HIGHLIGHTS
- Treasuries look to finish broadly higher Thursday, nearly recovering from Wednesday's post-CPI sell-off even after today's PPI & revisions came out higher than expected.
- The PCE-relevant components of PPI have clearly set the tone with the market's dovish reaction to the release but the aggregate series were still notably stronger than expected.
- Details of President Trump's reciprocal tariffs plan remained vague but markets reacted positively to delaying any implementation until April 2 which gives more time for negotiations to continue.
- US$ index extended late session lows (BBDXY -8.37 at 1292.82), stocks rallied back over last Friday's highs when talk of reciprocity weighed heavily on stocks.
MNI US TSYS: PPI/PCE Details, Reciprocal Tariff Implementation Delay
- Treasuries look to finish near late session highs Thursday, back near Wednesday's pre-CPI levels despite higher than expected PPI and up-revisions this morning, while a delay in implementing reciprocal tariffs to early April buoyed market sentiment.
- The PCE-relevant components of PPI have clearly set the tone with the market's dovish reaction to the release but the aggregate series were still notably stronger than expected. Overall PPI final demand inflation printed at 0.40% M/M sa (cons 0.3) after a heavy upward revision of 0.50% (initial 0.22) in Dec although that was partly offset by a downward revised 0.23% (initial 0.38) in Nov.
- US President Trump has signed a measure ordering his administration (namely the USTR and Commerce Secretary) to propose country-by-country reciprocal tariffs. The tariff rates would be determined on a country-by-country basis, in what would appear to be a complex process.
- Treasury Mar'25 10Y futures trade +21 at 108-29.5 after the bell vs 109-01 high, just below initial technical resistance at 109-08.5 (50-day EMA). 10Y yield -.0939 at 4.5269% while curves bull flattened: 2s10s -4.789 at 21.596, 5s30s -2.024 at 34.243.
- Cross asset update: extended late session lows (BBDXY -8.37 at 1292.82), stocks rallied back over last Friday's highs (SPX Eminis +57.25 at 6130.0) when talk of reciprocity weighed heavily on stocks.
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.00253 to 4.31186 (-0.00333/wk)
- 3M +0.00496 to 4.32298 (+0.01908/wk)
- 6M +0.02268 to 4.31501 (+0.05729/wk)
- 12M +0.04755 to 4.29153 (+0.11242/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.32% (-0.02), volume: $2.313T
- Broad General Collateral Rate (BGCR): 4.31% (-0.01), volume: $922B
- Tri-Party General Collateral Rate (TCR): 4.31% (-0.01), volume: $902B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $94B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $285B
FED Reverse Repo Operation
RRP usage gains slightly to $67.820B this afternoon after falling to the lowest level since mid-April 2021 yesterday: $67.670B. The number of counterparties at 28 from 27 prior.
US SOFR/TREASURY OPTION SUMMARY
SOFR & Treasury option trade remained mixed late Thursday, SOFR call flow picked up in the second half as underlying futures extended highs after it became apparent Trump's reciprocal tariff plans would not be implemented until early April, sentiment improved as the delay gave additional time for negotiations. Projected rate cuts through mid-2025 steady to slightly firmer vs. this morning (*) as follows: Mar'25 steady at -0.5bp, May'25 steady at -3.9bp, Jun'25 at -11.1bp (-9.8bp), Jul'25 at -15.1bp (-13.6bp).
SOFR Options:
Block, 10,000 0QK5 96.00/96.12 call spds, 5.5 ref 95.995
+5,000 SFRU5 95.75/95.87/96.00 call flys, 1.0
2,400 SFRZ5 96.00/96.12/96.18/96.31 call condors
3,000 0QU5 94.50/95.00 put spd vs. 3QU5 94.37/94.87 put spd spd
2,300 0QH5 95.87/96.00/96.12/96.31 broken call condors ref 95.94
6,000 SFRM5 95.93/96.00 call spds ref 95.765
1,750 SFRK5 95.62/95.75/95.88 put trees
4,000 SFRH5 95.56/95.62/95.68 put flys ref 95.69
5,500 SFRU5 96.00/96.12/96.25/96.37 call condors ref 95.85 to -.855
4,000 2QM5 95.87 calls, ref 95.915
7,250 SFRJ5 95.62/95.68/95.75 put flys ref 95.76
Treasury Options:
5,000 TYH5 108/109 put spds, 21 ref 108-27.5
over 8,000 TYJ5 107/109 2x1 put spds ref 108-26.5
2,750 USJ5 118/120/122 call flys, 8 ref 114-16
1,500 TYH5 109.5/109.75/110 call flys ref 108-24
4,000 TYH5 108.25/109.25 strangles, 14 ref 108-24.5
over 7,800 TYJ5 110 calls 16 last ref 108-15
6,000 TYH5 107.75/108.25 put spds vs. 109 calls ref 108-14.5
over 7,000 TYH5 107.5 puts, 4 ref 108-13
1,500 wk2 TY 108/108.25 3x2 put spds ref 108-14 (exp Fri)
2,000 TYH5 107.25/108 put spds ref 108-12.5
MNI BONDS: EGBs-GILTS CASH CLOSE: Bull Flattening On US PPI And Tariff Rhetoric
European curves bull flattened Thursday as US inflation data and tariff threats continued to set the tone.
- Having already pared much of Wednesday's post-US CPI rise, helped this morning by further reciprocal tariff bluster from US President Trump and softer energy prices, Bund and Gilt yields pushed lower in the afternoon on US data.
- With the US PPI report signalling lower PCE price pressures than feared after the CPI data, global bonds rallied led by Treasuries.
- The UK curve continued to bull flatten after the data, with the move in Germany stalling out somewhat.
- On the day, German instruments outperformed UK counterparts across the respective curves, with the short-end outperformance particularly pronounced.
- The latter can be attributed to ECB 2025 implied cut pricing extending 4bp to just over 81bp amid lower European gas prices and the EU considered particularly vulnerable to Trump tariff threats, contrasted with the BOE equivalent relatively flat at 58bp.
- UK quarterly and monthly GDP data surprised to the upside, but it is unlikely to change the narrative for the BOE in the near-term.
- Periphery EGB spreads tightened, but French OATs stood out in the semi-core space with 10Y spreads falling 3bp vs Bund.
- Friday's scheduled data highlight is Eurozone prelim Q4 GDP, along with a variety of price measures.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 4.9bps at 2.088%, 5-Yr is down 6bps at 2.207%, 10-Yr is down 5.9bps at 2.418%, and 30-Yr is down 5.3bps at 2.672%.
- UK: The 2-Yr yield is down 1.8bps at 4.179%, 5-Yr is down 2.6bps at 4.196%, 10-Yr is down 5.3bps at 4.49%, and 30-Yr is down 5.9bps at 5.076%.
- Italian BTP spread down 1.2bps at 107.2bps / French OAT down 2.9bps at 73.5bps
MNI EGB OPTIONS: Quieter Session For Rates Options Thursday
Thursday's Europe rates/bond options flow included:
- RXH5 134 calls, sold out at 10.5 & 10
- ERN5 97.8125/97.6875/97.625 put ladder, ppr pays 0.5 on 4k
MNI FOREX: Greenback Loses Ground, USDCHF Extends Intra-Day Decline to 1%
- The USD index has weakened around 0.5% on Thursday, as a multitude of factors produced further questions over the greenback’s dominant uptrend in the aftermath of the US election. The market analysed some notably soft details within the PPI data report, translating that into a more negative read for the Fed’s preferred measure of inflation (PCE).
- With this dynamic weighing on US treasury yields, the USD remained marginally on the back foot. Dollar weakness then picked up momentum as headlines crossed from CNBC suggesting that new reciprocal tariffs to be announced by President Trump would not go into effect today. With a possible start date of April 1 being proposed, risk sentiment was boosted as equity indices extended higher which in turn weighed broadly on the dollar.
- EURUSD has made a bullish development today by breaching the 50-day EMA, rising to a high of 1.0445. A clear breach of the average would strengthen a bullish condition and signal scope for stronger recovery and open 1.0533, the Jan 27 high.
- USDJPY is down 0.80% on the session, and although this is a sizeable daily adjustment, the pair has only pulled back to around mid-range for the week following the significant recovery seen on Wednesday.
- Lower core yields, a softer greenback and the hotter-than-expected core CPI print in Switzerland are all contributing to the ongoing weakness for USDCHF on Thursday. The pair has traded as low as 0.9036, extending session losses to ~1% and narrowing the gap to an area of key support. USDCHF has continually failed to close below the 50-day EMA, which currently intersects at 0.9024. Below here, the January low resides at 0.8965.
- China loans data and the second estimate of Eurozone GDP will be released on Friday, before the focus turns to the January US retail sales report.
MNI FX OPTIONS: Expiries for Feb14 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0200(E1.6bln), $1.0220-25(E1.5bln), $1.0275-80(E1.9bln), $1.0300-20(E4.5bln), $1.0325(E1.6bln), $1.0400(E4.0bln), $1.0435(E1.0bln), $1.0475(E1.6bln), $1.0500(E1.4bln)
- USD/JPY: Y150.00($1.9bln), Y150.90-00($1.6bln), Y152.00($2.8bln), Y153.85($670mln), Y154.00($1.2bln), Y155.00($882mln), Y155.50($1.3bln), Y156.00($1.7bln)
- EUR/JPY: Y157.65(E1.7bln)
- GBP/USD: $1.2080-00(Gbp1.2bln), $1.2380-00(Gbp1.3bln), $1.2500-20(Gbp771mln)
- EUR/GBP: Gbp0.8420-30(E794mln)
- AUD/USD: $0.6200(A$1.3bln), $0.6250(A$610mln), $0.6280-00(A$1.4bln), $0.6350(A$523mln)
- USD/CAD: C$1.4185-00($2.1bln), C$1.4245-55($1.4bln), C$1.4300-20($1.3bln), C$1.4450($1.1bln)
- USD/CNY: Cny7.1500($3.3bln), Cny7.2000($2.6bln), Cny7.3000($2.2bln), Cny7.3400($2.4bln)
MNI US STOCKS: Late Equities Roundup: Extending Gains on April 2 Tariff Delay
- Stocks are extending late session gains as headlines regarding President Trump's "reciprocal tariffs" filtered out of the White House. Currently, the DJIA trades up 336.32 points (0.76%) at 44704.11, S&P E-Minia up 47.5 points (0.78%) at 6120.25, Nasdaq up 214.1 points (1.1%) at 19863.94.
- Several factors in play: tariffs on autos, metals and pharmaceuticals will be over and above planned reciprocal tariffs, no exemptions as some had hoped for.
- Stocks gained as Commerce Secretary Lutnick said reciprocal tariffs would not begin until April 2, while a report on the impact of tariffs is expected with 180 days. Also of consequence, Trump would not rule out "one-size-fits-all flat tariff tax".
- Materials and Information Technology sectors led the late session rally, metals and mining shares supported the Materials sector: Smurfit WestRock +5.64%, Freeport-McMoRan +5.35% and Albemarle +4.44%. Leading gainers in the Technology sector included: Intel Corp +9.23%, Super Micro Computer +8.64% and Tyler Technologies +7.65%.
- Conversely, Utilities and Industrial sectors underperformed, energy providers weighing on the former with Duke Energy -2.44%, Edison International -2.07%, PG&E Corp -1.59%. Airlines continued to weigh on the Industrials sector: United Airlines -4.01%, Delta Air Lines Inc -3.97%.
- Stocks expected to announce earnings after the close include: Molson Coors Beverage, CBRE Group, Duke Energy Corp, TransUnion, Altice USA, Howmet Aerospace, Digital Realty Trust, Dexcom, Republic Services and GoDaddy Inc.
MNI EQUITY TECHS: E-MINI S&P: (H5) Trading Below Resistance
- RES 4: 6178.75 High Dec 6 and key resistance
- RES 3: 6162.25 High Jan 24
- RES 2: 6147.75 High Jan 31
- RES 1: 6123.25 High Feb 7
- PRICE: 6084.00 @ 14:23 GMT Feb 13
- SUP 1: 6014.00/5935.50 Low Feb 10 / 3
- SUP 2: 5892.37 76.4% retracement of the Aug 5 - Dec 6 bull leg
- SUP 3: 5842.50 Low Jan 14
- SUP 4: 5809.00 Low Jan 13 and a key resistance
S&P E-Minis is unchanged. Price action on Feb 3 in the contract continues to highlight a possible short-term reversal threat. If correct, it suggests that the latest bounce is a correction. A resumption of weakness would open 5892.37, a Fibonacci retracement point. On the upside, a stronger rally would expose key resistance at 6178.75, the Dec 6 ‘24 high. Clearance of this hurdle would resume the primary uptrend.
MNI COMMODITIES: Gold Gains With Reciprocal Tariff Announcement, Copper Rallies
- Spot gold has extended gains following President Trump’s tariff announcements, with the yellow metal currently up by 0.8% on the session at $2,926/oz.
- Trump signed a measure directing the US Trade Representative and Commerce secretary to propose new levies on a country-by-country basis in an effort to rebalance trade relations.
- President Trump’s reciprocal tariffs will not go into effect today and could start by April 2.
- A bull cycle in gold remains in play, with sights on $2,962.2, a Fibonacci projection.
- Meanwhile, crude fell earlier in the session amid signs of easing Israel/Hamas tensions and ‘imminent’ Ukraine peace talks, before recovering losses as the dollar weakened following delays to Trump’s reciprocal tariffs.
- WTI MAR 25 is broadly unchanged at $71.3/bbl.
- WTI futures have pulled back from Tuesday’s high, with attention on $70.43, the Feb 6 low.
- This has been pierced and a clear break would undermine a bullish theme and confirm a breach of the 50-day EMA. This would strengthen a bearish threat and open $68.05, the Dec 20 ‘24 low.
- Copper has extended gains today, with the red metal up by a further 1.6% to $478/lb, the highest level since Sep 30.
- Copper futures remain in a bull cycle, with sights on $480.00, the Sep 30 high and bull trigger. Above here, next resistance is at $489.60, the May 28 ’24 high.
FRIDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 14/02/2025 | 0800/0900 | *** |  ES | HICP (f) |
| 14/02/2025 | 1000/1100 | *** |  EU | GDP (p) |
| 14/02/2025 | - | *** |  CN | Money Supply |
| 14/02/2025 | - | *** | CN | New Loans |
| 14/02/2025 | - | *** | CN | Social Financing |
| 14/02/2025 | 1330/0830 | ** |  CA | Monthly Survey of Manufacturing |
| 14/02/2025 | 1330/0830 | ** | CA | Wholesale Trade |
| 14/02/2025 | 1330/0830 | *** |  US | Retail Sales |
| 14/02/2025 | 1330/0830 | ** | US | Import/Export Price Index |
| 14/02/2025 | 1415/0915 | *** | US | Industrial Production |
| 14/02/2025 | 1500/1000 | * | US | Business Inventories |
| 14/02/2025 | 1800/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |
| 14/02/2025 | 2000/1500 | US | Dallas Fed's Lorie Logan |