HIGHLIGHTS
- Treasuries holding firmer after the close, inside 10D range heading into Tuesday's year end.
- Mixed data, Chicago PMI lowest since May'24 at 36.9; Pending Home Sales jumped to 2.2% vs. 0.8% est; Dallas Fed Mfg 3.4 vs. -3.0 est.
- Cash Tsy close at 1400ET Tuesday for New Years Eve, FI futures, stocks regular close.
Early FI close on Jan 9 to honor passing of President Carter, stocks closed.
- Treasuries look to finish near the top end of the range Monday after marking session highs following much weaker than expected Chicago PMI data. Chicago Business Barometer™, produced with MNI slipped 3.3 points to 36.9 in December. This is the third consecutive monthly decline, with the index at its lowest since May 2024, and below the 2024 average.
- Higher than expected pending new home sales (2.2% vs. 0.8% est) and a jump in Dallas Fed mfg index data (3.4 vs. -3.0 est) tempered Tsy support by midmorning with the Mar'25 10Y contract trading around 108-30 (+16) through the second half, 10Y yield -.0806 at 4.5447% after the bell.
- Despite the pull-back, Projected rate cuts into early 2025 gained momentum vs. this morning, levels (*) as follows: Jan'25 steady at -2.8bp, Mar'25 -14.6bp (-13.6bp), May'25 -20.6bp (-19.5bp), Jun'25 -30.3bp (-28.8bp).
- Tuesday data (prior, est) includes FHFA House Price Index MoM (0.7%, 0.4%) and S&P CoreLogic CS 20-City MoM SA (0.18%, 0.20%) at 0900ET, Dallas Fed Services Activity (9.8, --) at 1030ET.
- Reminder for Tuesday's session: Rate futures have full session (1600ET close) while cash Tsys close at 1400ET.
MNI US: CME Early Close for January 9 Day of Mourning to Honor Pres Carter Passing
- While the NYSE Group markets will close in observance of the National Day of Mourning for President Carter (New York Stock Exchange, NYSE American Equities, NYSE American Options, NYSE Arca Equities, NYSE Arca Options, NYSE Chicago and NYSE National), the CME Group has opted for early close, link HERE
- FI open outcry will close at 1300ET, GLOBEX shortly after at 1315ET.
- More to follow, but economic data expected that day is likely to proceed as normal (weekly jobless claims at 0930ET, Wholesale trade & inventories at 1000ET).
- Treasury auctions scheduled for January 9 remain uncertain (4- & 8W bills at 1130ET, 30Y bond re-open at 1300ET).
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.01997 to 4.33704 (+0.02047 total last wk)
- 3M -0.01834 to 4.31044 (+0.00136 total last wk)
- 6M -0.02263 to 4.26230 (+0.00872 total last wk)
- 12M -0.03247 to 4.20684 (+0.01534 total last wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.46% (-0.07), volume: $2.275T
- Broad General Collateral Rate (BGCR): 4.45% (-0.05), volume: $840B
- Tri-Party General Collateral Rate (TGCR): 4.45% (-0.05), volume: $803B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $119B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $271B
FED Reverse Repo Operation
RRP usage recedes to $260.743B this afternoon from $268.739B last Friday. Compares to $98.356B on Friday, December 20 - the lowest level since mid-April 2021. The number of counterparties recedes to 57 from 63 prior.
US SOFR/TREASURY OPTION SUMMARY
Decent SOFR & Treasury option flow leaned towards low delta put structures Monday, fading the bounce in underlying futures to mid-December levels. Projected rate cuts into early 2025 gain momentum vs. this morning, levels (*) as follows: Jan'25 steady at -2.8bp, Mar'25 -14.6bp (-13.6bp), May'25 -20.6bp (-19.5bp), Jun'25 -30.3bp (-28.8bp).
SOFR Options
Update, over +18,000 SFRZ5 95.00 puts 8.0 vs. 96.065/0.10%
+2,500 SFRJ5/SFRM5 95.50/95.62/95.75 put fly strip, 5.25
+2,500 SFRF5 95.75 puts 1.25 vs. 95.805/.05%
Block, 15,000 SFRM5 96.125/96.62 call spds 4.5 over SFRM5 95.56 puts vs. 95.945/0.36%
+6,000 SFRZ5 95.00 puts, 8.0 vs. 96.065/0.10%
-3,000 2QG5 95.87/96.00/96.12 put trees 4.0, 2 legs over ref 96.025
over +34,200 0QM5 96.37/97.00 call spds 6.5 over 95.37/95.62 put spds ref 96.02
3,800 SFRK5 96.06/96.25 call spds ref 95.945
2,500 SFRF5 95.75/95.87/96.00/96.12 call condors ref 95.825
2,500 0QH5 95.62 puts ref 96.015
Treasury Options
-10,000 TYH5 109 straddles, 209-211 ref 108-30.5
1,000 TYG5 106/107 4x3 put spds ref 108-12
+10,000 wk2 TY 107/108 put spds, 8
+5,000 wk3 FV 106.75 calls 2 over FVG5 107 calls vs. 106-11/0.05%
1,200 FVH5 105/107.5 strangles ref 106-08
3,800 Wednesday wkly 30Y 113/113.5 put spds
1,200 TYG5 107/108.25 put spds ref 108-19
MNI BONDS: EGBs-GILTS CASH CLOSE: Year Winds Down With Modest Gains
European curves leaned modestly bull flatter Monday.
- Bunds and Gilts gained fairly steadily throughout the session, regaining ground from Friday's sell-off.
- There was no clear upside driver in the morning session, though gains ramped up in the afternoon as equities fell and the USD gained in an apparent risk-off move, while US MNI Chicago PMI came in below-expected.
- Spanish flash December inflation came in above-expected (core 2.6% Y/Y vs 2.4% survey), but there was little market reaction with the main national readings not released until next week.
- ECB's Stournaras eyed gradual rate cuts but that bigger reductions "shouldn't be ruled out" if inflation cooperates.
- Periphery EGB spreads widened by a little under 1bp as equities fell. French OATs underperformed peers, with 10Y spreads widening 2bp.
- As per usual on New Year's Eve, Tuesday's schedule is light, with Irish flash inflation the main scheduled highlight, and widespread market closures in Europe until Thursday.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 1.8bps at 2.082%, 5-Yr is down 3.6bps at 2.154%, 10-Yr is down 2.9bps at 2.367%, and 30-Yr is down 3bps at 2.597%.
- UK: The 2-Yr yield is down 1.2bps at 4.453%, 5-Yr is down 1.3bps at 4.394%, 10-Yr is down 2.2bps at 4.611%, and 30-Yr is down 0.9bps at 5.173%.
- Italian BTP spread up 0.8bps at 115.5bps / French OAT up 2.1bps at 83.3bps
MNI FOREX: EURJPY Sells Off Sharply on Lower Equities and Yields
- Lower US yields initially contributed to a lower greenback on Monday, with the likes of EURUSD and GBPUSD trading with a strong bid across the European morning. However, sharp weakness for equities abruptly altered the sentiment in currency markets, with the dollar paring losses and the Japanese yen then notably outperforming.
- This was best evidenced by the significant weakness for EURJPY (-0.80%), which fell around 200 pips from session highs to print a low of 162.82. Initial firm support for the cross lies at 162.34, the 20-day EMA and for now, the pullback is considered technically corrective with potential month/year end flow dynamics potentially contributing.
- For EURUSD, a session low of 1.0372 keeps bearish conditions firmly in play. The trend condition continues to highlight scope for a test of key support at 1.0335, the Nov 22 low and a bear trigger.
- The Swiss Franc was less interested by today’s moves across equity/bond markets, and notably USDCHF rose to fresh post-election highs of 0.9074, also representing the highest level for the pair since May. Above here, the year’s best level at 0.9224 remains the most obvious target should the trend continue.
- In emerging markets, USDMXN stands out having risen 1.5% to trade at a one-month high. Resistance to watch remains at 20.8313, the Nov 26 high, and a breach of this hurdle would confirm a resumption of the uptrend. In contrast, the Brazilian real trades higher on the session, with the central bank stepping in once more, auctioning 1.8 billion in the spot market to curtail the BRL weakness.
MNI FX OPTIONS: Expiries for Dec31 NY cut 1000ET (Source DTCC)
EUR/USD: $1.0525(E525mln)
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Larger FX Option Pipeline
EUR/USD: Jan02 $1.0400(E1.5bln), $1.0500(E1.2bln)
USD/JPY: Jan02 Y154.30($2.1bln)
AUD/USD: Jan02 $0.6400-20(A$1.1bln)
USD/CAD: Jan02 C$1.3905($1.2bln); Jan03 C$1.4220($1.5bln)
USD/CNY: Jan02 Cny7.0800($1.7bln)
MNI US STOCKS: Late Equities Roundup: Still Weaker But Well Off Lows
- Stocks remain weaker but are trading well off early session lows in late Monday trade - stocks have been gradually paring losses since this mornings better than expected pending home sales (2.2% vs. 0.8% est) and Dallas Fed Mfg (3.4 vs. -3.0 est) data.
- Currently, the DJIA trades down 337.49 points (-0.79%) at 42655.64, S&P E-Minis down 54 points (-0.9%) at 5973, Nasdaq down 165.6 points (-0.8%) at 19557.58.
- Consumer Discretionary and Materials sectors continued to underperform in late trade, auto-related shares weighing on the former: Tractor Supply -2.79%, Tesla -1.98%, LKQ Inc -1.79% and O'Reilly Automotive -1.48%. Metals and mining shares weighed on the Materials sector: Albemarle -2.10%, Newmont Corp and Freeport-McMoRan both -1.5%, FMC Corp -1.49%.
- On the positive side, the Energy sector continued to outperform while Information Technology sector shares gained momentum. Oil $ gas stocks buoyed the Energy sector as crude prices inched higher (WTI +0.33 at 70.95): EQT Corp +5.05%, Coterra Energy +4.22%, Devon Energy +2.76%.
- Meanwhile, semiconductor stocks buoyed the IT sector with Nvidia +1.68%, VeriSign +0.51% while Autodesk and Adobe both gained 0.05%.
- Reminder, 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) Support Remains Exposed
- RES 4: 6194.19 1.236 proj of the Aug 5 - Sep 3 - Sep 9 price swing
- RES 3: 6178.75 High Dec 6 and key resistance
- RES 2: 6163.75 High Dec 16
- RES 1: 6107.50 High Dec 26
- PRICE: 6008.25 @ 07:24 GMT Dec 30
- SUP 1: 5965.00/5866.00 Low Dec 23 / 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 bear threat in the S&P E-Minis contract remains present and Friday’s move lower highlights the end of the recent Dec 20 - 26 corrective bounce. An extension lower would expose 5866.00, the Dec 20 low and a key short-term support. Clearance of this level would strengthen a bearish theme. Initial firm resistance to monitor is 6107.50, the Dec 26 high. A break of this level is required to expose key resistance at 6178.75, the Dec 6 high.
TUESDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 31/12/2024 | 1355/0855 | ** |  US | Redbook Retail Sales Index |
| 31/12/2024 | 1400/0900 | ** | US | S&P Case-Shiller Home Price Index |
| 31/12/2024 | 1400/0900 | ** | US | FHFA Home Price Index |
| 31/12/2024 | 1400/0900 | ** | US | FHFA Home Price Index |
| 31/12/2024 | 1500/1000 | *** | US | Conference Board Consumer Confidence |
| 31/12/2024 | 1530/1030 | ** | US | Dallas Fed Services Survey |