HIGHLIGHTS
- Treasuries gradually extended lows, curves bear steepening Monday (2s10s +1.983 at 6.673), the first trading session with the Federal Reserve in media blackout ahead of the December 18 FOMC.
- Limited second tier data, NY Fed consumer inflation expectations all increased a tenth in November, albeit with the 3Y metric exaggerated by rounding.
- The main focus remains on CPI & PPI inflation data on Wednesday & Thursday respectively.
MNI US TSYS: Tsys Hold Narrow Weaker Band, Waiting for CPI, PPI Data
- Treasuries gradually extended session lows by midday, have held to a narrow range through the second half, curves bear steepening: 2s10s +1.983 at 6.673, 5s30s +1.770 at 31.624.
- The Fed in blackout and limited data to kick off the week: Wholesale trade sales lower than expected (-0.1% vs. 0.2% est) while the prior was uprevised to 0.5% from 0.3%. NY Fed consumer inflation expectations all increased a tenth in November, albeit with the 3Y metric exaggerated by rounding.
- The main data focus is on on CPI & PPI inflation data on Wednesday & Thursday respectively.
- Meanwhile, projected rate cuts into early 2025 have receded slightly from late Friday (*) as follows: Dec'24 cumulative -21.5bp (-22.2bp), Jan'25 -27.9bp (-29.7bp), Mar'25 -44.8bp (-46.6bp), May'25 -54.6bp (-56.4bp).
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.02535 to 4.45195 (-0.05505 total last wk)
- 3M -0.03050 to 4.39622 (-0.04653 total last wk)
- 6M -0.04035 to 4.28907 (-0.05417 total last wk)
- 12M -0.05184 to 4.12895 (-0.07310 total last wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.60% (+0.01), volume: $2.277T
- Broad General Collateral Rate (BGCR): 4.58% (+0.01), volume: $838B
- Tri-Party General Collateral Rate (TGCR): 4.58% (+0.01), volume: $809B
- (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: $270B
FED Reverse Repo Operation
RRP usage slips rebounds to $153.029B this afternoon from Friday's multi-year low of $130.014B (last seen at May 3 2021: $129.724B). The number of counterparties up to 52 from 50 prior.
US SOFR/TREASURY OPTION SUMMARY
SOFR options continued to focus on downside put structures Monday, Treasury options remained pared with slightly better upside skew plays in 10Y options reported. Underlying futures see-sawing near session lows since midday, curves bear steepening (2s10s +1.804 at 6.494), while projected rate cuts into early 2025 have receded slightly from late Friday (*) as follows: Dec'24 cumulative -21.5bp (-22.2bp), Jan'25 -27.9bp (-29.7bp), Mar'25 -44.8bp (-46.6bp), May'25 -54.6bp (-56.4bp).
SOFR Options:
1,750 SFRU5 95.62/96.00 2x1 put spds
Block, 25,000 SFRJ5 95.50/95.62 put spds, 1.25 ref 96.08
Block, 4,000 0QZ4 95.87/96.12 put spds, 1.0 vs. 96.28/0.15%
6,000 0QG5 95.87/96.12/96.25 broken put trees ref 96.335 to -.33
2,000 0QZ4 95.87/96.00/96.25/96.37 put condors ref 96.28
1,500 SFRZ4 95.50/95.56/95.62 put flys ref 95.63
Treasury Options:
2,000 TYG5 108.5/111 2x1 put spds, ref 111-05.5
3,000 TYH5 100/103/104 broken put trees ref 111-06
20,000 TYF5 112/113 call spds, 10 ref 111-08 to -08.5
6,800 wk2 FV 108 calls, 6 ref 107-20.75
Block, 25,000 TYF5 112/113 call spds vs. 12,500 TYF5 110 puts, 15 net/call spd over
4,000 TYF5 112.5/112.75 call spds, 1 ref 111-05
5,000 USF5 123/125 1x2 call spds ref 119-20
2,000 TYF5 110 puts, 7 ref 111-13
2,000 TYF5 112.75/113.75 1x2 call spds
1,700 TYF5 112.75/113.5 call spds ref 111-18.5
6,000 wk2 TY 110.75/111.25 put spds vs. 112 calls ref 111-16.5
MNI BONDS: EGBs-GILTS CASH CLOSE: Twist Steepening With ECB Coming Into View
European yields were little changed Monday, with the ECB's final decision of the year coming into view.
- Core FI futures softened to start the week's trade, pressured by a risk-positive cross-asset move following a dovish monetary policy stance tweak in China.
- Bunds and Gilts regained ground over the course of the late morning and early afternoon, as European equity and crude oil futures retraced from session highs, but the weakness resumed in the last couple of hours of cash trade with yields closing near the session highs.
- There was no discernable market reaction to an appearance by BoE’s Ramsden, who did not discuss policy rates; he said he wants QT to be "gradual and predictable".
- The German and UK curves each twist steepened, with Bunds modestly underperforming Gilts.
- Periphery/semi-core EGB trade largely mirrored the moves in core markets, with spreads compressing on the day but finishing off tightest levels amid a bit of weakness toward the cash close.
- The week's focus is Thursday's ECB decision (pricing was unchanged Monday, at 27bp of cuts implied), but Wednesday's US CPI release and Friday's UK economic activity data will also bear watching.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 0.3bps at 1.998%, 5-Yr is up 0.9bps at 1.978%, 10-Yr is up 1.3bps at 2.121%, and 30-Yr is up 3.2bps at 2.348%.
- UK: The 2-Yr yield is down 1.4bps at 4.247%, 5-Yr is down 1.4bps at 4.119%, 10-Yr is down 0.5bps at 4.27%, and 30-Yr is up 1.6bps at 4.824%.
- Italian BTP spread down 0.8bps at 107.7bps / French OAT down 1.4bps at 75.4bps
MNI OPTIONS: Large Call Spread Selling Features Monday
Monday's Europe rates/bond options flow included:
- OEF5 120.00/120.50 call spread sold at 4 down to 3.25 in 17.5k vs OEG5 120.00/120.50 call spread bought for 10 in 15k (rolling Jan into Feb)
- ERG5 98.00/98.12/98.25c fly, bought for 1 in 4k
- ERH5 97.75/98.12 call spread sold at 10 in 47k (vs 77, 77.5)
- ERJ5 98.12/98.25cs vs ERG5 97.75/97.87cs, bought the April for -0.25 in 2.5k.
MNI FOREX: AUDJPY Soars 1.85% Pre-RBA as China Signals More Stimulus
- Headlines from China on Monday hinted at looser monetary policy ahead, and the news has provided a boost to risk sentiment across currency markets, with the Australian dollar leading the G10 charge. We noted the monetary policy stance tweak and fiscal language used today reduces the odds of a meaningful move lower in the country's GDP growth target for '25.
- In contrast to the firm rally for antipodean FX, the Japanese Yen is the weakest major currency, prompting a near 2% advance for AUDJPY.
- Despite AUDUSD’s 1%advance, trend conditions remain bearish and resistance is at 0.6497, the 20-day EMA. This average has capped gains well in recent weeks.
- Notably, Friday had the first daily close below the 0.6400 mark since November 2023, and leaves key support at 0.6350.
- For USDJPY, today’s rally extends the most recent recovery to around 1.8% and spot is almost at identical levels to before the US election. Price action narrows the gap to initial firm resistance at 151.75, the 20-day EMA. However, the trend direction remains south, for now.
- Fresh pressure on EURGBP saw the cross touch a low of 0.8269 to again trouble the twice-tested support from last week. We have noted across the past few weeks a clear area of demand in the cross, layered between 0.8260-87 that coincides with the range-defining support around the 0.8300 handle.
- Analysts are expecting an unchanged RBA rate decision at 4.35%, before the focus turns swiftly to US CPI and the Bank of Canada Wednesday.
MNI OPTIONS: Expiries for Dec10 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0450(E1.0bln), $1.0465-75(E2.3bln), $1.0500(E1.4bln), $1.0550(E530mln), $1.0600-20(E1.7bln), $1.0650(E599mln), $1.0715(E710mln)
- USD/JPY: Y151.90-00($1.0bln)
- EUR/GBP: Gbp0.8300-20(E500mln)
- AUD/USD: $0.6500(A$1.1bln)
- USD/CNY: Cny7.2400($627mln), Cny7.3000($1.0bln)
MNI US STOCKS: Late Equities Roundup: Communication, Financial Sectors Underperform
- Major averages held weaker levels late Monday, near session lows after reversing modest gains following the lower than expected Wholesale Trade sales data (-0.1% vs. 0.2% est; prior up revised to 0.5% from 0.3%, however). Currently, the DJIA trades down 92.59 points (-0.21%) at 44550.28, S&P E-Minis down 27.25 points (-0.45%) at 6072, Nasdaq down 107 points (-0.5%) at 19752.76.
- Communication Services and Financial sectors underperformed in the second half, leading laggers in the Communication sector included Comcast -9.72% after the CEO announced a 100k subscriber drop at a UBS investor event this morning, Omnicom Group -8.98% after announcing $13B deal to merge with Interpublic (IPG), while Charter Communications -7.23% on lackluster broadband subscriber numbers.
- Insurance and services companies weighed on the Financial sector: MetLife -3.75%, Harford and Travelers both -3.20% while Prudential declined 2.85%.
- Of interest, China officials announced they were investigating Nvidia over alleged anti-monopoly violations, the chip stock trading down 2.39% in late trade.
- Conversely, Health Care and Energy sectors led gainers in late trade, pharmaceuticals and service providers buoyed the Health Care sector: Charles River Labs +5.05%, Molina and Centene both +4.1% while Elevance Health gained 3.71%.
- Following the fall of the Assad regime in Syria this weekend, the power vacuum lending to increased uncertainty in the Middle East with crude prices rising (WTI +1.26 at 68.46). That in turn supported oil and gas shares with APA +4.84%, Occidental Petroleum +3.208%, Valero +2.86%.
- Meanwhile some standout earnings announcements this week include Toll Brothers and Oracle after today's close. AutoZone Inc kicks off Tuesday morning followed by GameStop after the close. Midweek on: Macy's, Adobe, Costco and Broadcom.
MNI EQUITY TECHS: E-MINI S&P: (Z4) Bulls Remain In The Driver’s Seat
- RES 4: 6200.00 Round number resistance
- RES 3: 6184.00 1.000 proj of the Nov 4 - 11 - 19 price swing
- RES 2: 6145.26 1.236 proj of the Aug 5 - Sep 3 - 6 price swing
- RES 1: 6111.00 High Dec 6
- PRICE: 6094.25 @ 14:30 GMT Dec 9
- SUP 1: 6009.42 20-day EMA
- SUP 2: 5913.54 50-day EMA
- SUP 3: 5855.00 Low Nov 19
- SUP 4: 5814.75 Low Nov 6
The S&P E-Minis contract maintains a bullish tone and price is trading at its latest highs. Recent gains confirm a resumption of the uptrend and signal scope for a continuation near-term. Note that moving average studies are in a bull-mode set-up, highlighting a dominant uptrend and positive market sentiment. Sights are on 6145.26, a Fibonacci projection. Initial support to watch lies at 6009.42, the 20-day EMA.
MNI COMMODITIES: Crude, Gold Rally Amid Middle-East Uncertainty, China Optimism
- WTI has traded higher today, boosted by China’s plan to loosen monetary policy, coupled with increased Middle East uncertainty.
- WTI Jan 25 is up by 1.8% at $68.4/bbl.
- The toppling of Syria’s Bashar al-Assad's regime at the weekend has added a level of Middle East geopolitical uncertainty for oil markets on Monday.
- Despite today’s gains, a bearish threat in WTI futures remains present, and a reversal lower would focus attention on $65.74, the Oct 1 low. Initial firm resistance to watch is unchanged at $72.41, the Nov 7 high.
- Meanwhile, spot gold has risen by 1.0% to $2,660/oz, buoyed by the boost to risk sentiment from the China stimulus headlines.
- China will implement a more proactive fiscal policy and a moderately loose monetary policy in 2025 to boost domestic demand and stabilise both property and stock markets, according to a Political Bureau meeting.
- For gold, trend conditions remain bullish, with resistance to watch at $2,721.4, the Nov 25 high.
- Silver is outperforming today and is up by 2.8% at $31.8/oz, bringing the gold-silver ratio down briefly to its lowest since Oct 31.
- For silver a clear break of the 50-day EMA would open $33.125, the Nov 1 high.
TUESDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 10/12/2024 | 0700/0800 | *** |  DE | HICP (f) |
| 10/12/2024 | 0700/0800 | *** |  NO | CPI Norway |
| 10/12/2024 | 0700/0800 | ** |  SE | Private Sector Production m/m |
| 10/12/2024 | 0900/1000 | * |  IT | Industrial Production |
| 10/12/2024 | 1000/1000 | * |  GB | Index Linked Gilt Outright Auction Result |
| 10/12/2024 | 1100/0600 | ** |  US | NFIB Small Business Optimism Index |
| 10/12/2024 | - | *** |  CN | Trade |
| 10/12/2024 | - | *** | CN | Money Supply |
| 10/12/2024 | - | *** | CN | New Loans |
| 10/12/2024 | - | *** | CN | Social Financing |
| 10/12/2024 | - |  EU | ECB's De Guindos in ECOFIN meeting | |
| 10/12/2024 | 1330/0830 | ** | US | Non-Farm Productivity (f) |
| 10/12/2024 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 10/12/2024 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 10/12/2024 | 1700/1200 | *** | US | USDA Crop Estimates - WASDE |
| 10/12/2024 | 1800/1300 | *** | US | US Note 03 Year Treasury Auction Result |