HIGHLIGHTS
- Treasuries finish Thursday's shortened session mildly higher, early support faded as accounts squared longs ahead of Friday's December employment and UofM sentiment data.
- Projected rate cuts through mid-2025 gained slightly on the day, June back to fully pricing in 25bp rate cut, with a second 25bp cut priced in by September.
- Several Fed speakers failed to move the needle on markets Thursday though KC Fed Schmid mirrored Gov Waller's opinion that gradual cuts are favored if data improves.
MNI US TSYS: Rate Sale Falters in Leadup to December Employment Data
- Treasury futures looked to finish Thursday's shortened session mildly higher, off early highs as longs squared ahead of Friday's headline December employment and UofM sentiment data.
- Nonfarm payrolls growth is seen at circa 160k in December as some recent distortions from hurricanes and strikes are increasingly in the rear-view mirror, and with a relatively narrow range to analyst estimates. The unemployment rate is broadly seen holding at 4.2%, although at an unrounded 4.246% in November it wouldn’t surprise if it rounded to 4.3%. A ‘high’ 4.3% would still be notable, though, for a fresh recent high.
- Challenger job cut announcements continued their recent run of Y/Y increases in December, and were at the high end of recent Decembers, but don't show any signs of a sharp increase. Challenger job cuts increased 11% Y/Y to 38.8k in December, rounding out a year that saw Y/Y job cut announcements stabilize/fall a touch in 1H24 before climbing again in 2H24.
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M +0.00444 to 4.30208 (-0.01335/ wk)
- 3M -0.00009 to 4.28894 (-0.00475/wk)
- 6M -0.00736 to 4.25060 (+0.00865/wk)
- 12M -0.01731 to 4.19237 (+0.02766/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.29% (+0.02), volume: $2.313T
- Broad General Collateral Rate (BGCR): 4.27% (+0.01), volume: $818B
- Tri-Party General Collateral Rate (TGCR): 4.27% (+0.01), volume: $798B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $105B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $293B
FED Reverse Repo Operation
RRP usage continues to recede, $168.225B this afternoon from $185.144 Wednesday. Compares to $98.356B on Friday, December 20 - the lowest level since mid-April 2021. The number of counterparties rises to 52 from 48.
US SOFR/TREASURY OPTION SUMMARY
Mixed SOFR & Treasury options on Thursday's shortened session leaned towards upside calls, Tsy options seeing some decent two-way puts in 10s. Underlying futures mildly bid at the early close - paring gains ahead of Friday's Dec employment and UofM sentiment data. Projected rate cuts through mid-2025 look a little firmer vs. late Wednesday levels* as follows: Jan'25 at -1.2bp, Mar'25 -11.0bp (-10.2bp), May'25 -16.4bp (-15.4bp), Jun'25 -26.9bp (-24.1bp).
SOFR Options:
3,900 SFRZ5 96.00/96.12/96.18/96.31 call condors
+5,000 SFRM5 95.50/95.62 put spds, 1.0 vs. 95.96/0.05%
+2,500 SFRJ5/SFRM5 95.50/95.62/95.75 put fly strip, 5.5
Block, 11,111 SFRM5 95.37/95.62 put spds 1.75 ref 95.94
+8,000 SFRZ5 96.25/96.75 call spds 2.75 over 95.25 puts
Block, 6,000 SFRZ5 95.25 puts, 9.5 w/ 10k sold in pit at same lvl
+15,000 SFRH5 95.62 puts, 0.5 vs. 95.815/0.09%
+5,000 SFRZ6 97.00 calls 26.0 ref 95.995
+5,000 SFRG5 95.68 puts, 1.0 ref 95.80
+10,000 SFRH5/SFRU5 95.75/96.00 call spd spd 4.75
+10,000 SFRG5 95.62/95.75 2x1 put spds 2.75 ref 95.805
+6,000 3QM5 96.37 calls, 10.5 vs. 95.86/.21%
+5,000 0QH5 95.87 puts vs. -2,500 2QH5/3QH5 95.87 put strip, 10.5 net cr (traded similar in SFRU5 vs. midcurves yesterday: +16,000 SFRU5 95.87 put vs. -8,000 2QU5/3QU5 95.87 put strip, 34.5-35 net)
+4,000 SFRF5 95.81 calls 1.75 ref 95.80
10,000 SFRJ5 95.68/95.81 put spds vs SFRM5 95.75/95.87 put spds
2,000 SFRM5 95.87/96.25 1x2 call spds ref 95.92
6,000 SFRJ5 96.12/96.31/96.56/96.75 call condors ref 95.93
1,500 0QM5 96.25/96.43/96.56/96.75 call condors ref 96.02
over 22,000 SFRM5 96.00/96.25 call spds ref 95.925
Treasury Options:
10,000 TYH5 113/114 2x1 call spds (wrong way) ref 108-07
2,000 FVH5 107/107.25 calls ref 106-04
Block +33.5k Blocked TYG5 106.5/107.5 put spds, 11 ref 108-11 (market maker turned around and bought spd back 35,000 spds at 10 on screen)
+10,000 wk2 TY 107.5 puts, 2
+2,000 wk2 US 112 puts, 16
2,000 TYG5 109.5/110.5 call spds ref 108-12
1,350 TYG5 108.25/108.75 1x2 call spds
1,000 FVH5 106.25/106.75/107/107.5 call condors ref 106-03.25
Block, 2,100 TYH5 105/107/109 put flys, 36 ref 108-10.5
2,000 TYH5 106/107.5 put spds ref 108-08
MNI EGBS: Recovery In Bund Futures Capped By Overnight Highs
Overnight highs capped the late-morning recovery in Bund futures today, but RXH5 remains on course for a fifth consecutive downward session. Currently -23 ticks today at 131.49, a bearish technical theme in Bund futures remains in tact. Clearance of today’s low (131.32) would expose 131.28, the November 14 low on a continuation chart.
- 10-year Bund yields have consolidated above 2.500%, over 50bps above levels seen at the start of December.
- Regional headline flow has been relatively light today, with supply once again the main point of interest.
- Both the Spanish and French auctions passed smoothly. Spain sold E6.222bln of nominals (the top half of its E5.5-6.5bln target) while France sold E12.997bln of LT OATs (top of the target range and the largest auction since March).
- Today’s E4bln 10-year PGB syndication saw books close in excess of E25bln. The 10-year PGB/Bund spread has narrowed ~2bps since the syndication priced, now 0.5bps tighter today at 43bps.
- Tomorrow’s regional calendar includes industrial production data from France and Spain, with Italian retail sales also due. Broader macro focus will be on the US labour market report.
MNI FOREX: GBP Weakness Extends, USD Index Steady Ahead of NFP
- The focus for G10 currency markets on Thursday has been the weaker GBP, with early moves prompting GBPUSD to print the lowest level since November 2023 at 1.2239. Despite moves stabilising, Cable remains weaker on the session, consolidating around the 2024 lows at 1.2300 as we approach the APAC crossover. The likes of GBPJPY (-0.75%) and EURGBP (+0.35%) are adjusting in tandem, highlighting the renewed Uk fiscal worries continue to permeate financial markets.
- EURGBP extended its recovery, printing a two-month high above 0.8400. Recall on Wednesday, we had a firm break above 50-day EMA resistance, which intersected at 0.8311. Today’s continued strength undermines the recent bearish theme and suggests scope for a stronger short-term recovery, targeting 0.8448, the Oct 31 high and reversal trigger.
- The USD index has remained steady, and will likely have been impacted by lower volumes due to the US Federal holiday and the close proximity to the US non-farm payrolls report tomorrow.
- As such, EURUSD (-0.17%) has spent the session oscillating around 1.0300, while AUDUSD (-0.32%) price action has remained contained below the 0.6200 mark. The pair did print a fresh cycle low of 0.6172, after we had retail sales slightly below expectations. Market pricing for an RBA cut at the Feb meeting is just over 70%, supported after yesterday's slower core CPI print and retail sales figures today.
- All focus on tomorrow’s US employment data, while Canadian jobs figures will also cross.
EQUITIES
Stock markets closed Thursday in observance of Day of Mourning for former President Carter.
MNI EQUITY TECHS: E-MINI S&P: (H5) Support Remains Exposed
- RES 4: 6194.19 1.236 proj of the Aug 5 - Sep 3 - Sep 9 price swing
- RES 3: 6178.75 High Dec 6 and key resistance
- RES 2: 6163.75 High Dec 16
- RES 1: 6068.25/6107.50 High Jan 6 / High Dec 26
- PRICE: 5940.00 @ 14:15 GMT Jan 9
- SUP 1: 5911.25/5866.00 Low Jan 3 / Dec 20
- SUP 2: 5811.65 38.2% retracement of the Aug 5 - Dec 6 bull leg
- SUP 3: 5784.00 Low Nov 4
- SUP 4: 5698.25 50.0% retracement of the Aug 5 - Dec 6 bull leg
A bear threat in the S&P E-Minis contract remains present. The reversal lower from the Dec 26 high, highlights the end of the Dec 20 - 26 correction. Attention is on 5866.00, Dec 20 low and a key short-term support. Clearance of this level would strengthen a bearish theme. Initial firm resistance is 6107.50, the Dec 26 high. A breach of this hurdle would highlight a bull reversal and open key resistance at 6178.75, the Dec 6 high.
MNI COMMODITIES: Crude Climbs, Copper Rally Extends
- Crude has been on the rise today, with support coming from concerns over tighter supplies from Iran and Russia amid US sanctions.
- WTI Feb 25 is up by 1.1% at $74.1/bbl.
- The trend structure in WTI futures remains bullish, with key short-term resistance at $76.41, the Oct 8 high.
- Meanwhile, spot gold has given up earlier gains to be up by just 0.2% at $2,667/oz.
- Recent gains in gold, which has risen by 1.7% since the start of the year, appear corrective for now. However, a stronger climb would instead signal scope for gains towards resistance at $2,726.2, the Dec 12 high.
- Elsewhere, copper has risen for a sixth consecutive session, with the red metal up by another 1.1% to $431/lb.
- Today’s move takes total gains since the start of the year to nearly 7%.
- Analysts at MUFG say that copper is likely to face near-term challenges due to the threat of US tariffs on Chinese goods, but Beijing's stimulus measures should support global demand.
- From a technical perspective, the move higher in copper futures has undermined the recent bearish theme.
- Price has traded through the 50-day EMA and pierced key short-term resistance at $433.50, the Dec 12 high, today. A clear break of this level would highlight a reversal.
FRIDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 10/01/2025 | 0645/0745 | ** |  CH | Unemployment |
| 10/01/2025 | 0700/0800 | *** |  NO | CPI Norway |
| 10/01/2025 | 0700/0800 | ** |  SE | Private Sector Production m/m |
| 10/01/2025 | 0745/0845 | * |  FR | Industrial Production |
| 10/01/2025 | 0745/0845 | ** | FR | Consumer Spending |
| 10/01/2025 | 0800/0900 | ** |  ES | Industrial Production |
| 10/01/2025 | 0900/1000 | * |  IT | Retail Sales |
| 10/01/2025 | 1330/0830 | * |  CA | Building Permits |
| 10/01/2025 | 1330/0830 | *** | CA | Labour Force Survey |
| 10/01/2025 | 1330/0830 | *** |  US | Employment Report |
| 10/01/2025 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 10/01/2025 | 1500/1000 | ** | US | U. Mich. Survey of Consumers |
| 10/01/2025 | 1700/1200 | *** | US | USDA Crop Estimates - WASDE |
| 10/01/2025 | 1700/1200 | ** | US | USDA GrainStock - NASS |
| 10/01/2025 | 1700/1200 | *** | US | USDA Winter Wheat |
| 10/01/2025 | 1900/1400 | ** | US | Treasury Budget |