at 4.411%, 10-Yr is up 2.1bps at 4.52%, and 30-Yr is down 0.2bps at 4.911%.
- Italian BTP spread down 3.9bps at 124bps / Spanish down 2.7bps at 72.6bps.
MNI OPTIONS: Upside In Euribor Features Wednesday
Wednesday's Europe rates/bond options flow included:
- ERH5 97.87/98.12/98.37c fly, bought for 4.5 in 21k (ref 97.765, 12del).
- ERM5 98.25/98.50cs vs 97.50p, bought the cs for half in 26.9k
- SFIZ4 95.45/95.55cs vs 95.30p, sold the cs at 0 in 7.5k.
MNI FOREX: Greenback Shrugs Off Weak US Supercore CPI, USD Index at 2024 Highs
- Despite the softer-than-expected US supercore inflation data and front-end treasury yields declining, weakness for the greenback was extremely short-lived. The underlying dollar optimism continues to prevail and has resulted in the USD index rising to the highest levels of the year around 106.50.
- For EURUSD (-0.58%), this translated in a sharp move lower through the 1.06 handle, extending as low as 1.0553 and continuing to signal scope for a more protracted move lower towards 1.0448, the 2023 lows.
- While we would not rule out EURCHF following suit on broader Eurozone growth concerns and tariff risks, we would highlight that areas between 0.9250-0.9350 might attract the attention of the SNB. Therefore, with the EURCHF downside potentially capped, USDCHF could well be a better way to capture the next leg higher in the dollar.
- USDCHF has rallied above an influential pivot point at 0.8820, the most notable short-term target and exponential moving average indicators highlight a bull trend. Medium-term attention now turns to 0.9050 and the key resistance zone between 0.9224/44.
- Similarly, USDJPY (+0.56%) eventually joined the broader greenback reversal and has printed the highest level since July in the process, reaching a fresh recovery peak of 155.43. Clearance of 155.27 (Fibonacci projection) bolsters this theme and signals scope for a more substantial move to 156.67 and 157.86, the Jul 19 high. 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 rose above the 2022 highs of 1.3977, briefly printing a new four and half year high of 1.3999. Today’s appreciation represents a breach of a key medium-term resistance point with eyes now on next Tuesday’s October inflation report as the next important input for the Bank of Canada.
- Potential comments from RBA Governor Bullock and Australian employment data will headline the APAC calendar on Thursday. Focus then turns to jobless claims and PPI data in the US.
MNI OPTIONS: Expiries for Nov14 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0600(E948mln), $1.0635-50(E2.1bln), $1.0750(E1.2bln)
- USD/JPY: Y151.30-50($3bln), Y154.50($884mln), Y156.50($597mln)
- GBP/USD: $1.2645-65(Gbp888mln)
- USD/CAD: C$1.4000($595mln)
- USD/CNY: Cny7.1900($754mln), Cny7.2000($2.1bln)
MNI US STOCKS: Late Equities Roundup: Mildly Higher, Awaiting More Data
- Stocks drifted in mildly higher territory late Wednesday, near record highs in the aftermath of this morning's in-line CPI inflation data. Stocks bounced off early lows after the lack of an upside inflation surprise underscored dovish policy expectations. That said, markets still have Thursday's PPI inflation before committing more capital for buying stocks.
- Currently, the DJIA trades up 72.39 points (0.16%) at 43988.15, S&P E-Minis up 7.5 points (0.12%) at 6020, Nasdaq down 0.7 points (0%) at 19278.9.
- Energy and Consumer Discretionary sectors led gainers in late trade, oil and gas stocks buoyed the Energy sector: Coterra Energy +2.58%, Marathon Petroleum +2.24% while Phillps 66 gained 2.21%. Retail distribution shares buoyed the Consumer Discretionary sector: Amazon +2.39%, CarMax +1.58%, the Home Depot +1.50%.
- Utilities and Health Care sectors underperformed in the second half, multi-energy providers weighing on the Utility sector: Consolidated Edison -2.0%, Dominion Energy -1.79%, DTE Energy -1.57%. Meanwhile, the Health Care sector was weighed down by ResMed -3.64%, Molina Healthcare and Charles River Labs both -3.46% while Dexcom declined 3.15%.
- Earnings expected after today's close: Tetra Tech and Cisco, followed by Walt Disney and Applied Materials Thursday.
MNI EQUITY TECHS: E-MINI S&P: (Z4) Bulls Remain In The Driver’s Seat
- 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: 6019.25 @ 14:36 ET Nov 13
- SUP 1: 5927.25 High Oct 17 and a recent breakout level
- SUP 2: 5892.23/5809.43 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 holding on to the bulk of its recent gains. 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: Gold Corrective Bear Cycle Remains In Play
- WTI closed higher on the day, having sharply dipped earlier without a clear driver. Upside is likely to be capped by soft China demand expectations and continued strength in the US dollar.
- WTI Dec 24 rose by 0.4% at $68.4/bbl.
- The EIA has kept its forecast for global oil demand in 2024 stable at 103.1m b/d, according to its November Short-Term Energy Outlook.
- A bearish theme in WTI futures remains intact and a move lower would expose $65.99, the Oct 1 low. On the upside, initial resistance is at $72.88, the Nov 7 high.
- Meanwhile, spot gold has declined by another 0.6% today to $2,584/oz as the US dollar posted further gains, despite the softer-than-expected US supercore CPI inflation data.
- The latest pullback in gold appears to be corrective, but the recent weakness has brought the yellow metal below the 50-day EMA, at $2,642.0, signalling scope for a deeper retracement towards $2,547.0 the Sep 18 low.
- Copper is also down by another 1.3% at $408/lb, taking losses this week to more than 5%.
- Citi has cut its short-term outlook for copper prices by 11% as likely tariff hikes under a Trump presidency and weaker-than-expected China stimulus will weigh on demand.
- This week’s move lower reinforces a bearish theme, with focus on $404.20, the Sep 5 low, followed by $396.45, the Aug 7 low and the bear trigger.
THURSDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 14/11/2024 | 0700/0800 | *** |  SE | Inflation Report |
| 14/11/2024 | 0800/0900 | *** |  ES | HICP (f) |
| 14/11/2024 | 0830/0930 |  EU | ECB's De Guindos remarks at event organised by ABC and Deloitte | |
| 14/11/2024 | 1000/1100 | *** | EU | GDP (p) |
| 14/11/2024 | 1000/1100 | ** | EU | Industrial Production |
| 14/11/2024 | 1200/0700 |  US | Fed Governor Adriana Kugler | |
| 14/11/2024 | 1230/1330 | EU | Publication of the ECB MonPol meeting account | |
| 14/11/2024 | - |  GB | Rachel Reeves’ debut Mansion House dinner speech as chancellor | |
| 14/11/2024 | 1300/1300 | GB | BOE's Mann at Revitalising the global economy event | |
| 14/11/2024 | 1330/0830 | *** | US | Jobless Claims |
| 14/11/2024 | 1330/0830 | *** | US | PPI |
| 14/11/2024 | 1415/0915 | US | Richmond Fed's Tom Barkin | |
| 14/11/2024 | 1530/1030 | ** | US | Natural Gas Stocks |
| 14/11/2024 | 1600/1100 | ** | US | DOE Weekly Crude Oil Stocks |
| 14/11/2024 | 1630/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 14/11/2024 | 1630/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 14/11/2024 | 1830/1930 | EU | ECB's Schnabel in panel on "Reassessing policy tools" | |
| 14/11/2024 | 1900/1400 | *** |  MX | Mexico Interest Rate |
| 14/11/2024 | 2000/1500 | US | Fed Chair Jerome Powell | |
| 14/11/2024 | 2100/2100 | GB | BOE's Bailey speech at Mansion House | |
| 14/11/2024 | 2115/1615 | US | New York Fed's John Williams | |
| 15/11/2024 | 2350/0850 | *** |  JP | Japan GDP 1st Estimate |
| 15/11/2024 | 0200/1000 | *** |  CN | Fixed-Asset Investment |
| 15/11/2024 | 0200/1000 | *** | CN | Retail Sales |
| 15/11/2024 | 0200/1000 | *** | CN | Industrial Output |
| 15/11/2024 | 0200/1000 | ** | CN | Surveyed Unemployment Rate M/M |
| 15/11/2024 | 0430/1330 | ** | JP | Industrial Production |