HIGHLIGHTS
- Treasuries look to finish modestly weaker Friday, curves bear steepening as short end rates managed to outperform Bonds.
- Hawkish data Treasury futures extended lows after a surge in Empire Mfg and firmer October Retail Sales followed by flat Industrial Production data distorted by idiosyncratic effects.
- Fed Goolsbee said on Bbg TV that the "Fed may slow" the "pace of rate cuts as it nears neutral" and if the "current rate of inflation extended, it's too high".
US TSYS
MNI US TSYS: Tsys Support Eases After Chicago Fed Goolsbee Bbg Comments
- Treasury futures drifted off late session highs Friday, curves maintaining steeper profiles (2s10s +4.081 at 12.718; 5s30s +4.585 at 30.552) as short end rates outpace long Bonds.
- Tsy Dec'24 10Y futures tapped 109-23.5 (+6) high, neared initial technical resistance above at 109-30.5/110-17.5 (High Nov 13 / 20-day EMA) before slipping to 109-14.5 at the moment. 10Y yield down to 4.4335% after climbing to 4.5007% high earlier, the first time above 4.5% since May 31 this morning.
- Fast two-way trade as Treasury futures see-sawed lower after higher than expected Retail Sales for October and up-revisions for prior. Meanwhile, import/export price indexes come out higher than expected, while Empire Mfg jumps to late 2021 levels.
- The Empire data had very strong internals: new orders soared 38 points to 28.0, with shipments up 35 points to 32.5. Labor market conditions were "stable" (number of employees edging down, average workweek edging up). This is a figure consistent witan ISM Manufacturing survey above 60, though of course that seems unlikely given it's recently been stuck in contractionary (<50) territory.
- Treasury support eased after Chicago Fed Goolsbee said on Bbg TV that the "Fed may slow" the "pace of rate cuts as it nears neutral" and if the "current rate of inflation extended, it's too high". Next up: Richmond Fed Barkin is expected on Yahoo Finance at 1500ET.
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.00003 to 4.61045 (-0.00603/wk)
- 3M +0.00574 to 4.49113 (-0.02504/wk)
- 6M +0.00618 to 4.39191 (-0.00916/wk)
- 12M -0.00211 to 4.24243 (+0.02371/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.58% (-0.01), volume: $2.177T
- Broad General Collateral Rate (BGCR): 4.57% (-0.01), volume: $827B
- Tri-Party General Collateral Rate (TGCR): 4.57% (-0.01), volume: $800B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.58% (+0.00), volume: $107B
- Daily Overnight Bank Funding Rate: 4.58% (+0.00), volume: $286B
FED Reverse Repo Operation
RRP usage falls back under $200B to $172.400B this afternoon from $214.509B Thursday. Compares to $144.243B on Tuesday, November 5 -- the lowest since May 6, 2021. The number of counterparties holds steady at 51.
US SOFR/TREASURY OPTION SUMMARY
Treasury and SOFR option flow continued to center on downside put structures with some sporadic call interest Friday. Underlying futures still weaker but well off morning lows, curves bear steepening (2s10s +4.205 at 12.842 vs. 8.540 low). Projected rate cuts into early 2025 look largely steady vs. this morning (*) : Dec'24 cumulative -14.6bp (-15.5bp), Jan'25 -22.6bp (-23.bp), Mar'25 -37.9bp (-37.4bp), May'25 -44.7bp (-44.6bp).
SOFR Options:
-4,000 SFRZ4 95.18/95.43 put spds, 1.5 ref 95.545
+10,000 SFRF5 95.37/95.50/95.62 put trees 2.25 ref 95.775
+10,000 SFRF5 95.25/95.50/95.75 put flys 6.5 ref 95.78
+10,000 SFRM5 96.25/96.37/96.50/96.62 call condors 1.0 ref 95.92
+4,000 SFRZ4 95.50/95.56/95.62 call flys 0.75 ref 95.53
+5,000 SFRF5/SFRG5/SFRH5 95.25/95.37/95.50 put fly strip 4.0 total ref 95.76
-7,000 SFRZ5 96.00 puts, 38.0 vs. 96.125/0.45%
12,500 SFRG5 95.62/95.68/95.75 put flys ref 95.755
5,000 SFRZ4 95.43/95.50/95.56 put flys
3,500 SFRZ4 95.43 puts, 1.75 ref 95.545
3,000 0QZ4 95.68/95.81/96.00 broken put flys ref 96.095
-4,800 SFRZ4 95.56/95.62/95.68 call flys, 1.75 ref 95.545
2,000 SFRZ4 95.50/96.00 call spds ref 95.545
2,000 SFRX4 95.43/95.50/95.56 put flys ref 95.454
5,000 SFRX4 95.56 puts, 2.75 ref 95.545
Treasury Options:
3,200 TYH5 112.5 calls, 34 ref 109-27
5,000 USZ4 114/115 put spds, ref 116-11
2,000 TYZ4 114 calls ref 109-18.5
2,000 TYZ4 110.5/111 put spds, 47 ref 109-16.5
6,580 TYZ4 116.25 calls ref 109-12.5
+5,000 USZ4 115 puts, 19 ref 116-07
5,000 wk3 TY 109/109.25 2x1 put spds ref 109-15 to -14.5 (exp today)
3,400 TYF5 108.5 puts, 34 ref 109-16.5
3,300 TUF5 102.5 puts, 9 ref 102-25.25
+4,000 TYF5 115 calls, 3 ref 109-14/0.05%
2,000 TYG5 107/108.5 put spds ref 109-12
MNI BONDS: EGBs-GILTS CASH CLOSE: Gilts, Bunds Close Flat On The Week
Gilts outperformed Bunds slightly Friday, though both instruments finished the week relatively flat.
- The session started with a constructive tone, with core EGBs/Gilts aided by an uptick in US Treasuries overnight. UK GDP data was a little softer than expected but didn't have much tangible impact.
- EGBs weakened to the session's worst levels in afternoon trade. The retracement came as TTF gas prices hit the highest levels in a year after Austria's OMV confirms Russia's Gazprom is set to suspend deliveries on November 16.
- While they recovered, aided by a down-leg in equities, EGBs would underperform Gilts on the day. The German curve bear flattened, with the UK's bull steepening. Gilt yields closed the week modestly higher, with Bund yields modestly lower.
- Periphery EGB spreads closed mostly tighter, with 10Y BTPs closing within 120bp of Bunds.
- ECB's Cipollone was typically dovish, commenting that Q3 Euro GDP may have been flattered by Paris Olympics effects.
- Next week's schedule is highlighted by November flash PMIs, with UK CPI hitting next Wednesday.
Closing Yields / 10-Yr Periphery EGB Spreads To Germany
- Germany: The 2-Yr yield is up 2bps at 2.122%, 5-Yr is up 0.8bps at 2.176%, 10-Yr is up 1.5bps at 2.356%, and 30-Yr is up 0.8bps at 2.574%.
- UK: The 2-Yr yield is down 2.4bps at 4.399%, 5-Yr is down 1.7bps at 4.328%, 10-Yr is down 1.2bps at 4.471%, and 30-Yr is up 0.5bps at 4.924%.
- Italian BTP spread down 0.6bps at 119.8bps / Spanish down 0.6bps at 70.1bps
MNI OPTIONS: Upside Thursday Gives Way To More Mixed Rates Trade Friday
Friday's Europe rates/bond options flow included:
- ERZ4 97.37/97.50cs 1x2, bought for 1.25 in 6k.
- ERF5 97.75/97.625ps 1x1.25, bought for 3.75 in 5k.
- ERF5 97.75/97.625ps 1x2, bought for 1.5 in 6k.
- ERF5 97.625/97.50 1x2 put spread paper paid 0.25 on 8K
- SFIZ4 95.35/94.95ps vs 95.60/95.70cs, bought the ps for 2 and 2.25 in 5k.
MNI FOREX: USD/JPY Rally Undermined by Softer Stocks
- GBP proved to be the poorest performer in G10 through the Friday close, extending the losing streak for GBP/USD on both a daily and a weekly basis. A seventh consecutive week of losses for the pair outstrips the duration of the sell-off that followed both the Brexit referendum as well as the onset of the COVID pandemic in 2020 - the last longer weekly losing streak came in 2010, where 8 consecutive lower weekly closes made for a total loss of 923 pips (vs. 741 pips in seven weeks of losses this year).
- JPY gained against all others, helping USD/JPY return back below the Y155.00 as part of corrective weakness posted off the November high. For now, the underlying bull trend remains intact, but Friday's price action proves it won't be one-way, however near-term weakness could provide opportunity for those pursuing a buy-on-dips strategy.
- While US yields rose across the curve on solid economic data, softer equity markets undermined USD/JPY, particularly in light of Powell's hawkish comments on Thursday evening, in which he noted the near-term strength of the US economy - thereby reducing the odds of a further rate cut in December.
- Focus across the coming week turns to the UK CPI print - ahead of which markets price only a small chance of a further 25bps rate cut in December - as well as the Canadian and Japanese equivalent. Central bank decisions include Turkey, Hungary and South Africa.
MNI OPTIONS: Expiries for Nov18 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0500-20(E1.3bln), $1.0600(E1.3bln)
- NZD/USD: $0.5835(N$853mln)
- USD/CAD: C$1.3950($689mln)
- USD/CNY: Cny7.2300($741mln)
MNI US STOCKS: Late Equities Roundup: Chip Stocks and Pharmaceutical Continue to Lag
- Stocks continue to extend session lows in late Friday trade, indexes back at last week Wednesday levels after this morning's surge in Empire Mfg and firmer October Retail Sales data tempered market expectations of a Fed cut in December. Currently, the DJIA trades down 345.99 points (-0.79%) at 43403.81, S&P E-Minis down 96.5 points (-1.61%) at 5881.5, Nasdaq down 492.4 points (-2.6%) at 18615.27.
- Information Technology, Health Care and Communication Services sectors continued to underperform late trade, semiconductors weighing on the IT: Applied Materials -9.07%, Adobe -5.19%, Lam Research -5.75%.
- Pharmaceuticals weighed on the Health Care sector, analysts citing President Trump's choice of RF Kennedy Jr to head the Dept of Health & Human Services: Moderna -7.24%, Bio-Techne Corp -5.95%, IQVIA -5.1% while Amgen trades 5.01% lower.
- Interactive media and entertainment share weighjed on the Communication Services sector in the second half: Omnicom Group -7.8%, Warner Bros -7.35%, Interpublic Group -5.51%.
- On the flipside, Utilities and Financial sectors outperformed late Friday, shares of multi-energy providers supporting the Utility sector: American Electric +2.37%, Alliant Energy Corp +2.17%, Dominion Energy +1.99%. Meanwhile, banks and financial services continued to support the Financials sector: WR Berkley +1.46%, Aflac +1.27%, JP Morgan Chase +1.26%.
- Big names still to report earning next week include: Lowe's, Walmart, Target, Williams-Sonoma, TJX, Nvidia, Palo Alto Networks, Intuit, Copart and the Gap.
MNI EQUITY TECHS: E-MINI S&P: (Z4) Monitoring Support
- RES 4: 6145.26 1.236 proj of the Aug 5 - Sep 3 - 6 price swing
- RES 3: 6103.88 1.500 projection of the Sep 6 - 17 - 18 price swing
- RES 2: 6070.16 1.382 projection of the Sep 6 - 17 - 18 price swing
- RES 1: 6053.25 High Nov 11 and the bull trigger
- PRICE: 5895.75 @ 1220 ET Nov 15
- SUP 1: 5891.00 Intra-day low
- SUP 2: 5823.84 50-day EMA
- SUP 3: 5724.25 Low Nov 4 and a key support
- SUP 4: 5675.25 Low Sep 18
The trend condition in S&P E-Minis remains bullish and the latest pullback is - for now - considered corrective. A key short-term support has been defined at 5724.25, the Nov 4 low. Initial supports to watch are 5911.09 and 5823.84, the 20- and 50-day EMA points respectively. Recent gains resulted in a breach of the bull trigger at 5927.25, Oct 17 high, confirming a resumption of the primary uptrend. Sights are on 6070.16, a Fibonacci projection.
MNI COMMODITIES: WTI, Gold Down 4.5% on The Week
- WTI fell to its lowest intraday level since Oct 29 and remains under pressure from mixed Chinese economic and consumption data and growing expectations of a supply surplus in 2025.
- WTI Dec 24 is down by 2.4% at $67.1/bbl.
- With a bearish theme in WTI futures still intact, focus is on $65.99, the Oct 1 low, and $64.16, the Sep 10 low and key support.
- In contrast, Henry Hub is on the rise again in US hours, showing some recovery after a sharp selloff yesterday. Front month sank after EIA data showed another larger than normal gas storage injection last week.
- US Natgas Dec 24 is up 1.5% at $2.82/mmbtu.
- Meanwhile, spot gold is broadly unchanged at $2,563/oz today, leaving the yellow metal almost 4.5% lower on the week on the back of the strong dollar in recent sessions.
- The move down has resulted in a breach of the 20- and 50-day EMAs, signalling scope for a deeper retracement towards $2,511.1 next, the Sep 18 low.
- After rising in early trade, copper has fallen back and is now 0.7% lower on the day and 5.5% lower on the week at $411/lb.
- This week’s move down reinforces a bearish theme. $419.91, 76.4% of the Aug 7 - Sep 30 bull cycle has been cleared and the continuation lower opens $401.35, the Aug 7 low and a bear trigger.
MONDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 18/11/2024 | 0815/0915 |  EU | ECB's De Guindos speech at 27th Euro Finance Week | |
| 18/11/2024 | 1000/1100 | * | EU | Trade Balance |
| 18/11/2024 | 1300/1400 | EU | ECB's Lane lecture on Inflation Expectations | |
| 18/11/2024 | 1315/0815 | ** |  CA | CMHC Housing Starts |
| 18/11/2024 | 1330/0830 | * | CA | International Canadian Transaction in Securities |
| 18/11/2024 | 1500/1000 | ** |  US | NAHB Home Builder Index |
| 18/11/2024 | 1500/1000 | US | Chicago Fed's Austan Goolsbee | |
| 18/11/2024 | 1630/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 18/11/2024 | 1630/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 18/11/2024 | 1830/1930 | EU | ECB's Lagarde on economic and human challenges | |
| 18/11/2024 | 2100/1600 | ** | US | TICS |
| 19/11/2024 | 0030/1130 |  AU | RBA Minutes |