MNI (NEW YORK) - HIGHLIGHTS:
- Yield Curves Continue To Steepen After Fed, BOJ, BOE Decisions
- USD Gains Again As GBP's BoE Slide Only Outdone by JPY and BoJ Pressure
- Friday Sees First Post-Meeting Fed Speakers, US PCE Inflation, UK Retail Sales
US TSYS: Hawkish Fed Vs The World Sees Treasuries Twist Steepen
The Treasury curve twist steepened Thursday, as the implications of the Fed's apparent hawkish shift continued to be digested.
- Short-end Treasuries were an early focus, following dovish decisions overnight by the BOJ and BOE. At one point 2Y yields were 8bp below Wednesday's post-FOMC highs (they had risen 15bp on the decision), and they would held on to most of the steady declines made through Thursday's session.
- Data had little significant impact on market pricing: continuing and initial jobless claims, final GDP growth and Q3 core PCE prices were all on the stronger side of expectations, offset somewhat by a weak Philly Fed manufacturing index.
- Political developments arguably helped the curve steepen, with president elect Trump and his proxies discussing a government shutdown (growth negative) as well as a removal of the statutory debt limit (arguably putting focus on longer-end liabilities).
- Unusually, nominal Treasuries weakened after a 5Y TIPS auction - but this was one of the worst such sales in years, tailing by 7bp and resulting in the belly of the nominal coupon curve briefly underperforming.
- A large TYH5 block at 1349ET, 14.25k at 108-19+ (unconfirmed buyer) helped Treasury futures come off the lows, but that nascent rebound faded into the close.
- Curves finished steeper, with various segments at multi-year highs.
- Friday's schedule includes the November PCE report and the final December UMichigan survey, while we also get the first post-FOMC meeting commentary with SF's Daly and NY's Williams appearing in the morning.
- Latest levels: Mar 10-Yr futures (TY) down 13.5/32 at 108-19 (L: 108-16.5 / H: 109-0.5). The 2-Yr yield is down 3.6bps at 4.3186%, 5-Yr is up 2.7bps at 4.4301%, 10-Yr is up 5.8bps at 4.5722%, and 30-Yr is up 6.7bps at 4.7426%.
MNI POLITICAL RISK ANALYSIS - Political Event Calendar 2025
(MNI) London - In our Political Risk calendar for 2025 we include details on the major political events scheduled to take place in developed and emerging markets over the course of the next 12 months. We only include those events that have a set date or period in which they will take place.
The plethora of dates outlined in the table below, combined with unconfirmed but expected events; the incoming Trump administration’s imposition of tariffs impacting global trade and geopolitics; ongoing conflicts in Ukraine, the Middle East and elsewhere; continued political, economic, and resource competition between global powers; and the ever-present prospect of ‘black swan’ events will ensure that political risks continue to have a significant impact on financial, commodity and credit markets through 2025.
See PDF below for the full Calendar:
MNIPOLITICALRISK-PoliticalCalendar2025.pdf
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
US TSYS/OVERNIGHT REPO: SOFR Dips Below EFFR, Post-FOMC Adjustments Pending
Secured rates fell back significantly Wednesday, with SOFR down 5bp to 4.57%. That move comes alongside GSE inflows reverberating through funding markets, and marks the first time this month that SOFR has printed below effective Fed funds (4.58%).
- Rates will adjust lower in Thursday's prints after the Fed's 25bp funds rate cut and 30bp ON RRP cuts are implemented - SOFR should fall by 26-30bp, with limited impact seen from the ON RRP tweak to EFFR.
REPO REFERENCE RATES (rate, change from prev. day, volume):
* Secured Overnight Financing Rate (SOFR): 4.57%, -0.05%, $2291B
* Broad General Collateral Rate (BGCR): 4.56%, -0.03%, $847B
* Tri-Party General Collateral Rate (TGCR): 4.56%, -0.03%, $820B
New York Fed EFFR for prior session (rate, chg from prev day):
* Daily Effective Fed Funds Rate: 4.58%, no change, volume: $112B
* Daily Overnight Bank Funding Rate: 4.58%, no change, volume: $251B
SOFR FIX - Source BBG/CME
- 1M 4.35600 -0.01426
- 3M 4.33730 -0.01676
- 6M 4.28090 -0.00228
- 12M 4.21110 0.0186
BONDS: EGBs-GILTS CASH CLOSE: Gilts Outperform On BoE Vote Split
Long-end European bonds sold off sharply Thursday, with Gilts a notable outperformer after the BoE decision.
- Global yields rose in the aftermath of the Federal Reserve's hawkish rate outlook released late Wednesday.
- But short-end/medium-term Gilts bucked the trend in Thursday's trade, as the BoE MPC split 6-3 in favour of a rate hold versus a 25bp rate cut, which led to a dovish reaction given expectations for an 8-1 vote.
- Expectations for BoE rate cuts were duly pared, with around 17bp of cuts seen at the February meeting (was 13bp prior), with about 10bp added to implied easing through 2025 (around 60bp).
- That helped Gilts outperform Bunds, after a lengthy period of underperformance seeing UK/German spreads rise to 34-year wides (to 227bp vs from 231bp at Wednesday's close).
- The UK curve twist steepened, with Germany's bear steepening.
- Periphery and semi-core spreads were little changed, with GGBs and BTPs widening around 1-2bp vs 10Y Bunds.
- Friday's calendar includes UK retail sales.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 2bps at 2.048%, 5-Yr is up 4.2bps at 2.112%, 10-Yr is up 6.1bps at 2.306%, and 30-Yr is up 5.9bps at 2.534%.
- UK: The 2-Yr yield is down 3.9bps at 4.424%, 5-Yr is down 2.7bps at 4.367%, 10-Yr is up 2.1bps at 4.579%, and 30-Yr is up 5.1bps at 5.114%.
- Italian BTP spread up 1.1bps at 117bps / Greek up 1.3bps at 85.7bps
EUROPE OPTIONS: Familiar Sonia Structures Stand Out Thursday
Thursday's Europe rates/bonds option flow included:
- ERM5 98.12/98.50cs, sold at 7 in 10k.
- 0RH5 99.00/99.25cs, bought for half in 8k.
- SFIG5 95.60/95.65/95.70/95.85 broken c condor, bought for 0.75 in 6.5k. Was also bought Wednesday in over 16k.
- SFIH5 9540/95.45/95.55/95.60c condor, bought for 0.75 in 3k.
- SFIU5 96.00/96.10cs vs 95.50/95.40ps, bought for flat in 3k. This was also bought for half in 7k Wednesday.
FOREX: GBP's BoE Slide Only Outdone by JPY and BoJ Pressure
- GBP suffered into the close, slipping on the back of a dovish read from the BoE's December meeting. While rates were held unchanged - alongside expectations - markets were taken offguard by the 6-3 vote split among the committee, meaning the MPC doves were just two votes short of a majority, making for firmer pricing for the easing cycle across 2025. As a result, EUR/GBP bounced off a fresh cycle low as the relentless widening of the SFI - ER Z5 spread hit pause.
- USD/JPY extended the day's rally through the London close as the confluence of BoJ/Fed meetings gave the pair the best session of the year so far. The daily gains of near 300 pips are akin to the rally posted on April 26th, which was followed just the next day by official BoJ intervention to slow the decline of the JPY. That seems unlikely at this juncture given the move today has been triggered by fundamentals, rather than baseless speculation, with the Fed/BoJ confluence moving markets globally, and not just contained to Japan.
- A pullback in crude oil prices helped NOKSEK take another leg lower, building on the move seen after the Riksbank/Norges Bank rate decisions, making for a clearing of the November 1 low at 0.9672. Having traded over 1.0% lower Thursday, the cross is on track for the second largest one-day fall this year (topped only by the 1.4% fall on Aug 2). Trendline support drawn from the August 5 low is now firmly in view (0.9639 today), clearance of which exposes the Sep 26 low at 0.9572.
- Friday turns to the UK retail sales release for November, final UMich sentiment data for November as well as the core PCE release - among the last key datapoints of the year for the US. The first Fed speakers following the rate decision are due to appear, with Fed's Daly and Williams set to make appearances on Bloomberg TV and CNBC respectively.
FX OPTIONS: Expiries for Dec20 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0350(E2.9bln), $1.0390(E927mln), $1.0400(E3.8bln), $1.0425(E2.6bln), $1.0430(E965mln), $1.0440(E2.2bln), $1.0450(E5.0bln)
- USD/JPY: Y150.00($1.7bln), Y150.65($1.3bln), Y155.00($1.6bln), Y156.00($1.3bln), Y157.00-05($3.6bln), Y158.00($596mln)
- GBP/USD: $1.2490-00(Gbp1.3bln), $1.2600(Gbp524mln), $1.2650(Gbp658mln), $1.2805(Gbp864mln)
- EUR/GBP: Gbp0.8290-00(E2.7bln), Gbp0.8345(E2.0bln)
- EUR/JPY: Y163.40(E580mln)
- AUD/USD: $0.6285(A$500mln), $0.6330-50(A$2.2bln), $0.6494-00(A$2.0bln)
- NZD/USD: $0.5850-60(N$1.0bln)
- USD/CAD: C$1.4200($2.6bln), C$1.4250($863mln), C$1.4300($768mln), C$1.4400($531mln)
- USD/CNY: Cny7.2500($1.4bln), Cny7.3000($3.2bln)
EQUITY TECHS: E-MINI S&P: (H5) Short-Term Reversal
- RES 4: 6178.75 High Dec 6 and key resistance
- RES 3: 6163.75 High Dec 16
- RES 2: 6089.68 20-day EMA
- RES 1: 6011.85 50-day EMA
- PRICE: 5984.50 @ 14:38 GMT Dec 19
- SUP 1: 5906.50 Intraday low
- SUP 2: 5876.25 Low Nov 6
- SUP 3: 5811.65 38.2% retracement of the Aug 5 - Dec 6 bull leg
- SUP 4: 5784.00 Low Nov 4
A sharp sell-off in the S&P E-Minis contract yesterday highlights a possible short-term top. The move down has resulted in a breach of both the 20- and 50-day EMAs. A continuation lower would open 5811.65, a Fibonacci retracement level. Note that support at 5921.00, the Nov 19 low, has been pierced. A clear break of this level would strengthen a bearish threat. Initial resistance is at 6011.85, the 50-day EMA.
COMMODITIES: Crude Under Pressure, Copper Slides Further
- Oil prices faced further pressure on Thursday after the Fed signalled fewer rate cuts in 2025 which has supported a stronger dollar.
- WTI Jan 25 is down by 1.1% at $69.8/bbl.
- The oil market is widely expected to be in a surplus next year, with JP Morgan analysts predicting that supply will outpace demand by 1.2mbpd.
- A bearish threat in WTI futures remains present, with eyes on $65.57, the Oct 1 low. Initial firm resistance to watch is unchanged at $71.97, the Nov 7 high.
- Meanwhile, spot gold has risen by 0.5% to $2,599/oz, which still leaves the yellow metal 1.9% lower on the week, amid the more hawkish Fed outlook.
- Looking ahead, analysts at Saxo bank still believe gold will remain a crucial element in stabilising investment portfolios next year, as global uncertainties stay high.
- From a technical perspective, yesterday’s move lower in gold undermines a recent bullish theme. A resumption of weakness would signal scope for an extension towards the key support at $2,536.9, the Nov 14 low. Initial pivot resistance is $2,645.4, the 20-day EMA.
- In contrast, copper has fallen by a further 1.8% to $408/lb, extending losses since last Thursday’s high to almost 6%
- The red metal is set to close at its lowest level since Aug 9, following the mixed Chinese data on Monday.
- A bearish trend condition in copper futures is intact, with attention on $401.35, the Aug 7 low and a bear trigger.
| Date | GMT/Local | Impact | Country | Event |
| 19/12/2024 | 2100/1600 | ** |  US | TICS |
| 20/12/2024 | 2330/0830 | *** |  JP | CPI |
| 20/12/2024 | 0700/0700 | *** |  GB | Public Sector Finances |
| 20/12/2024 | 0700/0800 | ** |  DE | PPI |
| 20/12/2024 | 0700/0800 | ** |  SE | PPI |
| 20/12/2024 | 0700/0800 | ** | SE | Retail Sales |
| 20/12/2024 | 0700/0700 | *** | GB | Retail Sales |
| 20/12/2024 | 0745/0845 | ** |  FR | PPI |
| 20/12/2024 | 0800/0900 | ** | SE | Economic Tendency Indicator |
| 20/12/2024 | 0900/1000 | ** |  IT | ISTAT Business Confidence |
| 20/12/2024 | 0900/1000 | ** | IT | ISTAT Consumer Confidence |
| 20/12/2024 | 1100/1200 | ** | IT | PPI |
| 20/12/2024 | 1100/1100 | ** | GB | CBI Distributive Trades |
| 20/12/2024 | 1330/0830 | *** | US | Personal Income and Consumption |
| 20/12/2024 | 1330/0830 | ** |  CA | Retail Trade |
| 20/12/2024 | 1330/0830 | ** | CA | Retail Trade |
| 20/12/2024 | 1330/0830 | *** | US | Personal Income and Consumption |
| 20/12/2024 | 1400/1500 | ** |  BE | BNB Business Confidence |
| 20/12/2024 | 1500/1600 | ** |  EU | Consumer Confidence Indicator (p) |
| 20/12/2024 | 1500/1000 | ** | US | U. Mich. Survey of Consumers |
| 20/12/2024 | 1630/1630 | GB | BOE to announce Q1-25 APF sales schedule |