HIGHLIGHTS
- Treasuries look to finish first day of 2025 steady to mixed after paring early session gains.
- Curves climbed off early flatter levels, 2s10s adding to the highest levels since May 2022.
- Despite the modest steepening, projected rate cuts into mid-2025 retreated on the day.
- Corporate debt issuance resumed with nearly $15B high grade debt issued, most since early December
- Treasuries look to finish the first session of 2025 near steady to mixed after retreating from early session highs, curves off early flatter levels: 2s10s at 32.321 vs. 29.794 low in the first half, 5s30s at 41.567 vs. 39.505 low.
- After the bell, the Mar'25 10Y contract trades +2.5 at 108-26, as technical trend conditions remain bearish despite the intraday rally earlier in the week w/ short-term gains considered corrective below the 110-03+ 20-day EMA. The contract has traded through key short-term support and the bear trigger at 109-02+, the Nov 15 low. The breach confirms a resumption of the downtrend and opens 108+12+, a Fibonacci projection.
- Limited reaction to data: Initial claims in the Dec 28 week fell to 211k from 220k, continuing claims, which had risen more sharply than expected in the previous week, pulled back in the Dec 21 week to a 13-week low 1,844k, from 1,896k. Final December S&P Global US manufacturing PMI reading showed less of a deterioration than implied by the flash estimate, coming in at 49.4 (49.7 prior, 48.3 prelim).
- Friday data: ISM mfg & prices paid at 1000ET. Fed speak: Richmond Fed Barkin, bankers assn address (text, Q&A) at 1100ET. On Saturday: SF Fed Daly & Fed Gov Kugler mon-pol panel event (no text, Q&A) at 1730ET.
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.00693 to 4.32556 (-0.02939/wk)
- 3M -0.00905 to 4.29605 (-0.03273/wk)
- 6M -0.01221 to 4.23780 (-0.04713/wk)
- 12M -0.01259 to 4.16241 (-0.07690/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.49% (+0.12), volume: $2.474T
- Broad General Collateral Rate (BGCR): 4.45% (+0.10), volume: $812B
- Tri-Party General Collateral Rate (TGCR): 4.45% (+0.10), volume: $778B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $53B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $111B
FED Reverse Repo Operation
RRP usage retreats to $239.858B this afternoon after surging to $473.460B on Tuesday's year end (highest level since June 28). Compares to $98.356B on Friday, December 20 - the lowest level since mid-April 2021. The number of counterparties retreats to 64 from 80 prior.
US SOFR/TREASURY OPTION SUMMARY
Two-way wing trade kept SOFR & Treasury volumes rolling Thursday, underlying futures steady to mixed, off early session highs. Projected rate cuts into early 2025 look steady to slightly higher vs. late Tuesday levels (*) as follows: Jan'25 steady at -2.8bp, Mar'25 -13.5bp (-14.6bp), May'25 -19.0bp (-21.3bp), Jun'25 -28.4bp (-30.8bp).
SOFR Options:
Block, +7,150 SFRZ5 97.00/98.00 call spds, 9.0 vs. 96.075/0.14%
Block, 10,000 SFRF5 95.75/95.87/96.00/96.12 call condors, 6.5 vs. 95.83/0.45%
+6,000 SFRZ5 96.12/96.50 3x2 put spds, 7.5
2,000 SFRG5 95.62/95.75 2x1 put spds ref 95.835
2,500 3QM5 95.50 puts ref 96.015
1,000 SFRJ5 95.75/95.87/96.00 put flys
1,000 SFRF5 95.75/95.81/95.88/95.93 put condors ref 95.84
Treasury Options:
+18,000 TYH5 106 puts, 14
Block: 7,500 TYH5 112 calls, 11 w/ 14,500 TYH5 106 puts, 14 ref 108-24
-35,000 TYG5 108/TYH5 106 put spds 8 vs. 108-27.5
Block: -35,000 TYG5 107.5 puts 11 w/ -11,600 TYG5 108.5 puts, 29 vs. +34,000 TYH5 106 puts 13 Covered vs. -16,000 TYH5 108-31.5
+5,000 USG5/USH5 110 put spds, 27 ref 114-03
-5,000 USG5/USH5 108 put spds, 15 ref 114-03
-8,000 USG5/USH5 122 call spds, 8 ref 114-03
+10,000 wk2 TY 108 puts, 8
2,000 TYG5 110/110.75 1x2 call spds ref 109-05
4,000 wk1 10Y 109/109.25 call spds, 4 ref 109-03.5
1,600 USG5 113 puts, 55 ref 114-02
2,000 Monday wkly 10Y 108.25/108.5 put spds ref 108-29.5
2,500 TYH5 112.5/114/115.5 call flys ref 108-29.5
MNI FOREX: Greenback Extends Rally, GBPUSD Slides Aggressively Below 1.25
- The US dollar continued its impressive rally to start 2025, with the ICE dollar index rising around 0.7% on Thursday. This took the index to the highest level in two years, above the 109 handle. News flow remained limited as markets remain in holiday mode, as the path of least resistance remains clearly tilted towards the upside for the greenback.
- The broad dollar strength prompted a couple of major pairs to break significant levels, most notably EURUSD sliding to a fresh cycle low. The move was kickstarted by the pair cleanly breaking support at the bear trigger of the Nov 22 low at 1.0335. The low print so far according to Bloomberg was 1.0226 in relatively thin trade, a level that matches closely with the 1.0223 low on Nov 21, 2022.
- As noted, today's price action keeps moving average studies in a bear-mode position, highlighting a dominant downtrend to begin the year. While there are small supports noted at 1.0198, and 1.0181 (the 2.0% 10-dma envelope), chart levels remain scant between here and parity.
- Underperforming on the session has been GBPUSD (-1.16%), which has plunged below the 1.24 handle, the lowest level for the pair since April. Below here, market participants will focus on the 2024 lows at 1.2300. Standing out is the 1.37% decline for GBPAUD, erasing the past two-week rally in short order. This cross has edged back below the psychological 2.00 mark and is now trading below its 20-day EMA for the first time since late November. Mid-December lows at 1.9799 provide the initial target for the move.
- In emerging markets, the Mexican peso is notably outperforming, with USDMXN tracking 0.85% lower on the session to 20.65. This further reverses the strong move higher earlier in the week, which saw the pair print a fresh cycle high above 20.90.
- US ISM Manufacturing PMI headlines the data docket on Friday.
MNI US STOCKS: Late Equities Roundup: Second Half Retreat, Autos Weighing
- Stocks have reversed first half gains, currently extending lows in late Thursday trade, Consumer Discretionary and Real Estate sectors continue to underperform. Currently, the DJIA trades down 251.26 points (-0.59%) at 42292.26, S&P E-Minis down 40 points (-0.67%) at 5894.75, Nasdaq down 117.7 points (-0.6%) at 19192.91.
- Consumer Discretionary and Real Estate sectors continued to lead laggers in late trade, autos weighing on the discretionary sector, namely Tesla -6.60% after failing to meet delivery expectations, while GM declined 3.92%, Ford -2.07%.
- Estate investment trusts, particularly residential and hotel REITs weighed on the Real Estate sector: Federal Realty -2.64%, Equity Residential -2.40%, Regency Centers -2.22%.
- On the positive side, Energy and Communication Services sectors continued to lead gainers, oil & gas stocks buoyed after crude prices surged (WTI +1.47 at 73.18): Texas Pacific Land Corp +4.88%, Devon Energy +1.74%, The Williams Cos +1.83%.
- Interactive media and entertainment stocks supported the Communication Services sector: Meta +1.16%, Charter Communications +0.95% while Fox Corp gained 0.55%.
MNI EQUITY TECHS: E-MINI S&P: (H5) Bear Threat
- 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: 6011.35/6107.50 50-day EMA / High Dec 26
- PRICE: 5967.75 @ 07:21 GMT Jan 2
- 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 bear threat in the S&P E-Minis contract remains present and the latest move down 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 open key resistance at 6178.75, the Dec 6 high.
MNI COMMODITIES: Crude Extends Rally, Precious Metals Gain
- Crude front month traded higher on the day, as US stock draws weigh against weaker Chinee economic data.
- WTI Feb 25 rose by 2.3% to $73.4/bbl.
- Concern for a potential surplus in 2025 is weighed against geopolitical risks with uncertainty over the impact of the Trump presidency on US and Iran output and on tariffs.
- For WTI futures, initial firm resistance at $71.97, the Nov 7 high, has been pierced. A clear breach of this level would refocus attention on key short-term resistance at $76.41, the Oct 8 high.
- Meanwhile, spot gold has risen by 1.2% to $2,655/oz, bringing the yellow metal to its highest level since Dec 17.
- Analysts at Kotak securities believe that sustained buying by central banks and geopolitical uncertainties will keep gold in focus as a preferred safe haven asset, despite the Fed’s cautious tone.
- Gold has now risen above initial pivot resistance at $2,637.5, the 50-day EMA, with sights on $2,664.5 next, the Dec 16 high.
- Silver is outperforming today, with the precious metal up by 1.8% at $29.4/oz, bringing the gold-silver ratio down from the 10-month high reached on Dec 31.
- However, silver remains below support at $29.642, the Nov 28 low, opening $28.446, a Fibonacci retracement. Key resistance has been defined at $32.338, the Dec 12 high.
FRIDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 03/01/2025 | 0700/0200 | * |  TR | Turkey CPI |
| 03/01/2025 | 0855/0955 | ** |  DE | Unemployment |
| 03/01/2025 | 0930/0930 | ** |  GB | BOE M4 |
| 03/01/2025 | 0930/0930 | ** | GB | BOE Lending to Individuals |
| 03/01/2025 | - | *** |  US | Domestic-Made Vehicle Sales |
| 03/01/2025 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 03/01/2025 | 1500/1000 | *** | US | ISM Manufacturing Index |
| 03/01/2025 | 1530/1030 | ** | US | Natural Gas Stocks |
| 03/01/2025 | 1600/1100 | US | Richmond Fed's Tom Barkin |