HIGHLIGHTS
- Treasuries look to finish Tuesday's shortened Christmas-eve session mildly higher after trading weaker through midmorning, 10Y yield climbing to 4.8160% high (late April highs).
- Treasuries bounced off lows after the 5Y Note auction stopped through for the second consecutive time, concerns over supply indigestion into the holidays quelled for the moment.
- Santa-rally saw major equity averages rebound as well, SPX Eminis nearing last week's pre-FOMC highs.
MNI US TSYS: Late Session Rebound, Post-Auction Short Sets Unwound
- Treasury futures look to finish Tuesday's shortened Christmas-eve session near session highs, TYH5 +2.5 at 107-17 vs. 108-19 high, after trading much of the session weaker. The 10Y contract had breached a couple levels of technical support on it's way down to 108-09.5 low, 10Y yield climbing to 4.8160% high last seen in late May.
- Rates recovered soon after the $70B 5Y note auction (91282CMD0) stopped 0.2bp through (second consecutive stop since June): drawing 4.478% high yield vs. 4.480% WI; 2.40x bid-to-cover vs. 2.43x for the prior auction.
- The bounce helped projected rate cuts into early 2025 look steady to slightly higher vs. this morning (*) as follows: Jan'25 steady at -2.1bp, Mar'25 at -12.6bp (-11.7bp), May'25 -17.2bp (-16.7bp), Jun'25 -24.6bp (-23.1bp).
- No substantive reaction to regional Fed data:
- -6.0 reading for December's Philadelphia Fed's Nonmanufacturing current regional activity index (-2.4 expected) represented a steady outturn from -5.9 prior, and suggested a regional services sector that remained "weak", per the report.
- Richmond Fed's regional manufacturing survey index came in in at -10 as expected in December, the best reading since June (-14 prior). The shipments and employment subindices were flat, but new orders saw a solid improvement to -11 from -19 prior.
- Markets closed for Christmas holiday Wednesday, Globex pre-open Wednesday evening at 1700ET/re-open at 1800ET. Full sessions Thursday & Friday.
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.00096 to 4.33778 (+0.00124/wk)
- 3M +0.00072 to 4.32666 (-0.00076/wk)
- 6M +0.01308 to 4.28467 (+0.00846/wk)
- 12M +0.03016 to 4.24104 (+0.01707/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.31% (+0.01), volume: $2.337T
- Broad General Collateral Rate (BGCR): 4.29% (+0.01), volume: $846B
- Tri-Party General Collateral Rate (TGCR): 4.29% (+0.01), volume: $815B
- (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: $282B
FED Reverse Repo Operation
RRP usage climbs to $180.989B this afternoon from $116.004B yesterday. Compares to $98.356B last Friday - the lowest level since mid-April 2021. The number of counterparties climbs to 52 from 47 prior.
US SOFR/TREASURY OPTION SUMMARY
SOFR & Treasury option flow turned bullish, albeit on light pre-holiday volumes, well before the post-auction rebound in rates. Call buyers and put unwinds reported as underlying futures trade back to overnight levels, 10Y yield at 4.7578% after climbing to late April levels at 4.8160% this morning. Curves mildly steeper with short end rates outperforming (2s10s now at 25.174 vs. 23.991 low), while projected rate cuts into early 2025 look steady to slightly higher vs. this morning (*) as follows: Jan'25 steady at -2.1bp, Mar'25 at -12.6bp (-11.7bp), May'25 -17.2bp (-16.7bp), Jun'25 -24.6bp (-23.1bp).
SOFR Options:
+10,000 0QZ5 96.25/96.75/97.25/97.75 call condors 4.25 over SFRZ5 96.50/97.00/97.50/98.00 call condors
+2,000 0QF5 96.25/96.31 call spds, 0.5 ref 95.925/0.05%
+2,000 SFRM5/SFRU5 97.00 call spds 4.25
+1,000 3QF5 96.00 straddle 21.5 ref 95.925
3,100 SFRF5 95.56/95.62/95.68 put flys
Treasury Options:
-5,000 TYF5 108/108.5 put strip, 23
3,400 TYF5 107.75/108 put spds, 2 ref 108-11
4,000 FVF5 106.25/106.5 call spds, 1 ref 105-31.5
2,500 TYH5 106/111 strangles, 38 ref 108-10
6,000 TYF5 108.5/108.75/109/109.25 call condors
Block, 6,000 TYF5 108.5 puts, 13 ref 108-15, 8,200 total, 11 last
26,000 TYG5 107.5/108.5 put spds, 24 ref 108-16.5
1,700 USF5 112 puts, 2 ref 113-18
MNI US STOCKS: Late Equities Roundup: Santa Rally Support
- Stocks continued to pull higher Tuesday, brief program selling tempered price action before climbing higher again before the early close ahead of the midweek Christmas holiday, Consumer Discretionary and Information Technology sectors outperforming.
- Currently, the DJIA trades up 299.2 points (0.7%) at 43206.37, S&P E-Minis up 50.75 points (0.84%) at 6086.75, Nasdaq up 206.8 points (1%) at 19971.56.
- Autos and broadline retailers buoyed the Consumer Discretionary sector in the first half: Tesla +5.12%, General Motors +1.71%, Amazon +1.5%, AutoZone +1.29%. Semiconductor stocks continued to support the IT sector for the second day running: Super Micro Computer +5.49%, Broadcom +2.87%, Palantir Technology +1.74%, ON Semiconductor +1.25%.
- On the flipside, Health Care and Utility sectors underperformed ahead the early close, pharmaceutical shares weighing on the former: Viatris -0.80%, Regeneron Pharmaceuticals -0.58%, Biogen -0.56% and Bristol-Myers Squibb -0.46%. Gas and Electricity providers weighed on the Utility sector: American Water Works -0.70%, AES Corp -0.57%, Consolidated Edison -0.41%.
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: 6064.86 20-day EMA
- RES 1: 6050.75 High Dec 20
- PRICE: 6036.75 @ 06:56 GMT Dec 24
- 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.
MNI COMMODITIES: Crude Climbs, Gold Steady, Copper Edges Higher
- Oil has climbed further today in a thin pre-holiday trading session. Front month remains around the middle of its December range, supported by more positive factors out of the US.
- WTI Feb 25 is up by 1.6% at $70.3/bbl.
- The Biden Administration is looking to tighten sanctions on Russia as a parting blow to Putin, the Washington Post reports.
- For WTI futures, a bearish threat remains present and recent gains are, for now, considered corrective. A resumption of the bear cycle would open $65.57, the Oct 1 low. Initial firm resistance to watch is unchanged at $71.97, the Nov 7 high.
- Meanwhile, spot gold has remained broadly unchanged today, with the yellow metal edging up by 0.2% to $2,617/oz.
- For gold, a resumption of weakness would signal scope for an extension towards the key support at $2,536.9, the Nov 14 low.
- However, moving average studies are in a bull mode position highlighting a medium-term uptrend. Initial pivot resistance is $2,637.6, the 20-day EMA. A breach of this EMA would be positive for bulls.
- Copper has risen by 0.6% to $411/lb, although the red metal remains near the bottom of its recent range.
- Bloomberg reports that speculators have cut their net LME copper bets to an 11-month low.
- A bearish trend condition in copper futures is intact, with attention on $401.35, the Aug 7 low and a bear trigger.
WEDNESDAY/THURSDAY DATA CALENDAR
| Date | ET | Impact | Period | Release | Prior | Consensus | |
| 26/12/2024 | 0830 | *** | 21-Dec | Continuing Claims | 1874 | -- | (k) |
| 26/12/2024 | 0830 | *** | 21-Dec | Initial Jobless Claims | 220 | 223 | (k) |
| 26/12/2024 | 0830 | *** | 21-Dec | Prev Continuing Claims, Rev | -- | -- | (k) |
| 26/12/2024 | 0830 | *** | 21-Dec | Prev Initial Jobless Claims, Rev | -- | -- | (k) |
| 26/12/2024 | 1100 | ** | 20-Dec | Crude Oil Stocks ex. SPR w/w | -- | -- | bbl (m) |
| 26/12/2024 | 1100 | ** | 20-Dec | Distillate Stocks w/w change | -- | -- | bbl (m) |
| 26/12/2024 | 1100 | ** | 20-Dec | Gasoline Stocks w/w change | -- | -- | bbl (m) |
| 26/12/2024 | 1300 | ** | Dec | Bid to Cover Ratio | -- | -- |