HIGHLIGHTS
- Treasuries continued to rebound off midweek lows Thursday, gaining it's first strong bid after Tsy Sec Bessent suggested the terming out of US debt is still "a long way off".
- A risk-off tone gained traction around midmorning after Atlanta Fed President Bostic cited high uncertainty over Trump administration policy changes triggered heavy selling in bank stocks.
- Negative sentiment for the dollar has been the key theme in G10 currency markets Thursday, with the ICE dollar index currently down 0.68% and pressing to fresh pullback lows below 1.0650.
MNI US TSYS: Yields Decline on Terming Out Comments, Policy High Uncertainty
- Treasury futures look to close near moderate session highs Thursday, gaining it's first strong bid ahead of the NY open when Tsy Sec Bessent suggested the terming out of US debt is still "a long way off".
- Bessent also commented on Russia sanctions: "If we need to, [we] will take off Russia sanctions", adding that the US is "ready for a ramp-up or wind down" of sanctions.
- Tsys extended session highs around midmorning after Atlanta Fed President Bostic cited high uncertainty over Trump administration policy changes triggered heavy selling in bank stocks.
- Not as busy as volumes suggest: heavy roll volumes in March to June Tsy futures (June takes lead quarterly next week Friday). March 10Y futures trade 109-05 (+6.5) after the bell, inside technical levels: resistance above at 110-00 (High Feb 7 and the bull trigger), support well below at 108-04/00 (Low Feb 12 / Low Jan 16).
- Negative sentiment for the dollar has been the key theme in G10 currency markets Thursday, with the ICE dollar index currently down 0.68% and pressing to fresh pullback lows below 1.0650.
- Friday focus on S&P flash PMI data at 0945 followed by UofM sentiment and existing home sales data at 1000ET.
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M +0.00211 to 4.32232 (+0.00867/wk)
- 3M -0.00144 to 4.32859 (+0.00560/wk)
- 6M -0.00167 to 4.30501 (-0.00598/wk)
- 12M -0.00106 to 4.24442 (-0.03045/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.35% (-0.02), volume: $2.394T
- Broad General Collateral Rate (BGCR): 4.33% (-0.01), volume: $928B
- Tri-Party General Collateral Rate (TCR): 4.33% (-0.01), volume: $914B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $95B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $255B
FED Reverse Repo Operation
RRP usage recedes to $63.207B this afternoon from $73.196B on Wednesday. Compares to last Friday's $58.770B - the lowest level since mid-April 2021. The number of counterparties at 23.
US SOFR/TREASURY OPTION SUMMARY
Mixed FI option flow reported Thursday, SOFR more pared between calls & puts while Treasury option volume centered on 10Y puts, notably a large April 10Y put over risk reversals (+50k TYJ5 108 put 19 vs. -TYJ5 110.5 calls 11 ref 108-31) that printed just before underlying futures gapped higher on Tsy Sec Bessent comment on terming out debt "a long way off". Projected rate cuts through mid-2025 look steady to firmer vs. early morning levels (*) as follows: Mar'25 steady at -0.5bp, May'25 at -5.8bp (-3.2bp), Jun'25 at -15.1bp (-13.4bp), Jul'25 at -20.6bp (-19.1bp).
SOFR Options
40,000 SFRU5 96.50 SFRZ5 97.00 call spds, .5 cr Dec sold over
Block, +20,000 SFRU5 96.25 calls, 11.5 vs. 95.95/0.28%
+10,000 0QM5 95.12/95.50 put spds 3.0 ref 96.08
+10,000 0QM5/2QM5 96.50/97.00 call spd spd 0.25 net steepener
-8,000 SFRU5 95.93 straddles 37.0 ref 95.94
+4,000 SFRU5 95.50/95.62 put spds 1.0 ref 95.94
+5,000 SFRJ5 97.12 calls vs SFRM5 96.25/97.00 call spds, 1.5 vs. 95.80/0.06%
+5,000 2QH5 95.75/95.87 put strips, 4.5 vs. 96.06/0.32%
+5,000 0QM5/2QM5 96.31/96.93 call spds 0.0 net, flattener
+5,000 0QJ5 96.25/96.62/96.93 call flys 5.0 ref 96.08
3,000 SFRM5 95.56/95.68 put spds
2,500 SFRM5 95.68/95.81/96.00/96.12 call condors ref 95.815
2,000 SFRZ5 95.62/95.68 put spds ref 96.01
7,500 SFRU5 96.00/96.37/96.75 call flys ref 95.935
1,500 0QH5 95.87/96.00/96.06/96.12 put condors ref 96.055
Treasury Options
Block, +10,000 TYJ5 109 puts 41 ref 109-06
19,000 TYJ5 109 puts, 39 ref 109-04.5
Block, +19,500 TYK5 106 puts, 10 vs. 109-06/0.18%
+5,000 TYJ5 110/111 call spds 14
+50,000 TYJ5 108/110.5 put over risk reversals, 8 net ref 108-31.5
3,000 FVH5 106.25 puts, 2.5 last
over 7,350 TYH5 108.25 puts ref 109-00.5
7,500 TYM5 107.5/109 2x1 put spds ref 109-01.5
MNI BONDS: EGBs-GILTS CASH CLOSE: Bull Steeper On Late Rally
A late rally in global bonds saw core European curves lean bull steeper modestly Thursday.
- Yields were mixed in early trade but leaned higher, with Spanish and French supply helping weigh.
- But those auctions were digested smoothly and weakness was pared by after Treasury Secretary Bessent noted no immediate plans to extend the maturity profile of US government bonds.
- Subsequently, a risk-off rally in core EGBs/Gilts following news that a Ukraine-U.S. press conference had been cancelled saw core yields hit session lows as equities pulled back sharply.
- Implied ECB cut pricing for the remainder of 2025 increased 2bp on the day (74bp); BOE was flat at 52bp - at one point earlier in the session, implied cuts had been pared by about 2bp apiece.
- Mirroring the above moves, periphery EGB spreads closed flat/slightly tighter. French OAT spreads widened modestly.
- Friday's focus will be flash February PMIs, though we also get significant UK-specific data in the form of retail sales and public sector borrowing. There is also an appearance by ECB's Lane.
Closing Yields / 10-Yr EGB Spreads To Germany:
- Germany: The 2-Yr yield is down 2.5bps at 2.153%, 5-Yr is down 2.4bps at 2.303%, 10-Yr is down 2.3bps at 2.534%, and 30-Yr is down 1.4bps at 2.789%.
- UK: The 2-Yr yield is down 1.2bps at 4.265%, 5-Yr is down 0.9bps at 4.296%, 10-Yr is down 0.4bps at 4.607%, and 30-Yr is up 0.5bps at 5.2%.
- Italian BTP spread down 0.2bps at 108.2bps / French OAT up 0.6bps at 73.3bps
MNI OPTIONS: Call Structure Buying Resumes Thursday
Thursday's Europe rates/bond options flow included:
- OEJ5 118.00/118.50/119.00 call fly paper paid 7 on 8K.
- RXJ5 131.00/132.50cs 1x1.5, bought for 29 in 4k.
- RXJ5 130.5p, bought for 78.5 in +5.5k.
- 0RM5 98.3125c with 0RM5 98.625c, bought the strip for 5.75 in 7.5k.
- SFIJ5 95.90/95.80/95.70p fly, sold at 2.75 in 2.5k.
MNI FOREX: Greenback Extending Losses, USDJPY Declines 1.35%
- Negative sentiment for the dollar has been the key theme in G10 currency markets Thursday, with the ICE dollar index currently down 0.68% and pressing to fresh pullback lows below 1.0650.
- Most notable has been the move for USDJPY, sinking 1.35%. The pair has been under considerable pressure on a break of the bear trigger at 150.93, as bearish sentiment for the greenback and bolstered tightening expectations for the BOJ compliment both sides of the trade.
- BoJ Governor Ueda stated he didn't discuss rising JGB yields with PM Ishiba at their regular meeting to discuss economic matters, with some analysts suggesting some comfort around the broader tightening BoJ backdrop, bolstering the Yen. A close at current levels would resume the bear cycle that started on Jan 10th, opening 148.65, the Dec 3 low and a key support. Below here, attention will be on 148.01, the Oct 9 low.
- Amid the broad dollar weakness, AUD and NZD have also performed well, with both rising close to 1%. AUDUSD has printed above 0.6400 for the first time since December 12, narrowing the gap with key resistance ahead at 0.6414 - marking both the 100-dma as well as the 38.2% retracement of the Sep 30 ‘24 - Feb 3 bear leg. 0.9429 and 0.6471 are the next levels on the topside.
- EURUSD and GBPUSD have not been immune to the broader trends, as the former claws its way back to the 1.05 handle. For cable, we have risen above 1.2650, underpinning the current technical uptrend. A continuation higher would place attention on 1.2767, the 50.0% retracement of the Sep 26 ‘24 - Jan 13 bear leg.
- RBA Governor Bullock speaks in the APAC session Friday, before the focus turns to Japan National CPI data. In Europe, UK retail sales and Eurozone flash PMIS headline the docket. In North America, Canadian retail sales and US PMIs are scheduled.
MNI FX OPTIONS: Expiries for Feb21 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0400(E2.1bln), $1.0442(E632mln), $1.0450-51(E880mln), $1.0485(E719mln), $1.0500-18(E1.1bln
- USD/CAD: C$1.4500($1.2bln), C$1.4600($1.7bln), C$1.4700($1.6bln)
MNI US STOCKS: Late Equities Roundup: Banks Continue To Underperform
- Stocks remain weaker late Thursday, near morning lows as Financial and Consumer Discretionary sectors continue to underperform. Currently, the DJIA trades down 556.64 points (-1.25%) at 44070.5, S&P E-Minis down 36 points (-0.58%) at 6126.5, Nasdaq down 117.3 points (-0.6%) at 19938.84.
- Banks continued to weigh on the Financial sector in the second half, partially tied to comments from Atlanta Fed President Bostic cited high uncertainty over Trump administration policy changes. Currently, JP Morgan trades -4.35%, Citigroup -3.34%, Citizens Financial -2.84%.
- Cruise lines weighed heavily on the Consumer Discretionary sector: Royal Caribbean -8.8%, Norwegian Cruise Line -6.15%, Carnival -6.09%. Broadline retailers pressed after Walmart (-6.5%) earnings warning and weak macro data the last few days. On the flipside, Hasbro surged 13.5% after better than expected earnings and forward guidance.
- On the positive side, Health Care and Energy sectors outperformed in the first half, with pharmaceuticals supporting the former: Vertex +1.91%, Merck +1.76%, Danaher +1.69%. Energy sector shares partially buoyed by support in crude (WTI +0.27 at 72.52): Occidental Petroleum +3.02%, Devon Energy +2.79%.
MNI EQUITY TECHS: E-MINI S&P: (H5) Key Resistance Remains Exposed
- RES 4: 6205.38 0.764 proj of the Jan 13 - 24 - Feb 3 price swing
- RES 3: 6200.00 Round number resistance
- RES 2: 6178.75 High Dec 6 and key resistance
- RES 1: 6166.50 High Jan 24
- PRICE: 6130.75 @ 1450 ET Feb 20
- SUP 1: 6075.54 20-day EMA
- SUP 2: 6014.00/5935.50 Low Feb 10 / 3
- SUP 3: 5892.37 76.4% retracement of the Aug 5 - Dec 6 bull leg
- SUP 4: 5842.50 Low Jan 14
S&P E-Minis have faded off intraday highs yesterday, but remain firm and hold the bulk of the recent phase of strength. Attention remains on resistance at 6162.25, the Jan 24 high. Clearance of this level would expose the key resistance at 6178.75, the Dec 6 ‘24 high. A move above this hurdle would resume the primary uptrend. On the downside, initial key support has been defined at 6014.00, the Feb 10 low. A break would highlight a bearish development.
FRIDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 21/02/2025 | 0700/0700 | *** |  GB | Public Sector Finances |
| 21/02/2025 | 0700/0700 | *** | GB | Retail Sales |
| 21/02/2025 | 0745/0845 | ** |  FR | Manufacturing Sentiment |
| 21/02/2025 | 0815/0915 | ** | FR | S&P Global Services PMI (p) |
| 21/02/2025 | 0815/0915 | ** | FR | S&P Global Manufacturing PMI (p) |
| 21/02/2025 | 0830/0930 | ** |  DE | S&P Global Services PMI (p) |
| 21/02/2025 | 0830/0930 | ** | DE | S&P Global Manufacturing PMI (p) |
| 21/02/2025 | 0900/1000 | *** |  IT | HICP (f) |
| 21/02/2025 | 0900/1000 | ** |  EU | S&P Global Services PMI (p) |
| 21/02/2025 | 0900/1000 | ** | EU | S&P Global Manufacturing PMI (p) |
| 21/02/2025 | 0900/1000 | ** | EU | S&P Global Composite PMI (p) |
| 21/02/2025 | 0930/0930 | *** | GB | S&P Global Manufacturing PMI flash |
| 21/02/2025 | 0930/0930 | *** | GB | S&P Global Services PMI flash |
| 21/02/2025 | 0930/0930 | *** | GB | S&P Global Composite PMI flash |
| 21/02/2025 | 1330/0830 | ** |  CA | Retail Trade |
| 21/02/2025 | 1330/0830 | ** |  US | WASDE Weekly Import/Export |
| 21/02/2025 | 1330/0830 | ** | CA | Retail Trade |
| 21/02/2025 | 1430/1530 | EU | ECB's Lane Speech at FIW-Research Conference | |
| 21/02/2025 | 1445/0945 | *** | US | S&P Global Manufacturing Index (Flash) |
| 21/02/2025 | 1445/0945 | *** | US | S&P Global Services Index (flash) |
| 21/02/2025 | 1500/1000 | *** | US | NAR existing home sales |
| 21/02/2025 | 1500/1000 | * | US | Services Revenues |
| 21/02/2025 | 1500/1000 | ** | US | U. Mich. Survey of Consumers |
| 21/02/2025 | 1630/1130 | US | Fed Vice Chair Philip Jefferson | |
| 21/02/2025 | 1630/1130 | US | San Francisco Fed's Mary Daly | |
| 21/02/2025 | 1730/1230 | CA | BOC Governor speech/press conference. |