MNI ASIA MARKETS ANALYSIS: PPI YoY Gains, UofM Sentiment Miss

HIGHLIGHTS

• Treasuries gradually extended session highs Friday afternoon, curves maintaining steeper profiles after this morning's mixed PPI results where month-over-month eased vs higher year-over-year metrics.
• U.Mich consumer sentiment disappointed in the preliminary October release, falling to 68.9 (cons 71.0) after 70.1 in September.
• Projected rate cuts have gained slightly vs. this morning's pre-data levels (*): Nov'24 cumulative -22.7bp (-21.4bp), Dec'24 -45.1bp (-44.6bp), Jan'25 -65.4bp (-64.4bp).

US TSYS

MNI US TSYS: Curves Bull Steepen After Mixed PPI. UofM Sentiment Miss
Treasuries are trading near session highs after the bell, curves steeper after this morning's mixed PPI results where month-over-month eased vs higher year-over-year metrics.

• Some of the main PPI categories that feed into core PCE calculations saw an acceleration in M/M terms in September, adding 0.06pps to core PCE vs an upward revised 0.03pp in Aug (had been 0.00pp).
• Upward revisions to August could mean a more notable upside surprise for Y/Y figures though, potentially seeing some upside risk to the recently downward revised median FOMC forecast of 2.6% for core PCE inflation in 4Q24 (lowered from 2.8% in the June SEP).
• Meanwhile, U.Mich consumer sentiment disappointed in the preliminary October release, falling to 68.9 (cons 71.0) after 70.1 in September. It leaves sentiment at one of the lower levels seen this year but well within post-pandemic ranges.
• Treasuries gradually extended highs in the second half, while projected rate cuts have gained slightly vs. this morning's pre-data levels (*): Nov'24 cumulative -22.7bp (-21.4bp), Dec'24 -45.1bp (-44.6bp), Jan'25 -65.4bp (-64.4bp).

SOFR FIXES AND PRIOR SESSION REFERENCE RATES
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SOFR Benchmark Settlements:

• 1M -0.01804 to 4.78592 (-0.05966/wk)
• 3M -0.00860 to 4.64730 (+0.06332/ wk)
• 6M -0.00514 to 4.44358 (+0.16559/wk)
• 12M -0.00768 to 4.13974 (+0.27392/wk)

US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 4.82% (-0.01), volume: $2.198T
• Broad General Collateral Rate (BGCR): 4.81% (-0.01), volume: $805B
• Tri-Party General Collateral Rate (TGCR): 4.81% (-0.01), volume: $769B
• (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: $258B

FED Reverse Repo Operation

RRP usage climbs to $331.735B this afternoon from $322.587B prior. Compares to $239.386B on Monday September 16 2024 -- the lowest level since early May 2021. Number of counterparties at 59 from 68 prior.

US SOFR/TREASURY OPTION SUMMARY

Option desks reported mixed trade Friday, with some large prints in SOFR and Dec 10Y Treasury puts outweighing more modest call trades. Underlying futures gradually extended highs after this morning's mixed PPI and UofM sentiment, curves holding steeper with the short end outperforming. Projected rate cuts have gained slightly vs. this morning's pre-data levels  (*): Nov'24 cumulative -22.7bp (-21.4bp), Dec'24 -45.1bp (-44.6bp), Jan'25 -65.4bp (-64.4bp). Highlight trade includes:

SOFR Options:
+10,000 SFRH5 96.75/97.25 call spds vs. 0QH5 97.62/98.00 call spds, 1.25
Block, 10,000 SFRH5 95.81/95.93/96.06 put flys, 1.25 ref 96.085 to -.095
+15,000 SFRM5 95.50/95.62/95.87 put flys, 4.0
+5,000 0QF5 97.25/97.62 call spds, 3.75-4.0
Block/screen 59,000 SFRZ4 95.25 puts, 0.75
-22,000 SFRM5 96.87 puts 68.5 vs. 96.365/0.70%
+9,000 SFRZ5 96.25 puts 32.0 vs. 96.615/0.38%
+10,000 SFRH5 96.75 calls vs 0QH4 97.62 calls, 2.5 net
Block, 8,000 2QZ4 97.12/97.37 call spds, 2.5 ref 96.605
Block, 6,000 2QZ4 97.25/97.50 call spds 1.75/splits ref 96.605
Block/screen, over 5,800 0QZ4 96.37 puts. 12.5 ref 96.60
3,000 SFRZ4 95.68 calls, 8.0
3,000 SFRZ4 95.18/95.31 put spds
4,150 SFRZ5 96.50 puts ref 96.58
3,800 SFRV4 95.62 puts ref 95.665
2,000 SFRX4 95.06/95.43 put spds ref 95.665
Treasury Options:
16,000 TYZ4 111 puts, 42 ref 112-09
3,000 TYZ4 110 puts, 24 ref 112-09
5,000 wk3 TY 112.25 straddles, 40 ref 112-07.5
+20,000 Wednesday weekly TY 113 calls, 2 reef 112-07.5
9,000 wk3 TY 110/110.75 2x1 put spds ref 112-04.5
11,170 TYX4 113/114 call spds 7 ref 112-04
1,500 USZ4 115/117 put spds ref 119-30
3,100 USX4 116.5 puts, 9 ref 120-02
3,000 TYX4 112/112.5 strangle vs. TYZ4 110/114.5 strangle
Block, 20,000 USZ4 115 puts, 42.5/splits vs. 119-30/0.19%
+11,750 USZ4 115 puts, 42 ref 119-30/0.19%
+53,000 TYZ4 109.5 puts, 21 vs. 111-31.5/0.19%
4,000 TYX4 110.75/112 put spds vs. 113.25 calls ref 112-01.5
4,500 TYX4 111.5 puts, 13 ref 112-05
over 3,100 TYX4 113 calls, 10 last
over 3,200 TYZ4 115.5 calls, 11 last
Block/screen, 12,500 TYX4 112.25 straddles, 60 ref 112-08

EGBS

MNI BONDS: EGBs-GILTS CASH CLOSE: Early Losses Reverse, Curves Steepen Again

Core EGBs and Gilts rebounded from early losses to close Friday flat, with periphery spreads coming off early wides.

• Bond futures ticked higher overnight, but the move faded over the course of the European morning.
• UK economic activity came in close to expectations and had little impact. Heavy Italian supply (3/7/15/24-year BTP auctions) helped weigh on the space in the morning.
• The main macro event of the day, US PPI, brought an initially dovish reaction on a soft headline reading but the details were more mixed, and the uptick faded with a move back to the lows.
• But the rest of the session saw an almost uninterrupted rally, with no clear catalyst, mainly tracking Treasuries higher. Curves steepened on the day: the UK's in a bullish fashion, with Germany's bear steepening modestly.
• Overnight reaction to France's fiscal and issuance plans for 2025 released late Wednesday was limited, with OAT/Bund closing Friday unchanged. BTPs underperformed on the periphery, with 10Y spreads to Bunds coming off early wides (4bp) to close about 2bp wider.
• Fitch's review of France features after hours. Next week brings a busier European schedule, with the ECB decision Thursday (our preview will be out early next week), and UK CPI and labour market data.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 0.2bps at 2.235%, 5-Yr is up 0.7bps at 2.119%, 10-Yr is up 0.9bps at 2.265%, and 30-Yr is up 1.1bps at 2.559%.
• UK: The 2-Yr yield is down 1.6bps at 4.171%, 5-Yr is down 0.9bps at 4.072%, 10-Yr is down 0.3bps at 4.207%, and 30-Yr is down 0.2bps at 4.749%.
• Italian BTP spread up 1.8bps at 129.5bps /Spanish up 1.3bps at 74.9bps 

FOREX

MNI FOREX: Record Highs for Equities Underpins Cross JPY Strength
Currency markets traded with a muted tone on Friday, amid a mixed set of US data and potentially reflecting cautiousness ahead of the week’s close and the impending US holiday on Monday. All eyes remain on China stimulus measures, with a key press conference taking place on Saturday from the MOF on fiscal policy. We also have more meetings at the start of next week.

• Fresh record highs for Emini S&P 500 futures weighed on the Japanese yen, with the risk on tone
• Boosting the likes of AUD and NZD, which are the best performers in G10, alongside the Norwegian Krone.
• AUDJPY has risen 0.60% and while it did breach Thursday’s high, the cross remains shy of the October peak which is located around 65 pips above current levels at 101.42.
• The most interesting move was following the stellar jobs report from Canada which momentarily provided the Canadian dollar with a welcome reprieve. USDCAD shed roughly 50 pips from 1.3775 to 1.3725 on the release, however, a steady grind higher since then makes it likely that USDCAD will extend its winning streak to 8 consecutive sessions. This keeps the bull trend firmly intact, and sights are on 1.3800 and 1.3846, the mid-April highs. Canadian CPI is due next Tuesday.
• EURUSD held a very tight 31 pip range, as the pair consolidated its small bounce from 1.0900 lows made this week. Next week will be highlighted by the October ECB rate decision and press conference.

MNI FX OPTIONS: Expiries for Oct14 NY cut 1000ET (Source DTCC)

• EUR/USD: Oct15 $1.1000(E1.8bln); Oct16 $1.0950-55(E2.4bln), $1.0975(E1.0bln); Oct17 $1.0735-45(E1.9bln), $1.0990-10(E2.7bln)
• USD/JPY: Oct17 Y147.60($1.1bln)
• AUD/USD: Oct15 $0.6675(A$1.7bln), $0.6775(A$1.7bln), $0.6800(A$1.7bln)
• USD/CAD: Oct17 C$1.3600-10($1.0bln)
• USD/CNY: Oct17 Cny6.9867($1.3bln), Cny6.9913-18($2.0bln), Cny6.9934($1.0bln)

EQUITIES

MNI US STOCKS: Late Equities Roundup: S&Ps. DJIA Drift Near Record Highs
Stocks are holding near this morning's record highs late Friday, the Dow currently trading up 379.46 points (0.89%) at 42833.62, S&P E-Minis up 33 points (0.57%) at 5862.25, Nasdaq up 73.7 points (0.4%) at 18356.25. S&P Eminis and the DJIA indexes marked new all-time-highs of 5,865.25 and 42,832.21 respectively in the first half, while the Nasdaq still remains off mid-July all-time highs (18,671.07). Mixed PPI results notwithstanding, month-over-month metrics eased while year-over-year gained, focus turned to corporate earnings with banks leading gainers in the first half.

• Beating estimates ahead of the open, Wells Fargo trades 6.13% higher in late trade, JP Morgan +5.16%, Blackrock +3.39%. Gains helped Bank of America +5.04% ahead of their release next Tuesday, Citigroup +3.64%, Goldman Sachs +2.37%.
• Industrials were next up, supported by transportation stocks with Uber climbing 10.77% after Tesla's "Robotaxi" presentation failed to wow investors. Elsewhere, Old Dominion gained 2.42% while JB Hunt climbed 2.8%.
• Laggers meanwhile, were led by Consumer Discretionary and Information Technology sectors as they scaled back gains from the week. Tesla weighed on autos -8.33% on the aforementioned Robotaxi reveal while Nike slipped 0.21%. Meanwhile, Broadcom -2.53%, Palantir -1.68% Adobe -1.38% weighed on the IT sector.
   

MNI COMMODITIES: Precious Metals Gain, Crude Trades Lower
Spot gold has risen by 1.0% to $2,656/oz today, leaving the yellow metal broadly unchanged on the week. With the resumption of gains over the last two sessions, following six consecutive losses, attention refocuses on $2,690.2, a Fibonacci projection.

• Firm support lies at $2,620.3, the 20-day EMA.
• Meanwhile, silver has also gained by 1.0% to $31.5/oz on Friday, leaving it around 2% lower on the week.
• The short-term weakness in silver this week is considered corrective and bullish conditions remain intact. Focus remains on $32.963, the Oct 4 high.
• WTI traded lower today, but rose around 1.5% on the week, as the market weighs the risk of supply disruption in the Middle East and awaits Israel’s retaliation against Iran.
• WTI Nov 24 is down by 0.5% at $75.5/bbl.
• Recent gains for WTI futures suggest potential for a continuation higher near-term. Attention is on $77.40, the 76.4% retracement of the Jul 5 - Sep 10 bear leg. This level has been pierced and a clear break of it would strengthen a bullish condition.

MONDAY-TUESDAY DATA CALENDAR