HIGHLIGHTS
- Treasuries extended both highs then lows following the January employment data: 10Y yield fell to 4.38% low after lower than expected jobs gains for January, reversed initially to 4.4725% as prior jobs sharply up-revised .
- Mixed sentiment prompted the USD index to oscillate around unchanged levels until midday as Trump "reciprocal" tariff headlines aired and the USD remained on the front foot for the majority of the late Friday session.
- Stocks reversed early gains - extended lows in in stages after lower than expected University of Michigan sentiment data and rise in 1Y inflation from 3.3% to 4.3%.
MNI US TSYS: Reciprocal Tariff Headlines Buoy Tsys After Volatile Jobs Data
- Treasuries look to finish weaker Friday, near midday lows after a volatile data releases this morning: Treasuries gapped higher (TYH5 110-00 high, 4.38% yld) after lower than expected jobs gains for January, and small dip in unemployment rate -- but quickly reversed on higher up-revisions to prior jobs gains to 109-07.5 low at the time.
- Nonfarm payrolls were softer than expected in January alone at 143k (cons 175k) but the latest two-month revision of +100k more than offset this (almost evenly split across Dec and Nov). As such, the 143k followed two even stronger than previously thought months with 307k in Dec and 261k in Nov.
- The Mar'25 10Y contract ratcheted lower after 1Y forward inflation expectations in the UMichigan survey for February (to 4.3% from 3.3% in January), tapping 109-01 low in the first half. Brief risk-off support arrived after Pres Trump headlines suggested reciprocal tariff's in the near term (rather vague - Trump is expected to discuss details at a press conference next Tuesday.
- Mixed sentiment prompted the USD index to oscillate around unchanged levels in the following hours, however, as Trump headlines began to cross, the USD remained on the front foot for the majority of the late Friday session.
- Next week's focus is on Chairman Powell mon-pol testimony to Congress on Tuesday-Wednesday,CPI and PPI inflation measures Wednesday and Thursday respectively.
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M +0.00505 to 4.31519 (+0.00213/wk)
- 3M +0.00659 to 4.30394 (+0.00169/wk)
- 6M +0.01089 to 4.25772 (+0.00941/wk)
- 12M +0.01854 to 4.17911 (+0.01881/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.36% (+0.03), volume: $2.365T
- Broad General Collateral Rate (BGCR): 4.34% (+0.03), volume: $913B
- Tri-Party General Collateral Rate (TCR): 4.34% (+0.03), volume: $899B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $104B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $281B
FED Reverse Repo Operation
RRP usage climbs to $95.248B this afternoon from yesterday's $79.983B - compares to Wednesday's $78.788B -- lowest level since mid-April 2021. The number of counterparties recedes to 33 from 38 prior.
US SOFR/TREASURY OPTION SUMMARY
Option desks report heavy two-way SOFR & Treasury flow Friday, better SOFR calls while Treasuries saw better put volume. Underlying futures weaker, near lows after volatile post jobs trade: TYH5 gapping to 110-00 on lower than expected jobs gain only to reverse course - extend lows (109-06 at the time) on large up-revisions to prior data. Projected rate cuts through mid-2025 consolidate vs. morning levels (*) as follows: Mar'25 at -2.5bp (-3.9bp), May'25 at -7.3bp (-10.7bp), Jun'25 at -15.8bp (-19.6bp), Jul'25 at -20.6bp (-25.1bp).
SOFR Options:
5,000 SFRH5 95.75 calls ref 95.715
+7,500 0QK5/0QM5 96.00/96.25/96.50/96.75 call condor strip, 13.5 total db
+10,000 SFRZ5 97.00 calls 3.25 over 0QZ5 97.50 calls, appr 30k steepener positions
+7,000 SFRM5 95.75/96.00/96.25 call flys, 4.25
+5,000 SFRJ5 95.62/95.68 put spds, 0.375 ref 95.825
Block, 9,000 SFRM5 95.81/95.87/95.93/96.00 call condors, 1.5 net ref 95.85
over +37,000 SFRU5 95.37/95.62/95.87 put flys, 9.0 ref 95.955
S0U S3U 9650/9700cs spread +1.75/2500 (S0U
S0G 9600/9606p stupid fut 9606.5 .80d -5K @9
S0H 9581/9593/9606pf 2.25/5K, bid (9606
S0G 9612^ +13.5/5K (9606
SRU5 9575/9600cs fut 9596.5 .20d -5K @11
-10,000 SFRM5 96.25/96.43 call spds, 1.0 ref 95.855
1,500 SFRK5 95.68/95.75/95.81 put flys ref 95.88
4,250 SFRM5 96.50/97.00 call spds ref 95.875 to -.87
4,500 SFRG5 95.81 calls, cab ref 95.74
2,000 SFRJ5 96.06 calls ref 95.875
2,000 SFRZ5 96.00/96.37/96.75 call flys ref 96.055
1,500 3MQ5 95.00/95.50 put spds vs. 96.75/97.00 call spds ref 96.05
Treasury Options:
6,000 TYJ5 107/109/109.5/111.5 iron condor on 2x3 ratio for 156 net (+2x body vs. -3x wings) appr $11.25M premium outlay for structure that expires on March 21.
-20,000 TYH5 109 puts 30-29 (fractional unwind of over 100k bought this week from 28 to 16)
over 10,000 FVH5 105.5/106/106.5 put trees ref 106-16.5
over +29,000 TYH5 107.75 puts, 8 vs. 109-04 to -06/0.16%, appr 6.7% implied vol targets 4.65% yld
over 52,000 TYH5 108 puts, 7-10 ref 109-08 to -07
Blocks, total 29,000 Mon weekly 10Y 109.25 puts, 14 vs. futures on 50% delta/unwound on screen
-20,000 TUH5 102.75 puts, 7 ref 102-24.88
4,000 TYH5 112 calls, 4 ref 109-19
2,000 TYH5 110.5/111.5/112.5 call flys ref 109-19
2,000 TYH5 111.5 calls, 6 ref 109-18.5
2,600 TYH5 110.5 calls, 16 ref 109-16
MNI BONDS: EGBs-GILTS CASH CLOSE: US Tariff Talk Spurs Late Rally
European bonds rallied late in Friday's session on the latest US tariff intrigue, reversing earlier losses.
- Bunds and Gilts weakened sharply after the US employment report showed higher than expected wage gains and lower unemployment.
- But global core instruments rallied in a risk-off move toward the cash close as Reuters reported that US President Trump was planning to issue reciprocal tariffs as early as Friday (though there was no more detail provided).
- German industrial production was much weaker than expected, but wasn't a market mover. The nominal neutral rate of interest in the eurozone was likely in a range of 1.75% to 2.25% as of Q4 2024, according to estimates by ECB staff released Friday. BOE's Pill set a high bar to him voting for a 50bp cut.
- The German curve twist steepened, with the UK's leaning bull flatter.
- Periphery EGB spreads widened into the cash close following the Trump tariff report, with BTPs underperforming on the day.
- Next week's scheduled highlights include UK and Eurozone GDP data, along with appearances by ECB's Lagarde and Schnabel (with an MNI event with ECB's Elderson) and BOE's Mann, Bailey, and Greene.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 1.1bps at 2.048%, 5-Yr is down 1.3bps at 2.153%, 10-Yr is down 0.7bps at 2.372%, and 30-Yr is up 0.9bps at 2.621%.
- UK: The 2-Yr yield is down 0.6bps at 4.168%, 5-Yr is down 0.2bps at 4.173%, 10-Yr is down 0.9bps at 4.476%, and 30-Yr is down 0.6bps at 5.056%.
- Italian BTP spread up 2.7bps at 109.4bps / French OAT up 0.3bps at 71.9bps
MNI EGB OPTIONS: Mixed UK Rates Trade Following BoE
Friday's Europe rates/bond options flow included:
- DUJ5 107.00c, sold at 20 in 7.5k
- SFIH5 95.60/95.75cs, sold at 6.5 in 7k
- SFIZ5 95.30/94.80ps, bought for 3.25 in 8k
MNI FOREX: Greenback Advances as Trump Tariff Announcements Awaited Next Week
- U.S. businesses created fewer jobs in January than the previous month and market forecasts, but the unemployment rate unexpectedly dipped a tenth to 4.0%, reinforcing the Federal Reserve's propensity to keep rates on hold for now. This dynamic provided sharp two-way swings for the greenback following the data.
- Initially, the US dollar gapped lower and prompted a 151.35 print for USDJPY. However, there was a very swift reversal which took the pair to a fresh session high of 152.42 just 1 minute after the release.
- This mixed sentiment prompted the USD index to oscillate around unchanged levels in the following hours, however, as Trump headlines began to cross, the USD remained on the front foot for the majority of the late Friday session.
- A plethora of tariff related headlines prompted a lot of noise in G10 currency markets, however, the underlying message that announcements will be made on reciprocal trade has bolstered a risk off theme, supporting haven currencies.
- The euro was hard hit during the flurry of messaging, with EURUSD extending the pullback from 50-day EMA resistance to around 1.4%, a level that was firmly rejected during Wednesday’s session. This renewed weakness places the focus back on 1.0272, the Feb 4 low.
- For EURJPY, weakness today briefly extended the week’s decline to around 3.05%. Price action saw the cross pierce key support at 156.18, the Dec 3 low. Below here, greater attention will be on the medium-term cluster of support between 153.27 and 154.46.
- JPY strength has been a key development of currency markets this week amid a relatively more hawkish BOJ narrative, and USDJPY has had two tries below the 151 handle on Friday. A solid bounce has ensued on both occasions with market participants citing an oversold condition for the pair and a late mention from Trump that tariffs on Japan are an option.
- Global FX markets will continue to be primarily driven by tariff related developments, however, Chinese CPI/PPI data is also due this weekend.
MNI US STOCKS: Late Equities Roundup: Broadline Retailers, Tech Stocks Underperform
- Stocks continued ratchet lower late Friday, extending lows in stages after this morning's mixed employment and inflation expectations data while late morning headlines regarding "reciprocal tariff" implementation accelerated the move. Currently, the DJIA trades down 413.67 points (-0.92%) at 44334.09, S&P E-Minis down 56.5 points (-0.93%) at 6049.5, Nasdaq down 282.7 points (-1.4%) at 19510.54.
- Consumer Discretionary and Information Technology sectors underperforming in late trade, broadline retailers weighing on the Consumer Discretionary sector: Ulta Beauty -6.63%, DR Horton -6.03%, Lennar -4.13% while Amazon declined -4.07% after missing earnings late Thursday.
- Hardware and semiconductor makers weighed on the Technology sector late Friday: Enphase Energy -6.00%, Zebra Technologies -5.27%, CDW Corp -3.99%, ON Semiconductor -3.49% and Microchip Technology -3.37%.
- On the positive side, Energy and Industrial sectors led gainers ahead midday. Oil & gas stocks buoyed the former with Texas Pacific +1.65%, Targa Resources +1.48%, Hess +1.38% and Chevron up 1.10%. Transportation stocks supported the Industrial sector with Uber +7.49%, Delta Air Lines +0.80% while Old Dominion Freight gained 0.68%.
- Earnings resume next Monday with ON Semiconductor, Rockwell Automation, Veradigm, McDonald's Corp, Astera Labs and Vertex Pharmaceuticals.
MNI EQUITY TECHS: E-MINI S&P: (H5) Monitoring Resistance
- RES 4: 6178.75 High Dec 6 and key resistance
- RES 3: 6162.25 High Jan 24
- RES 2: 6147.75 High Jan 31
- RES 1: 6120.25 Intraday high
- PRICE: 6054.75 @ 1440 ET Feb 7
- SUP 1: 6028.38/5935.50 50-day EMA / Low Feb 3
- SUP 2: 5892.37 76.4% retracement of the Aug 5 - Dec 6 bull leg
- SUP 3: 5842.50 Low Jan 14
- SUP 4: 5809.00 Low Jan 13 and a key resistance
Monday’s initial sell-off in the S&P E-Minis contract and a breach of support at 5948.00, the Jan 27 low, continues to highlight a possible short-term reversal threat. If correct, it suggests that the latest bounce is a correction. A resumption of weakness would open 5892.37, a Fibonacci retracement point. On the upside, a stronger rally would expose key resistance at 6178.75, the Dec 6 ‘24 high. Clearance of this hurdle would resume the primary uptrend.
MONDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 10/02/2025 | 0700/0800 | *** |  NO | CPI Norway |
| 10/02/2025 | - | *** |  CN | Money Supply |
| 10/02/2025 | - | *** | CN | New Loans |
| 10/02/2025 | - | *** | CN | Social Financing |
| 10/02/2025 | 1330/0830 | ** |  US | US CPI Annual Revised |
| 10/02/2025 | 1400/1500 |  EU | ECB's Lagarde participates in plenary debate on ECB 2023 Report | |
| 10/02/2025 | 1530/1030 |  CA | BOC market participants survey | |
| 10/02/2025 | 1600/1100 | ** | US | NY Fed Survey of Consumer Expectations |
| 10/02/2025 | 1630/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 10/02/2025 | 1630/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 11/02/2025 | 0001/0001 | * |  GB | BRC-KPMG Shop Sales Monitor |