HIGHLIGHTS
- Treasuries gapped off weaker levels after strong $44B 7Y note auction stopped 2.2bp through, Indirect take-up climbed to a new record high of 87.88% (71.28% 5M avg) vs. 64.08% last month -- the lowest since Dec'23.
- Limited reaction to steady/mixed weekly jobless claims came out slightly lower than expected (219k vs. 223k), continuing claims higher than expected (1.910M vs. 1.881M est) but tempered by down revision to prior read (1.864M from 1.874M).
- Curves reversed early steepening though projected rate cuts into early 2025 gained some ground vs. this morning's levels (*) as follows: Jan'25 -2.7bp (-2.1bp), Mar'25 at -13.1bp (-11.7bp), May'25 -17.0bp (-16.0bp), Jun'25 -25.3bp (-23.7bp).
MNI US TSYS: Near Late Session Highs, Post-Auction Sentiment Improved
- US markets returned from Christmas holiday to weaker stocks and rates Thursday, 10Y yield climbing to 4.6393% high ) early May levels in early trade. Lower volumes on the day with European markets still closed for the Christmas holiday.
- Limited data reaction: Initial jobless claims came out near steady in the Dec 21 week, coming in at 219k (220k prior, unrevised), thus coming in a little below the 223k expected. However, continuing claims (Dec 14 week) were more mixed: the 1,910k was above the 1,881k expected but this was offset by a 13k downward revision to prior (1,864k).
- Treasury futures gapped higher after the strong $44B 7Y note auction stopped 2.2bp through with high yield of 4.532% vs. 4.554% WI, indirect take-up surged to a new record high of 87.88% from 64.08 prior (this years low).
- The Mar'25 10Y contract climbed to 108-22 high (+4). Initial technical resistance still well above at 110-03.5 (20D EMA). Curves retreated from earlier steeper levels, currently mixed: 2s10s -0.583 at 24.425 (23.998 low vs. 27.611 high), 5s30s +1.662 at 32.778 (30.154 low / 33.404 high).
- Friday data calendar: Advance Goods Trade Balance (-$101.3B, -$98.3B prior rev), Wholesale Inventories MoM (0.2%, 0.1%) and Retail Inventories MoM (0.1%, 0.3%) at 0830ET.
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M +0.00686 to 4.34464 (+0.00810/wk)
- 3M -0.00200 to 4.32466 (-0.00276/wk)
- 6M -0.00258 to 4.28209 (+0.00588/wk)
- 12M -0.00078 to 4.24026 (+0.01629/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.40% (+0.09), volume: $2.282T
- Broad General Collateral Rate (BGCR): 4.39% (+0.10), volume: $858B
- Tri-Party General Collateral Rate (TGCR): 4.39% (+0.10), volume: $828B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $118B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $252B
FED Reverse Repo Operation
RRP usage climbs to $196.818B this afternoon from $180.989B Tuesday. Compares to $98.356B on Friday, December 20 - the lowest level since mid-April 2021. The number of counterparties climbs to 54 from 52 prior.
US SOFR/TREASURY OPTION SUMMARY
SOFR & Treasury option flow leaned toward upside calls Thursday as underlying futures bounced following a strong $44B 7Y note auction (2.2bp stop through to 4.532%. Tsy Mar'25 10Y contract trades 108-22 last (+4) vs. 108-06.5 low. Initial technical resistance well above at 110-03.5 (20D EMA). Tsy 10Y yield has retreated to 4.7600% after tapping 4.6293% high (+.0406), highest since late May. In turn, projected rate cuts into early 2025 look have gained some ground vs. this morning's levels (*) as follows: Jan'25 -2.7bp (-2.1bp), Mar'25 at -13.1bp (-11.7bp), May'25 -17.0bp (-16.0bp), Jun'25 -25.3bp (-23.7bp).
SOFR Options:
-1,500 SFRM5 95.87/SFRU5 95.93 straddle strip, 95.50 total cr
-4,000 2QG5 95.50/96.00 put spds, 16
-2,000 SFRM5 96.12/96.25 call strip 21.25 vs. 95.88/0.55%
+2,000 SFRM5 96.12 calls, 12 vs. 95.88/0.33%
+2,000 SFRM5 95.87 straddles, 37.5 ref 95.88
+5,000 SFRU5 95.25/95.75 1x2 put spds 6.25 ref 95.93
+15,000 0QZ4 97.00/98.00 call spds, 9.0 vs. 95.905/0.10%
+1,000 SFRH6 95.68/95.75/95.81/97.00 put condors, 0.75
-2,000 SFRG5/SFRH5 96.00 call strip 6.0 vs. 95.785/0.38%
Treasury Options:
over 5,000 TYF5 108.5/108.75 call spds ref 108-10.5 to -21.5
2,000 TYG5 110/111 call spds 11 ref 108-19
2,700 FVH5 109/110 call spds, 2 ref 105-29.5
2,000 TYG5 104 puts ref 108-09
+10,000 wk2 TY 107 puts, 10-11 vs. 108-05/0.08%
-5,000 USG5 108/112 put spds vs. wk2 US 108/112 put spds, 16 net
1,000 TYF5 108/108.25 2x1 put spds ref 108-08
2,100 TYH5 106.5/107 put spds ref 108-08
2,000 TYF5 108.25/108.75/109 broken call trees ref 108-09.5
2,500 FVF5 106/106.25/106.5 call flys ref 105-29.75
MNI US STOCKS: Late Equity Roundup: IT Shares Recover
- Major averages are drifting in mildly lower territory late Thursday after managing to trade slightly higher at midday as Information Technologysector shares bounced.
- Currently, the DJIA trades down 11.75 points (-0.03%) at 43285.2, S&P E-Minis down 6.5 points (-0.11%) at 6091.5, Nasdaq down 15.1 points (-0.1%) at 20016.18.
- Semiconductor makers rebounded in the second half after leading laggers earlier: Broadcom +2.52%, Teredyne +1.09%, Micron Technology +1.05% and Lam Research gaining 0.60%.
- Estate management shares, particularly industrial and office REITs continued to outperform in the second half: Prologis +2.24%, Essex Property +0.51%, UDR Inc +0.39%.
- On the flipside, The Consumer Discretionary and Energy sectors continued to underperform, autos and cruise lines weighed on the former: Tesla -2.01%, Royal Caribbean -0.95%, O'Reilly Automotive -0.80%.
- Meanwhile, oil and gas shares weighed on the Energy sector, partly tied to weaker crude prices (WTI -0.67 at 69.43): Targa Resources -1.55%, Williams Co's -1.47%, ONEOK Inc -0.98%.
- Looking ahead, the next round of quarterly earnings kicks off mid-January with Blackrock, Bank of NY Melon, Wells Fargo, JP Morgan, Goldman Sachs, Citigroup, US Bancorp, M&T Bank and PNC all reporting between January 13-16.
MNI EQUITY TECHS: E-MINI S&P: (H5) Resistance At The 20-Day EMA Is Intact For Now
- RES 4: 6178.75 High Dec 6 and key resistance
- RES 3: 6163.75 High Dec 16
- RES 2: 6106.25 High Dec 26
- RES 1: 6099.75 20-DMA
- PRICE: 6095.50 @ 1440 ET Dec 26
- SUP 1: 5866.00 Low Dec 20
- SUP 2: 5811.65 38.2% retracement of the Aug 5 - Dec 6 bull leg
- SUP 3: 5784.00 Low Nov 4
- SUP 4: 5698.25 50.0% retracement of the Aug 5 - Dec 6 bull leg
A sell-off in the S&P E-Minis contract on Dec 18 highlights a S/T top and a corrective cycle. The move down resulted in a breach of the 20- and 50-day EMAs. A resumption of weakness would open 5811.65, 38.2% of the Aug 5 - Dec 6 bull leg. Support at 5921.00, Nov 19 low, has been pierced. A clear break of it would strengthen a bearish threat. Initial resistance is 6064.86, the 20-day EMA. A clear break of the EMA would be a bullish development.
FRIDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 27/12/2024 | 1330/0830 | ** |  US | WASDE Weekly Import/Export |
| 27/12/2024 | 1330/0830 | ** | US | Advance Trade, Advance Business Inventories |
| 27/12/2024 | 1530/1030 | ** | US | Natural Gas Stocks |
| 27/12/2024 | 1600/1100 |  CA | Finance Dept monthly Fiscal Monitor (expected) |