HIGHLIGHTS
- Treasuries look to finish Thursday's session firmer but off early highs after mixed morning data: lower than expected weekly & continuing jobless claims, lower GDP, higher than expected Personal consumption.
- Treasuries gained renewed support after weaker than expected New Home sales.
- The ECB cut its key interest rate by 25 basis points to 2.75% earlier Thursday and said inflation should return sustainably to target this year, with the language in the statement barely changed from December.
- Focus turns to the Fed coming out of media Blackout and next week's key CPI & PPI inflation metrics ahead of the headline Employment data for January next week Friday.
MNI US TSYS: ECB Cut Underpins Treasuries, Mixed Data Tempered Gains
- Treasuries are close to the middle of a higher session range after the bell (TYH5 +8.5 at 109-07), off highs following this morning's mixed data, while gaining support after the ECB cut rates by 25bp to 2.75% earlier adding inflation should return sustainably to target this year, with the language in the statement barely changed from December.
- Initial claims in the Jan 25 week fell 16k to a 3-week low of 207k, defying forecasts of a 2k rise to 225k. This was the largest drop in SA initial claims in 6 weeks, and largely reverses the previous two weeks' uptick.
- Q4 GDP growth missed expectations at 2.3% Q/Q annualized (vs 2.6% survey, 3.1% prior, though exactly in line with yesterday's Atlanta Fed GDP Nowcast), the weakest in 3 quarters, with the headline PCE price deflator was on the soft side (2.2% vs 2.5% expected).
- Pending sales dropped 5.5%, vs 1.6% prior (downward rev from 2.2%) and expecfations of flat growth, marking the first drop after 4 consecutive increases.
- There was little reaction in EURUSD as the information hit the wires, however, short-term positioning and softer-than-expected US GDP data, prompted a firm bounce for the pair in early US hours. BBG US$ index receded 3.31 to 1298.81 after the bell.
- Focus turns to the Fed coming out of media Blackout and next week's key CPI & PPI inflation metrics ahead of the headline Employment data for January next week Friday.
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M +0.00127 to 4.31159 (-0.00382/wk)
- 3M +0.00386 to 4.29075 (-0.00909/wk)
- 6M +0.00719 to 4.23682 (-0.02224/wk)
- 12M +0.01158 to 4.15062 (-0.04828/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.35% (+0.00), volume: $2.323T
- Broad General Collateral Rate (BGCR): 4.33% (-0.01), volume: $897B
- Tri-Party General Collateral Rate (TCR): 4.33% (-0.01), volume: $859B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $92B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $274B
FED Reverse Repo Operation
RRP usage inches up to $125.965B this afternoon from $121.842B yesterday. Compares to Monday, January 27 usage of $92.863B - the lowest level since mid-April 2021. The number of counterparties rises to 45 from 35 prior.
US SOFR/TREASURY OPTION SUMMARY
Option desks reported better SOFR & Treasury option put flow on net Thursday, taking advantage of the higher underlying to buy cheaper downside insurance. Underlying futures are off early session highs - trading sideways since midday. Projected rate cuts through mid-2025 are steady to mildly lower vs. morning (*) levels as follows: Mar'25 at -4.2bp (-4.8bp), May'25 at -12.3bp (-12.9bp), Jun'25 at -24.2bp (-25.5), Jul'25 at -29.5bp (-30.5bp).
SOFR Options:
-6,000 SFRG5 95.68/95.81/95.93/96.00 put condors, 6.0 ref 95.755
+2,500 SFRH5 95.68/95.75/95.81 put trees 4.25 ref 95.76
+4,000 SFRM5 95.12/95.62 put spds 0.75 ref 95.92
Block, 5,000 SFRM5 95.12/95.62 put spds, .75 ref 95.92
+5,000 SFRJ5 95.62/95.68/95.75 put flys, 1.0 vs. 95.935/0.07
-5,000 0QZ5 95.75 puts, 26.0-26.5 vs. 96.10 to-.095/0.34%
+5,000 SFRU5 96.25/96.50 call spds, 5.0 ref 96.04
+5,000 SFRH5 95.68/95.75 2x1 put spds, 3.0 ref 95.755
+4,000 SFRG5 95.68/95.81/95.93/96.00 put condors, 0.75 ref 95.76
-5,000 SFRZ5 95.75/96.00/96.25/96.50 put condors, 6.5 ref 96.12
+4,000 SFRH5 95.68/95.75/95.81 call flys, 1.25 ref 95.75
Block/screen, over 13,000 SFRH5 95.75/96.00 call spds, 4.0 ref 95.76 to -.765
-5,000 SFRU5 96.25/96.62 call spds, 6.0 vs. 96.00/0.10%
Treasury Options:
4,000 FVH5 105.5/109.75/106.25 broken put trees ref 106-17.75
2,000 FVH5 105.5 puts, 5.5 ref 106-17.75, total volume over 12,500
2,500 FVH5 105.5/106.25 put spds, 14.5 ref 106-20.25
2,400 FVH5 107.5/108.5/109.5 call flys ref 106-18.5
+10,000 TYH5 107/108 put spds, 9.0 vs. 109-10/0.08%
4,900 FVH5 104.5/105.5 put spds ref 106-19.5 to -20
2,000 TYH5 107/107.5/108.5 broken put flys ref 109-06.5
10,000 TYH5 106/107 put spds ref 109-06.5 to -11
MNI BONDS: EGBs-GILTS CASH CLOSE: German Short End Leads Gains On ECB, Soft Data
EGBs and GIlts rallied Thursday after the ECB decision and soft Eurozone data.
- While the ECB 25bp cut didn't surprise, and there were few revelations in Lagarde's press conference, the German short end led gains as ECB cut pricing deepened (by 8bp for end-year to close to 78bp vs 70bp prior).
- Even before the ECB, bonds had been on the front foot, following an overnight recovery in US Treasuries from an initial drop on the Fed's slightly hawkish hold.
- Weak flash Q4 GDP prints in France, Germany, Italy and the Eurozone provided impetus to the European FI rally. Spanish inflation came in a little higher than expected on both a monthly and annual basis, though core CPI was a touch softer, with some indications of benign services prices developments.
- The German and UK curves both bull steepened. Periphery EGB / semi-core spreads closed slightly wider - OATs underperformed again on lingering French political risk concerns.
- Friday's scheduled highlight is inflation data from France and Germany. (MNI's Eurozone inflation preview is here).
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 7bps at 2.208%, 5-Yr is down 6.7bps at 2.315%, 10-Yr is down 6.4bps at 2.519%, and 30-Yr is down 4.5bps at 2.759%.
- UK: The 2-Yr yield is down 7.4bps at 4.256%, 5-Yr is down 7.1bps at 4.253%, 10-Yr is down 6.1bps at 4.56%, and 30-Yr is down 5.1bps at 5.125%.
- Italian BTP spread up 0.1bps at 108.1bps / French OAT up 0.6bps at 75.2bps
MNI OPTIONS: Upside Plays Continue Unabated Both Pre- And Post-ECB
Thursday's Europe rates/bond options flow included:
Pre-ECB decision:
- ERK5 97.8125/97.9375/98.0625c fly, bought for 2 in 4k.
- ERM5 98.00/98.12/98.25c fly, bought for 1.25 in 2.5k.
- ERM5 98.12/98.25cs, has been bought for half in 12k to bring the recent total to 127k
- ERZ5 97.75/97.87/98.00c fly, bought for 1.15 synth in 4k.
- SFIH5 95.75/95.90 call spread paper paid 1 on 6K.
Post-ECB decision:
- ERK5 97.75/97.87/98.00c fly bought for 2 in 7.5k.
- ERM5 97.8125/97.9375 cs, bought for 4.75 in 25k.
MNI FOREX: Euro Strength Post ECB Retraces, JPY Outperforms
- The ECB reduced its benchmark Deposit Rate by 25bps to 2.75% on Thursday as expected. This was its fourth consecutive cut, and the committee left the language in its statement unchanged, expressing confidence that inflation will converge towards its 2% target in 2025.
- There was little reaction in EURUSD as the information hit the wires, however, short-term positioning and softer-than-expected US GDP data, prompted a firm bounce for the pair in early US hours.
- EURUSD rallied from levels just above 1.0400 to a 1.0467 high, and price action gathered topside momentum as it broke a cluster of prior highs printed across the Tuesday and Wednesday sessions. With President Lagarde stating “it is premature in this point in time to discuss the point where we have to stop,” and stressing that decisions will be taken on a meeting-by-meeting basis, the Euro spent the remainder of Thursday trade steadily paring its initial advance. EURUSD is close to unchanged as we approach the APAC crossover.
- JPY is favoured across G10 for a second session, helping USDJPY consolidate a move back below its 50-day EMA. The moves follow a speech from the BoJ's deputy governor Himino, who stressed that real rates in Japan remain in negative territory despite a recent rate hike - meaning the BoJ has scope to continue to tighten policy should its economic outlook unfold inline with expectations. Price action raises the focus on key support below - crossing at 153.72 to coincide with the DeepSeek-inspired sell-off in US equities this week. This level also marks the 50% retracement for the upleg in the pair posted off December low - meaning a break below will open the next leg toward 152.55.
- Tokyo core CPI data highlights the overnight docket before German state level and French CPI cross in European hours. Elsewhere, Canada GDP and US Core PCE Price Index are expected, alongside the MNI Chicago Business Barometer.
MNI FX OPTIONS: Expiries for Jan31 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0375(E673mln), $1.0400-05(E2.7bln), $1.0450(E1.6bln), $1.0500(E1.6bln), $1.0520-30(E2.7bln)
- USD/JPY: Y155.00($1.2bln)
- GBP/USD: $1.2475(Gbp597mln)
- AUD/USD: $0.6200-20(A$1.3bln)
- USD/CAD: C$1.4400-20($1.6bln), C$1.4500($1.2bln)
MNI US STOCKS: Late Equities Roundup: Near Highs, Focus on Latest Earnings
- Stocks held firmer levels late Thursday, just off session highs as Real Estate and Utilities sectors remained supportive while software and services shares continued to weigh on tech-heavy Nasdaq.
- Focus on earnings after the close from Weyerhaeuser, Deckers Outdoor Corp, KLA Corp, Apple, ResMed, LPL Financial Holdings, Arthur J Gallagher, PPG Industries, Visa Inc, Intel Corp, United States Steel, Boot Barn Holdings and Baker Hughes Co.
- Currently, the DJIA trades up up 232.63 points (0.52%) at 44944.77, S&P E-Minis up 30.75 points (0.51%) at 6098.25,
Nasdaq up 39.9 points (0.2%) at 19672.44. - Utility and Real Estate sectors continued to lead gainers in late trade, independent power and electricity providers buoyed the Utility sector: Vistra rebounding +13.25% after suffering heavy losses earlier in the week (-28% at one point), Constellation Energy +5.77%, NRG Energy +4.38%.
- Investment trusts, particularly office and residential supported the Real Estate sector: after reporting strong post-pandemic leasing numbers BXP Inc gained 7.02%, Camden Property Trust and Mid-America Apartment Comm both +2.70, Equity Residential +2.48%.
- As noted above, software and services shares weighed on the Information Technology sector: ServiceNow Inc -12.62%, Microsoft -6.13%, Salesforce Inc -2.65%. Helping soften the sell-off, IBM surged 12.17%, Roper +5.17% while Oracle gained 5.29%.
MNI EQUITY TECHS: E-MINI S&P: (H5) Resistance Remains Exposed
- 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: 6095.25 @ 14:45 GMT Jan 30
- SUP 1: 6015.85 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 trading 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 Hits Record High, Silver Outperforms, WTI Rangebound
- Spot gold has risen to a fresh record high today, aided by continued haven demand and a weaker dollar, amid ongoing tariff uncertainty and softer-than-expected US GDP data.
- The yellow metal is currently up by 1.3% at $2,794/oz, having reached a high of $2,798.6 earlier in the session.
- A bull cycle in gold is in play, with sights on the $2,800 handle next, followed by $2,817.6, the 1.236 projection of the Nov 14 - Dec 12 - 19 price swing.
- Silver is outperforming again today, with the precious metal up by 2.4% at $31.6/oz, bringing the gold silver ratio down to 88.4, its lowest since Jan 17.
- For silver, the latest move higher suggests scope for a continuation near-term, with eyes on key resistance at $32.338, the Dec 12 high.
- Meanwhile, WTI has struggled for clear direction today. Support comes from the weaker USD, while speculation about the chances of tariffs on Canadian and Mexican oil imports into the US from Feb 1 is sparking uncertainty.
- WTI Mar 25 is 0.3% higher at $72.8/bbl.
- WTI remains lower on the week, marking an extension of the current corrective cycle. The 20-day EMA has been breached and attention turns to support around the 50-day EMA, at $72.26.
FRIDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 31/01/2025 | 0700/0800 | ** |  DE | Retail Sales |
| 31/01/2025 | 0730/0830 | ** |  CH | Retail Sales |
| 31/01/2025 | 0745/0845 | *** |  FR | HICP (p) |
| 31/01/2025 | 0745/0845 | ** | FR | PPI |
| 31/01/2025 | 0855/0955 | ** | DE | Unemployment |
| 31/01/2025 | 0900/1000 | *** | DE | North Rhine Westphalia CPI |
| 31/01/2025 | 0900/1000 | *** | DE | Bavaria CPI |
| 31/01/2025 | 0900/1000 | ** |  EU | ECB Consumer Expectations Survey |
| 31/01/2025 | 1000/1100 | ** |  IT | PPI |
| 31/01/2025 | 1300/1400 | *** | DE | HICP (p) |
| 31/01/2025 | 1330/0830 | *** |  CA | Gross Domestic Product by Industry |
| 31/01/2025 | 1330/0830 | *** |  US | Personal Income and Consumption |
| 31/01/2025 | 1330/0830 | *** | US | Employment Cost Index |
| 31/01/2025 | 1330/0830 | *** | CA | Gross Domestic Product by Industry |
| 31/01/2025 | 1330/0830 | US | Fed Governor Michelle Bowman | |
| 31/01/2025 | 1445/0945 | *** | US | MNI Chicago PMI |
| 31/01/2025 | 1600/1100 | CA | Finance Dept monthly Fiscal Monitor (expected) | |
| 31/01/2025 | 1800/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |