MNI ASIA MARKETS ANALYSIS:US Back From Holiday, Decent 2Y Sale

2024 Projected Rate Cuts Moderate Slightly

• Tsys hold firm, inside relatively narrow session range by Tuesday's close. March'24 10Y futures (TYH4) currently +2 at 112-21 vs. 112-24 intraday high on very light volume (TYH4 350k) with European exchanges closed for Boxing Day holiday. Initial technical resistance above at 113-04.5 (Dec 21 high), followed by 113-12+, a Fibonacci projection point. Key short-term support is at 109-31+, the Dec 11 low. Initial firm support is at 111-09+, the Dec 7 high.
• Limited reaction, if any after FHFA House Price Index comes in weaker than expected at +0.3% (+0.5% est), S&P CoreLogic CS mildly stronger than expected for MoM (0.64% vs. 0.60% est; YoY 4.87% vs. 4.85% est.).
• Tsy futures bounce (TYH4 +2 at 112-21, FVH4 steady) after the $57B 2Y note auction (91282CJS1) trades through: 4.314% high yield vs. 4.320% WI; 2.68x bid-to-cover vs. 2.54x prior.
• Indirect take-up climbed back to 61.85% vs. 57.38% prior (5-auction average of 65.2%), directs took 19.51% vs. 23.86% last month (20.05% 5-auction average), primary dealer take-up 18.63%
• Projected rate cuts for early 2024 holding steady to mildly softer vs. Friday with short end futures weaker: January 2024 cumulative -3.8bp at 5.290%, March 2024 chance of rate cut -81.4% vs. -90.1% late Friday w/ cumulative of -24.1bp at 5.087%, May 2024 pricing in a full 25bp cut with cumulative -49.8bp at 4.829%, June'24 cumulative -75.8bp at 4.570%. Fed terminal at 5.325% in Jan'24.
• Wednesday Data Calendar: Richmond, Dallas Fed Data; 2Y FRN and 5Y Note Sales

FIXES AND PRIOR SESSION REFERENCE RATES

SOFR Benchmark Settlements:

• 1M +0.00158 to 5.35694 (-0.00039 total last wk)
• 3M -0.00320 to 5.34791 (-0.01288 total last wk)
• 6M -0.01052 to 5.17674 (-0.03260 total last wk)
• 12M -0.02256 to 4.77613 (-0.05926 total last wk)

• Secured Overnight Financing Rate (SOFR): 5.32% (+0.01), volume: $1.667T
• Broad General Collateral Rate (BGCR): 5.30% (+0.00), volume: $631B
• Tri-Party General Collateral Rate (TGCR): 5.30% (+0.00), volume: $620B
• (rate, volume levels reflect prior session)

• Daily Effective Fed Funds Rate: 5.33% (+0.00), volume: $90B
• Daily Overnight Bank Funding Rate: 5.32% (+0.00), volume: $234B

RRP USAGE

• RRP usage rebounds to $793.937B from $772.285B in the prior session, compares December 15 when usage fell to the lowest level since mid-June 2021: $683.254B.
• The number of counterparties inched up to 86 from 85 in the prior session.

SOFR/TREASURY OPTION SUMMARY

SOFR Options:
+4,000 SFRM4 97.00/98.37 call spds, 3.25
+2,000 SFRF4 94.87/95.06/95.25 call flys, 7.0
+2,500 SFRH4 95.12/95.43/95.75 call trees, 0.25

Treasury Options:
+3,000 wk5 US 122.5/125 call over risk reversals, 6-11 (expire Friday)

EGBS

European markets closed for Boxing Day holiday.

FOREX

• EURUSD up 0.0035 (0.32%) at 1.1044
• USDJPY up 0.09 (0.06%) at 142.46

Late Equities Roundup: Extending Highs, Utilities Displace IT Shares

• Stocks gradually extending highs in late Monday trade, S&P eminis closing in on last Wednesday's high of 4830.75, Energy and Utility sectors outperforming. At the moment: DJIA trades up 178.79 points (0.48%) at 37565, S&P E-Mini futures up 20.25 points (0.42%) at 4826, Nasdaq up 78.1 points (0.5%) at 15071.66.
• Leading gainers: Energy and Utility sector shares, the latter outpacing Information Technology stocks in the second half. Equipment and services shares continue to support the Energy sector: Baker Hughes +1.96%, Schlumberger and Haliburton both +1.67%. Independent power stocks buoyed the Utility sector: Edison Int +3.01%, Constellation Energy +2.06%, NRG Energy +1.95%.
• Incidentally, semiconductor stocks still buoyed IT: Intel +4.78%, Monolithic Power +3.31%, AMD +2.27%, while shares of Apple continued to recede after ITC supports ban of Apple watch ban.
• Laggers: Communication Services and Health Care stocks led laggers in late trade, media and entertainment weighing on the former: Take Two -0.32%, Electronic Arts -0.26%, Comcast -0.15%. Pharmaceutical and biotech shares weighing on the former: Bristol-Myers Squibb -1.53% after announcing $4.1B to purchase radiopharmaceutical therapeutics company RayzeBio (RYZB) earlier in the day.

E-MINI S&P TECHS: (H4) Trend Direction Remains Up

• RES 4: 4915.11 1.236 proj of Nov 10 - Dec 1 - 7 price swing
• RES 3: 4900.00 Round number resistance
• RES 2: 4854.75 1.00 proj of Nov 10 - Dec 1 - 7 price swing
• RES 1: 4830.75 High Dec 20
• PRICE: 4826.00 @ 1520 ET Dec 26
• SUP 1: 4743.25 Low Dec 20
• SUP 2: 4692.70 20-day EMA
• SUP 3: 4594.00 Low Nov 30
• SUP 4: 4591.56 50-day EMA

A bullish theme in S&P e-minis remains intact and Wednesday’s abrupt sell-off appears to be a correction. This week’s fresh trend highs, confirm once again a resumption of the uptrend that started Oct 27. The contract has recently cleared resistance at 4738.50, the Jul 27 high, reinforcing current positive trend conditions. Sights are on 4854.75 next, a Fibonacci projection. On the downside, initial firm support lies at 4692.70, the 20-day EMA.

COMMODITIES

• WTI Crude Oil (front-month) up $1.9 (2.58%) at $75.47
• Gold is up $10.74 (0.52%) at $2061.95

WEDNESDAY DATA CALENDAR

• US Data/Speaker Calendar (prior, estimate)
• Dec-27 1000 Richmond Fed Mfg Index (-5, --)
• Dec-27 1000 Richmond Fed Business Conditions (-9, --)
• Dec-27 1030 Dallas Fed Services Activity (-11.6, --)
• Dec-27 1130 US Tsy 17W Bill and $70B 42D CMB Bill auctions
• Dec-27 1300 US Tsy $26B 2Y FRN Note and $58B 5Y Note auctions