HIGHLIGHTS
- Treasuries look to finish moderately weaker Friday, reversing first half gains amid conflicting reports over when the Trump administration would implement 25% tariffs on Canada $ Mexico, 10% on China.
- Markets rallied on a Reuters story saying the tariff decision would be put off until May 1, but reversed course when WH officials denied the report - confirming tariffs on Canada, Mexico and China will start February 1.
- USD surged on the February 1 tariff implementation, Treasuries revisited lows while stocks reversed gains to mostly weaker in late trade.
- Focus turned to next week's heavy corporate earnings docket, key CPI and PPI inflation measures and headline employment data for January.
MNI US TSYS: Extending Lows After Saturday Tariff Calls Confirmed
- Trading weaker most of the session, Treasuries extended lows late Friday after White House officials confirmed 25% tariffs on Canada & Mexico, 10% on China will be announced Saturday, February 1.
- The Mar'25 10Y Treasury futures contract trades -12.5 at 108-27 after the bell, still above initial technical support at 108-23 (20-day EMA)., 10Y yield +.0508 at 4.5671% after declining to as low as 4.5003% midmorning.
- Tariff confirmation stoked a swift move lower for the greenback, with the USD index extending to session lows following the WMR fixing window which also appeared to be dominated by USD supply. The likes of USDCAD and USDMXN pushed firmly lower, with the former erasing the entirety of the late Thursday surge to trade back below 1.44.
- Stocks did not like the confirmation either, SPX Eminis and Nasdaq retreating from near all-time highs to moderate session lows in late trade, Energy and Materials sectors underperforming.
- Focus turned to next week's heavy corporate earnings docket, key CPI and PPI inflation measures and headline employment data for January.
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M +0.00447 to 4.31308 (-0.00233/wk)
- 3M +0.01154 to 4.30225 (+0.00241/wk)
- 6M +0.00970 to 4.24831 (-0.01075/wk)
- 12M +0.00190 to 4.16030 (-0.03860/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.36% (+0.01), volume: $2.369T
- Broad General Collateral Rate (BGCR): 4.34% (+0.01), volume: $902B
- Tri-Party General Collateral Rate (TCR): 4.34% (+0.01), volume: $870B
- (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: $280B
FED Reverse Repo Operation
RRP usage climbs to $187.913B this afternoon from $125.965B yesterday. Compares to Monday, January 27 usage of $92.863B - the lowest level since mid-April 2021. The number of counterparties rises to 57 from 45 prior.
US SOFR/TREASURY OPTION SUMMARY
Option desks reported vol structure sales and carry-over mixed SOFR & Treasury flows Friday. Weaker underlying futures are near overnight lows in late trade, Tsy curves little steeper (2s10s +1.187 at 31.884). Projected rate cuts through mid-2025 receded vs. early Friday (*) levels as follows: Mar'25 at -3.9bp (-4.2bp), May'25 at -11.8bp (-12.3bp), Jun'25 at -22.6bp (-24.0), Jul'25 at -28.5bp (-29.5bp).
SOFR Options:
+4,000 0QH5/2QH5 96.25 call spds, 1.38 steepener
9,750 SFRU5 95.37/95.62/95.87 put flys
Block/screen, 8,000 SFRZ5/2QZ5 97.00 call spds, 0.5 front Dec over
+10,000 SFRM5 95.50/95.62 put spds, 0.5 vs. 95.88/0.05%
+4,000 0QG5 96.00/96.37 1x2 call over risk reversals, 0.0 ref 96.135
-10,000 0QM5 96.25/96.75/97.25 call flys, 8.0 vs. 96.105/0.12%
+2,500 0QJ5 95.43/95.50 2x1 put spds, 2.0 vs. 96.09/.05%
-4,000 0QH5 96.00/96.37 1x2 call over risk reversals, 2 net ref 96.12
3,000 SFRU5 96.25/96.50/96.62/96.87 call condors, 2.75 ref 96.03
-2,500 0QG5 96.12 straddles, 17.5 ref 96.11
+7,500 SFRJ5 95.68/95.75/95.81/95.87 put condors, 2.25 vs. 95.90/0.05%
1,750 SFRZ5 93.75/94.25/94.50/94.75 broken put condors ref 96.095
1,750 2QH5 96.06 straddles ref 96.065
1,250 SFRJ5 96.00/96.31/96.43 broken call trees
1,200 2QH5 95.50/95.75 put spds vs. 96.12 calls
1,400 SFRH5 95.62/95.75/95.81 put flys
Treasury Options:
-6,000 TYH5 108.25/110.25 strangles, 34
+10,000 wk1 FV 106/106.25 put spds, 4 ref 106-19.5
+7,500 TYK5 109 straddles 2-33 vs. -15,000 TYK5 105/113 strangles at 26 (1-45 net on the 1x2 iron fly, ref 109-05)
2,000 FVH5 105.5/106.25 put spds, 13 ref 106-18.25
4,000 TYH5 108 puts vs. wk1 TY 108.5 puts, 5 net ref 109-05
Block, 4,000 TYH5 108/109/110 call flys, 16 vs. 109-09.5/0.05%
1,800 TYH5 107/108.5 put spds ref 109-03.5
over 6,000 FVH5 107.25/108.25 1x2 call spds vs. 12,000 104 puts
+5,000 TYH5 105/107 2x1 put spds, 5 vs 108-31.5 to 109-01.5/0.08%
MNI BONDS: EGBs-GILTS CASH CLOSE: Bull Steepening Continues On Soft Euro Inflation
The German and UK curves bull steepened for a 2nd consecutive session Friday as Eurozone inflation pressures appeared softer than expected to start the year.
- Following on from Thursday's post-ECB rally, Bunds led gains across the space as German regional and French inflation data came in softer than expected.
- ECB implied rate cuts deepened, with around 81bp total expected by year-end (up 10bp from pre-data).
- In other data, UK mortgage approvals were firmer than expected, with consumer credit in-line; the ECB's Survey of Professional Forecasters saw respondents revised 2025
growth expectations down. - OATs notably outperformed the rest of the semi-core (and periphery) EGB space, with spreads narrowing after an apparent deal on the 2025 budget seemingly reducing near term fiscal/political risks. Periphery EGB spreads widened slightly as an intraday equity rally faded.
- Next week's European calendar includes the BoE decision (25bp rate cut expected, along with new forecasts and a press conference) and the Eurozone-wide flash inflation print.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 8.9bps at 2.119%, 5-Yr is down 8bps at 2.235%, 10-Yr is down 5.9bps at 2.46%, and 30-Yr is down 4.6bps at 2.713%.
- UK: The 2-Yr yield is down 3.7bps at 4.219%, 5-Yr is down 2.9bps at 4.224%, 10-Yr is down 2.2bps at 4.538%, and 30-Yr is up 0.1bps at 5.126%.
- Italian BTP spread up 1.2bps at 109.3bps / French OAT down 1.8bps at 73.4bps
MNI OPTIONS: More Mixed Rates Trade Concludes A Week Of Steady Upside
Friday's Europe rates/bond options flow included:
- ERJ5 97.75/97.8125/98.0625/98.125c condor, bought for 3.25 in 10k
- ERM5 97.875/98.00cs sold at 4.5 in 5k.
- 0RH5 97.875/98.25^^, sold at 9 in 16k.
- 0RM5 9.37/98.62cs, bought for 2.75 in 4k
- SFIH6 96.35/96.85cs vs 95.40p, bought the cs for 0.25 in 5k
MNI FOREX: Conflicting Tariff Headlines Continue to Dominate USD Sentiment
- Currency markets have been extremely volatile late Friday, amid conflicting reports on the implementation of tariffs by the Trump administration. Initially, a Reuters exclusive suggested that tariffs on Mexico and Canada could be delayed until March 1, but will include a process for the countries to seek specific exemptions for certain imports.
- This stoked a swift move lower for the greenback, with the USD index extending to session lows following the WMR fixing window which also appeared to be dominated by USD supply. The likes of USDCAD and USDMXN pushed firmly lower, with the former erasing the entirety of the late Thursday surge to trade back below 1.44.
- However, this news was then refuted by White House Press Secretary Karoline Leavitt, who said President Trump intends to move ahead with plans on Saturday to impose 25% tariffs on Mexico and Canada and a 10% levy on China, denying the prior report that he planned to delay the implementation by a month.
- Sharp reversals of the prior moves were then seen, as the greenback spiked aggressively higher and the USD index then made a fresh session high. USDCAD reversed around 100 pips and USDMXN printed back above 20.70 from 20.49 prior to the comments amid major equity indices coming under pressure.
- For the majors, EURUSD echoed the sentiment, rising to 1.0434 before reversing back to 1.0375 as we approach the close. USDJPY has been more insulated to the tariff volatility, however, spot stands a solid 110pips off session lows at 155.10.
- Tariff developments are sure to dominate across the weekend and into next week, however, we will also have the Bank of England and US employment data to highlight the economic calendar.
MNI FX OPTIONS: Expiries for Feb03 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0325(E1.5bln), $1.0350(E710mln), $1.0370-75(E662mln), $1.0400(E1.8bln), $1.0420-25(E1.2bln)
- USD/JPY: Y155.00($646mln)
- USD/CAD: C$1.4400($1.6bln)
MNI US STOCKS: Late Equities Roundup: Off Highs As Saturday Tariffs Confirmed
- Stocks reversed early gains to mostly lower late Friday after President Trump officials confirmed 25% tariffs on Canada & Mexico, 10% on China will start Saturday, February 1. Stocks had reacted positively to earlier reports the tariffs could be put off until May 1, with SPX Eminis and Nasdaq climbing near all-time highs.
- Currently, the DJIA trades down 251.41 points (-0.56%) at 44631.49, S&P E-Minis down 16 points (-0.26%) at 6083, Nasdaq up 3.5 points (0%) at 19685.95.
- Energy and Materials sectors underperformed in the second half, oil and gas stocks weighed on the former: Chevron -4.52%, Hess Corp -4.46%, Occidental Petroleum -4.23% while APA Corp declined 3.5%. Metals and mining shares weighed on the Materials sector: PPG Industries -5.67%, Mosaic -2.76%, Steel Dynamics -2.38%.
- On the positive side, Communication Services and Consumer Discretionary sectors outperformed, interactive media and entertainment stocks supporting Communication Services: Electronic Arts +3.51%, Charter Communications +2.81%, Alphabet +1.85%. Meanwhile, autos and parts retailers buoyed the Consumer Discretionary sector: Tesla +1.78%, Tractor Supply +0.46%, AutoZone +0.23%.
- Another heavy earnings docket next week includes the following on Monday-Tuesday: PepsiCo Inc, Archer-Daniels-Midland Co, Snap Inc, Alphabet, Match Group, Amgen Inc, Advanced Micro Devices, Lumen Technologies, Chipotle Mexican Grill, Juniper Networks Inc.
MNI US 10YR FUTURE TECHS: E-MINI S&P: (H5) Bullish Outlook
- RES 4: 6200.00 Round number resistance
- RES 3: 6178.75 High Dec 6 and key resistance
- RES 2: 6163.75 High Dec 16
- RES 1: 6162.28 High Jan 24
- PRICE: 6119.75 @ 14:36 GMT Jan 31
- SUP 1: 6019.12 50-day EMA
- SUP 2: 5961.75/5948.00 Low Jan 16 / 27
- SUP 3: 5943.94 61.8% retracement of the Jan 13 - 24 bull leg
- SUP 4: 5892.37 76.4% retracement of the Aug 5 - Dec 6 bull leg
The S&P E-Minis contract is firmer today and continues to trade above Monday’s low. Key short-term support to watch lies at 5961.75, the Jan 16 low (pierced). For now, the recent sharp pullback appears corrective, however, a clear breach of 5961.75 would strengthen a bearish threat and signal scope for a deeper retracement, towards 5943.94, a Fibonacci retracement. Key resistance is 6178.75, the Dec 6 high.
MNI COMMODITIES: Gold Pares Gains After Hitting Fresh Record High
- Spot gold has erased most of its earlier gains after White House Press Secretary Leavitt refuted reports that President Trump could delay the implementation of tariffs on Mexico and Canada until March 1.
- Leavitt said that Trump intends to move ahead with plans to impose 25% tariffs on Mexico and Canada and a 10% levy on China tomorrow.
- Spot gold is currently 0.2% higher on the day at $2,799/oz, having risen to a fresh record high of $2,817 earlier in the session.
- A bull cycle in gold remains in play, with the yellow metal reaching resistance at $2,817.6, a Fibonacci projection, earlier. Above here, next resistance is at $2,845.2, the 1.382 projection of the Nov 14 - Dec 12 - 19 price swing.
- Meanwhile, copper has slid by 1% today to $426/lb, amid the uncertainty on the tariff outlook.
- Despite the 1.3% pullback this week, copper futures remain in a bull cycle, with price still trading just above the 50-day EMA, at $425.54. Attention is on $452.85 next, the Nov 5 ‘24 high and a key resistance.
- WTI has struggled for clear direction today, amid the tariff headlines.
- WTI Mar 25 is 0.3% lower at $72.5/bbl on Friday, taking losses this week to 3%.
- This week’s move down in WTI futures marks an extension of the current corrective cycle. The 20-day EMA has been breached and attention is on support around the 50-day EMA, at $72.26, followed by $68.05, the Dec 20 low.
MONDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 03/02/2025 | 0700/0200 | * |  TR | Turkey CPI |
| 03/02/2025 | 0815/0915 | ** |  ES | S&P Global Manufacturing PMI (f) |
| 03/02/2025 | 0845/0945 | ** |  IT | S&P Global Manufacturing PMI (f) |
| 03/02/2025 | 0850/0950 | ** |  FR | S&P Global Manufacturing PMI (f) |
| 03/02/2025 | 0855/0955 | ** |  DE | S&P Global Manufacturing PMI (f) |
| 03/02/2025 | 0900/1000 | ** |  EU | S&P Global Manufacturing PMI (f) |
| 03/02/2025 | 0930/0930 | ** |  GB | S&P Global Manufacturing PMI (Final) |
| 03/02/2025 | 1000/1100 | *** | EU | HICP (p) |
| 03/02/2025 | 1000/1100 | *** | IT | HICP (p) |
| 03/02/2025 | - | *** |  US | Domestic-Made Vehicle Sales |
| 03/02/2025 | 1445/0945 | *** | US | S&P Global Manufacturing Index (final) |
| 03/02/2025 | 1500/1000 | *** | US | ISM Manufacturing Index |
| 03/02/2025 | 1500/1000 | * | US | Construction Spending |
| 03/02/2025 | 1630/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 03/02/2025 | 1630/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 03/02/2025 | 1730/1230 | US | Atlanta Fed's Raphael Bostic | |
| 03/02/2025 | 2330/1830 | US | St, Louis Fed's Alberto Musalem |