HIGHLIGHTS
- Treasuries reversed early gains and retreated back to midweek lows late Friday, focus on next week Friday's October employment report as the Federal Reserve heads into media blackout tonight at midnight.
- University of Michigan consumer sentiment was stronger than expected in October as it was revised up to 70.5 (prelim 68.9) for a small increase from 70.1 in September.
- Durable goods orders fared better than expected, with both headline and core orders beating expectations in the preliminary September release and a downward revision to Aug being confined to volatile items
- After a firmer start, Treasuries have retreated to lows for the week late Friday, no obvious headline or flow related driver with the Federal Reserve entering their self imposed media blackout regarding policy at midnight.
- The Dec'24 10Y contract is has fallen to 110-30.5 - matching the midweek low as it traded through 200-dma technical support of 111-04. The next significant support is at 110-13 (61.8% retracement of the Apr - Sep bull cycle (cont)). 10Y yield has climbed to 4.2419 +.0302. Curves modestly steeper: 2s10s +.639 at 13.520, 5s30s +.403 at 44.246.
- Current projected rate cuts into early 2025 look steady to mildly lower vs. late Thursday levels (*): Nov'24 cumulative steady at -23.6bp, Dec'24 -43.7bp (-42.9bp), Jan'25 -60.6bp (-60.1bp), Mar'25 -79.2bp (-81.0bp).
- Mixed data included better than expected Durable goods orders, with both headline and core orders beating expectations in the preliminary September release and a downward revision to Aug being confined to volatile items. Overall durable goods orders -0.8% M/M (cons -1.0%) after a downward revised -0.8% (initial 0.0%).
- U.Mich consumer sentiment was stronger than expected in October as it was revised up to 70.5 (prelim 68.9) for a small increase from 70.1 in September. Both current conditions and expectations were revised higher. 1Y inflation expectations: 2.7% (cons & prelim 2.9) in Oct after 2.7% in Sep, surprisingly remaining at what was the lowest since Dec 2020.
- Slow start to the week ahead, focus is on next Friday's October employment report.
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.01037 to 4.70730 (-0.05176/wk)
- 3M -0.01257 to 4.60464 (-0.02699/wk)
- 6M -0.01716 to 4.43072 (-0.01299/wk)
- 12M -0.02503 to 4.15290 (+0.02059/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.83% (+0.00), volume: $2.246T
- Broad General Collateral Rate (BGCR): 4.83% (+0.01), volume: $816B
- Tri-Party General Collateral Rate (TGCR): 4.83% (+0.01), volume: $785B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.83% (+0.00), volume: $98B
- Daily Overnight Bank Funding Rate: 4.83% (+0.00), volume: $264B
FED Reverse Repo Operation:
RRP usage rebounds to $227.000B from yesterday's new multi year low of $202.798B. This after usage fell to $237.760B Tuesday. Number of counterparties climb to 62 from 53 yesterday.
US SOFR/TREASURY OPTION SUMMARY
Desks reported moderate SOFR and Treasury option volumes Friday, SOFR put interest gradually increased as underlying futures reversed early gains to weaker after the bell. Current projected rate cuts into early 2025 look steady to mildly lower vs. late Thursday levels (*): Nov'24 cumulative steady at -23.6bp, Dec'24 -43.7bp (-42.9bp), Jan'25 -60.6bp (-60.1bp), Mar'25 -79.2bp (-81.0bp). Highlight trade includes:
SOFR Options:
+6,000 SFRX4 95.50/95.68 put spds 2x1 5.25 ref 95.63
+12,000 SFRZ4 95.06/95.31 put spds 0.75 ref 95.635
8,500 SFRG5 95.50/95.62/95.75 put flys ref 96.005
+6,000 0QZ4 9650/9687cs fut 9649 .25d +13.5/6K
+6,000 SFRX4 95.50/95.56/95.62 put trees 0.0 ref 95.625
+10,000 SFRG5 95.50/95.62/95.75 put flys 1.5 ref 95.985
Block, 3,000 SFRX4/SFRZ4 95.31/95.37 put spd strip, 1.0 total
8,100 2QZ4 96.25/2QH5 96.00 put spds
2,000 0QZ4 95.68/96.18 put spds vs. 3QZ4 95.37/96.12 put spds
Treasury Options: Reminder, November options expire today
12,000 wk1 TY 109.75/110.25 put spds ref 111-08 to -10.5 expire Nov 1
+50,000 Monday wkly 10Y 111.75 calls, 3 ref 111-10.5
3,000 FVZ4 106.5 puts
2,300 TYF5 111 puts, ref 111-16.5
over 14,000 TYZ4 109.5/111 put spds vs. 112.5 calls ref 111-09 to -09.5
7,000 wk1 TY 112 calls expire Nov 1
2,000 TYZ4 109.5/111 put spds vs. 113 calls ref 111-12.5
MNI FOREX: USD Index Advances 0.7% This Week as Presidential Election Looms
- The greenback is finishing the week on a firm footing, as late weakness for treasury futures on Friday gradually permeates through to a subdued session for currencies. Overall, the USD index looks set to post a 0.7% advance this week, as the latest greenback recovery continues to gather momentum ahead of a week filled with significant event risk.
- USDJPY has risen back towards session highs in sympathy, and the pair is consolidating a strong 1.8% rally on the week. The pair traded to a fresh cycle high on Wednesday, confirming a resumption of the current uptrend. Topside focus remains on 153.40, the 61.8% retracement of the downleg posted off the July 3rd high, and then 155.22, the Jul 30 high.
- Yen volatility is likely to remain the clear focus for currency markets as the primary driver for sentiment remains core yields. Next week’s busy calendar includes snap legislative elections in Japan, the BOJ decision and key growth & employment data prints in the US.
- Additionally, the UK budget will be announced, keeping high attention on GBP. Cable edged back towards 1.3000 before fading back towards 1.2970 into the close. While the GBPUSD move has been largely dollar driven, EURGBP’s close proximity to multi-year support at 0.8300 should keep sterling a must watch as fiscal developments unfold.
- The USDCAD trend outlook remains bullish, and the pair traded to a fresh short-term cycle high this week following the BOC’s well telegraphed 50bp cut. Spot has narrowed the gap to 1.3946, the Aug 5 high and the next key resistance, before the psychological 1.400 mark comes into play.
- In emerging markets, USDMXN had a late rally back towards 20.00 amid the greenback strength but also owing to a domestic senate vote renewed concerns surrounding the government’s reform trajectory. The peso is expected to remain vulnerable to risks surrounding the election and the year’s highs above 20.20 will remain a key level for the pair.
MNI US STOCKS: Late Equities Roundup: Paring Gains Ahead Wknd, Heavy Earnings Slate
- Stocks continue to scale off early Friday highs as accounts square up positions ahead of the weekend, not to mention a heavy slate of corporate earnings next week.
- Over half of the companies in the S&P have yet to report earnings this cycle, some names expected next Monday include: Arbor Realty Trust, CenterPoint Energy, ON Semiconductor, Ford Motor Co, Waste Management, Crane Co, Cadence Design System, Welltower, Trex and SBA Communications.
- Currently, the DJIA is down 216.12 points (-0.51%) at 42155.87, S&P E-Minis up 4 points (0.07%) at 5853, Nasdaq up 135.8 points (0.7%) at 18550.74.
- Little has changed since the first half as Information Technology, Communication Services and Consumer Discretionary sectors led gainers while Financials and Utility sectors continued to underperform. Western Digital +5.32% after topping quarterly profit estimates on strong cloud computing demand, Enphase +2.33% while Intel gained 2%. Of note, Itel announced plans to invest some $28B in two chip factories in Ohio.
- Interactive media and entertainment shares supported the Communication Services sector: Warner Bros +1.06%, Meta +1.24%. Consumer Discretionary sector shares saw the widest variance: clothing maker Tapestry +12.98%, Deckers Outdoor +10.52%, while Mohawk lost 12.64% after missing estimates late Thursday.
- Meanwhile, Financials and Utility sectors continued to underperform, financial services and insurance names weighing on the former: Principal Financial Grp -7.35%, Hartford -6.78%, while Aflac traded -2.41%. Gas and multi-energy companies weighed on the Utility sector: Consolidated Edison -2.01%, DTE Energy -2.14%.
MNI EQUITY TECHS: E-MINI S&P: (Z4) Remains Above The 20-Day EMA
- RES 4: 6012.75 1.00 projection of the Aug 5 - Sep 3 - 6 price swing
- RES 3: 6000.00 Psychological handle
- RES 2: 5961.00 1.00 projection of the Sep 6 - 17 - 18 price swing
- RES 1: 5927.25 High Oct 17 and the bull trigger
- PRICE: 5879.00 @ 14:35 BST Oct 25
- SUP 1: 5801.00/5749.80 Low Oct 23 / 50-day EMA
- SUP 2: 5724.00 Low Oct 2
- SUP 3: 5675.25 Low Sep 18
- SUP 4: 5658.00 Low Sep 13
S&P E-Minis traded lower Wednesday and the contract remains below its recent highs. Short-term weakness is considered corrective and the uptrend remains intact. Price has traded through the 20-day EMA, at 5833.22, but is - for now - trading above this EMA. A clear break of this average would open 5749.80, the 50-day EMA. A stronger resumption of gains would refocus attention on 5961.00, a Fibonacci projection.
COMMODITIES
MNI OIL: Oil End of Day Summary: WTI Jumps in US Hours
WTI has gained ground today, reversing yesterday’s losses, having found support from news that the US army is sending reinforcements to the Middle East, possible preparations for an Israeli attack on Iran. This could risk escalation which impacts 20% of global oil flows through the Straits of Hormuz.
- WTI DEC 24 up 2.4% at 71.89$/bbl
- US Central Command (CENTCOM), responsible for US military operations in the Middle East, has confirmed that F-16 fighter jets from the Spangdahlem Air Base in Germany have arrived in its area of operations.
- Baker Hughes oil rig count: 480 (-2) -down 24 rigs, or 4.8% on the year.
- The first two-thirds of October show a spike in Saudi Arabia’s crude/condensate exports, according to Vortexa.
- Indian oil company HPCL says the discount on Russian oil has declined significantly but is still cheaper than alternatives.
- A growing number of tankers involved in Iran and Venezuela’s illicit oil trade appear to be swapping their cargoes off WAF, according to Platts.
- The Central Bank of Russia forecasts the average price of Brent crude for 2024 at $80/b, down from $85/b.
- Black Sea CPC exports via the CPC pipeline are set to rise 33% to 1.42m b/d in November.
- OPEC+ needs to decide over the next 10-12 days whether it goes ahead with a production increase currently planned for December Bloomberg analyst Javier Blas says via X.
- OPEC and its allies aren't expected to start raising oil output until 3Q 2025 due to continued market weakness according to BNP Paribas's Aldo Spanjer.
- Venezuela is exploring new energy projects with India, VP and Oil Minister Delcy Rodriguez said, cited by Bloomberg.
MONDAY DATA CALENDAR
| Date | ET | Impact | Period | Release | Prior | Consensus | |
| 28/10/2024 | 1030 | ** | Oct | Dallas Fed manufacturing index | -- | -- | |
| 28/10/2024 | 1130 | * | 01-Nov | Bid to Cover Ratio | -- | -- | |
| 28/10/2024 | 1130 | * | Oct | Bid to Cover Ratio | -- | -- | |
| 28/10/2024 | 1300 | * | Oct | Bid to Cover Ratio | -- | -- | |
| 28/10/2024 | 1300 | * | 01-Nov | Bid to Cover Ratio | -- | -- |