HIGHLIGHTS
- Treasuries reversed early losses, look to finish at/near late session highs - similar to Friday's risk-off/safe haven trade.
- Carry-over factors: President Trump trade policy concerns while trading desks cited managed money rotation out of stocks into Fixed Income.
- Late President Trump comments on Canada & Mexico tariffs proceeding buoyed US$
- The upcoming US economic calendar is backloaded, with the second release for Q4 national accounts on Thursday before the January PCE report on Friday.
MNI US TSYS: Carry-Over Safe Haven FI Bid, US$ Bid as Mexico/Canada Tariffs Proceed
- Treasury futures reversed early session weakness and look to finish near late session highs. Safe haven buying amid ongoing concerns over the Trump administration's trade policy and stocks reversing early support to new multi-week lows were cited by trading desks.
- Tsy futures remain bid (TYH5 +4.5 at 109-26.5) after the latest $69B 2Y note auction (91282CMP3) stops out: 4.169% high yield vs. 4.179% WI; 2.56x bid-to-cover vs. 2.66x prior.
- Currently, Mar'25 10Y futures are through initial technical resistance of 109-24 to 109-27.5 (+5.5), nearing a Bull Trigger level at 110-00. Next resistance at 110-14 (High Dec 14). Curves off lows: 2s10 +0.143 at 23.047%, 5s30s +1.987 at 42.416%.
- Projected rate cuts through mid-2025 steady to firmer vs. this morning levels (*) as follows: Mar'25 steady at -0.5bp, May'25 steady at -7.1bp, Jun'25 at -18.0bp (-17.3bp), Jul'25 at -25.6bp (-23.6bp).
- Cross asset update: Crude mildly higher (WTI +.22 at 70.62; Gold climbing 13.55 at 2949.60; Bbg US$ index off lows at 1286.80 (+.57) as late President Trump comments on Canada & Mexico tariffs proceeding.
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M +0.00429 to 4.32359 (+0.00565 total last wk)
- 3M -0.00349 to 4.31804 (-0.00146 total last wk)
- 6M -0.01560 to 4.27516 (-0.02023 total last wk)
- 12M -0.03156 to 4.19186 (-0.05145 total last wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.34% (+0.01), volume: $2.400T
- Broad General Collateral Rate (BGCR): 4.32% (+0.01), volume: $922B
- Tri-Party General Collateral Rate (TCR): 4.32% (+0.01), volume: $906B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $103B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $293B
FED Reverse Repo Operation
RRP usage inches up to $76.818B this afternoon from $68.983B on Friday. Compares to Friday, February 14 low of $58.770B - the lowest level since mid-April 2021. The number of counterparties at 30 from 24 prior.
US SOFR/TREASURY OPTION SUMMARY
SOFR & Treasury option flow remained mixed Monday, early SOFR call structure buyers fading this morning's weaker underlying futures continued into the second half reversal. Projected rate cuts through mid-2025 steady to firmer vs. this morning levels (*) as follows: Mar'25 steady at -0.5bp, May'25 steady at -7.1bp, Jun'25 at -18.0bp (-17.3bp), Jul'25 at -25.6bp (-23.6bp).
SOFR Options:
Block, 1,250 SFRM5 95.87/96.00 4x5 call spds, 4.0 net, vs. 95.865/0.26%
Block +5,000 2QJ5 96.25/96.62/97.00 call flys, 6.0 vs. 96.13/0.10%
over 7,800 SFRH5 96.06 calls, 0.75 last
-12,000 SFRJ5 95.62/95.68/95.75 put flys, 1.25
+10,000 SFRU5 96.25/96.37 call spds, 2.0 ref 95.985
+4,000 SFRM5 96.18/96.31/96.43/96.56 call condors, 0.5 vs. 95.885
+4,000 0QJ5 96.31/96.62 call spds, 6.0 ref 96.135
Treasury Options:
Block, +15,000 wk1 TY 110.75/111.25 call spds 5 ref 109-25.5, exp Mar 7)
10,000 TYJ5 106/107 put spds, 1 ref 109-18.5 to -19
+4,200 TYM5 111/113.5 call spds 2 to 3 over TYU5 104.5/107 put spds
2,500 FVJ5 106.25 puts, 13.5 ref 106-28
1,200 wk4 TY 109.5/110.25/110.5 broken put trees ref 109-16.5 (expire Fri)
MNI BONDS: EGBs-GILTS CASH CLOSE: German Short-End Outperforms Post Election
Core European curves closed mixed Monday, with divergent short-end performances in EGBs and Gilts.
- Political headlines were prevalent with the German election not delivering major surprises with conservative Merz potentially forming a "grand coalition", while there was continued uncertainty over US-Ukraine-Russia negotiations.
- Equity weakness spilling over from Friday's weak US stock close helped buoy core FI. Data was not particularly impactful (Eurozone final January inflation in-line, German IFO mixed).
- 2025 ECB OIS-implied rate cut pricing deepened by 2bp to 81bp, most since Feb 13; BOE pricing was static at 53bp of cuts.
- Consequently, German short-end outperformed its UK counterpart, conversely Gilts outperformed Bunds across the rest of the curve.
- Periphery/semi-core EGBs were mixed too, with Spain underperforming on supply (15Y syndication mandate).
- BOE's Dhingra (who earlier in the day was reappointed to the MPC through Aug 2028) speaks after the cash close (MNI's Gilt Week Ahead is here).
- Tuesday's schedule includes final German GDP and UK CBI sales, with the data highlight likely to be the ECB's negotiated wages indicator. We also hear from ECB's Centeno and Schnabel, and BOE's Pill.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 1.7bps at 2.088%, 5-Yr is down 0.5bps at 2.236%, 10-Yr is up 0.7bps at 2.477%, and 30-Yr is up 3.2bps at 2.753%.
- UK: The 2-Yr yield is up 0.1bps at 4.228%, 5-Yr is down 0.8bps at 4.245%, 10-Yr is down 0.7bps at 4.564%, and 30-Yr is down 0.5bps at 5.16%.
- Italian BTP spread flat at 114.2bps / Spanish up 0.9bps at 63.5bps
MNI OPTIONS: Euribor Spread Trades Stand Out At Week's Start
Monday's Europe rates/bond options flow included:
- ERJ5/ERM5 97.6875/97.75 cs spread, buys the June paying up to -0.25 in 42k all day
- ERM5 97.8125/97.6875ps 1x2, bought for 1.5 in 20k.
- ERU5 97.93/98.37cs 1x2, sold at 9.5 in 5k.
MNI FOREX: Euro Remains Slightly Firmer Following German Election
- Overall, the smooth passage of the German election results has allowed currency markets to trade with a sense of calm on Monday, with the victory for Merz' CDU/CSU and the likely formation of a coalition with the SPD steering markets clear of any abrupt U-turns on policy - leaving the EUR to very modestly outperform on Monday.
- An initial rally to 1.0528 fell just shy of the January highs for EURUSD, which have capped the topside for now. Spot did edge lower across the US session and a brief bout of dollar strength helped EURUSD to bridge the gap to Friday’s close, briefly printing a session low of 1.0453.
- The aforementioned greenback strength was a result of a sharp selloff for major equity benchmarks, where notably the S&P 500 fell around 1.1% following the cash open. Coinciding with a bump lower for US yields, the Japanese Yen was boosted and AUDJPY fell quickly to a fresh session low in tandem.
- Equities have since recovered, leaving the USD index in very moderate negative territory on Monday. EURUSD has risen back to 1.0480 ahead of the APAC crossover and stands 0.25% higher on the session, with the Swiss Franc exhibiting similar strength vs the dollar. Elsewhere in G10, adjustments have been more moderate as markets continue to digest headlines from President Trump regarding the latest developments regarding a deal to end the Russia/Ukraine conflict.
- The Polish Zloty outperforms in the emerging market space, with recent fresh cycle lows in EURPLN (-0.51%) confirming a resumption of the downtrend. Sights are on the 2018 low of 4.1293, of which a break would place the cross at its lowest level since 2015.
- Upcoming - FOMC’s Goolsbee and Logan may speak and German final GDP will cross early Tuesday.
MNI OPTIONS: Expiries for Feb25 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0390-00(E1.2bln), $1.0450-55(E560mln)
- USD/JPY: Y149.00($751mln), Y149.75-80($790mln)
- USD/CNY: Cny7.3500($1.1bln)
MNI US STOCKS: Late Equities Roundup: Pharmaceuticals, Financial Services Leading
- Stocks are trading near steady (SPX Eminis) to mixed late Monday, the DJIA outperforming after falling to the lowest level since early January in the first half (43,343.67), the Nasdaq weaker but off morning lows (19,275.46 - lowest since the beginning of the month).
- Currently, the DJIA trades up 180.66 points (0.42%) at 43608.99, S&P E-Minis steady at 6029, Nasdaq down 101.9 points (-0.5%) at 19421.86.
- Stocks extended lows midmorning on President Trump trade policy concerns while trading desks cited managed money rotation out of stocks into Fixed Income. Treasury safe haven support saw rates reverse early losses to moderately higher in 5s to 30s.
- Health Care and Financial sectors continued to lead gainers in late trade, carry-over support from Friday noted in pharmaceuticals amid concerns over a new Covid strain with "pandemic potential": Charles River Laboratories +4.56%, Bristol-Myers Squibb +3.26%, West Pharmaceutical Services+3.23% and Baxter International +3.15%.
- Insurance companies buoyed the Financials sector: Travelers Cos +3.67%, Progressive Corp +3.31% and American International Group +2.67%.
- Meanwhile, Utilities and Information Technology sectors underperformed: Constellation Energy -6.44%, Vistra -5.18% and NRG Energy -1.91%. Technology sector shares were hampered by the threat of tariffs weighing on foreign investment: Palantir Technologies -9.30%, Constellation Energy -6.13%, Arista Networks -5.44% and Super Micro Computer -5.21%. Microsoft declined 1.04% on reports they canceled some leases for domestic data center capacity.
MNI EQUITY TECHS: E-MINI S&P: (H5) Corrective Pullback
- 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: 6088.20/6166.50 20-day EMA / High Jan 24
- PRICE: 6029.00 @ 1445 ET Feb 24
- SUP 1: 6014.00 Low Feb 10
- SUP 2: 5935.50 Low Feb 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 faded sharply off their recent highs, last week. The move down appears corrective - for now - and a bullish theme is intact. Attention is on the key resistance at 6178.75, the Dec 6 ‘24 high. A break of this hurdle would resume the primary longer-term uptrend. On the downside, initial key near-term support has been defined at 6014.00, the Feb 10 low. A breach would highlight a bearish development and expose 5935.50, the Feb 3 low.
TUESDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 25/02/2025 | 0700/0800 | *** |  DE | GDP (f) |
| 25/02/2025 | 0920/0420 |  US | Dallas Fed's Lorie Logan | |
| 25/02/2025 | 1000/1000 | * |  GB | Index Linked Gilt Outright Auction Result |
| 25/02/2025 | 1100/1100 | ** | GB | CBI Distributive Trades |
| 25/02/2025 | 1300/1400 |  EU | ECB's Schnabel at BOE's Annual Conference on Balance Sheet | |
| 25/02/2025 | 1330/0830 | ** | US | Philadelphia Fed Nonmanufacturing Index |
| 25/02/2025 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 25/02/2025 | 1400/0900 | ** | US | S&P Case-Shiller Home Price Index |
| 25/02/2025 | 1400/0900 | ** | US | FHFA Home Price Index |
| 25/02/2025 | 1400/0900 | ** | US | FHFA Home Price Index |
| 25/02/2025 | 1400/0900 | ** | US | FHFA Quarterly Price Index |
| 25/02/2025 | 1400/0900 | ** | US | FHFA Quarterly Price Index |
| 25/02/2025 | 1400/1400 | GB | BOE's Pill remarks at BEAR Conference | |
| 25/02/2025 | 1500/1000 | *** | US | Conference Board Consumer Confidence |
| 25/02/2025 | 1500/1000 | ** | US | Richmond Fed Survey |
| 25/02/2025 | 1530/1030 | ** | US | Dallas Fed Services Survey |
| 25/02/2025 | 1645/1145 | US | Fed Governor Michael Barr | |
| 25/02/2025 | 1800/1300 | US | Richmond Fed's Tom Barkin | |
| 25/02/2025 | 1800/1300 | * | US | US Treasury Auction Result for 5 Year Note |
| 26/02/2025 | 0030/1130 | *** |  AU | CPI Inflation Monthly |
| 26/02/2025 | 0030/1130 | *** | AU | Quarterly construction work done |