HIGHLIGHTS
- Treasuries recovered from weaker opening levels, finishing modestly higher in 2s-10s Monday, curves mixed (2s10s -.476 at 12.717; 5s30s +2.052 at 32.900).
- Projected rate cuts into early 2025 look largely steady vs. early Monday levels (*) : Dec'24 cumulative -14.6bp (-14.6bp), Jan'25 -22.6bp (-22.6bp), Mar'25 -37.2bp (-37bp), May'25 -45.4bp (-44.2bp).
- Market focus remains on Trump's cabinet picks, with the Treasury Secretary position still up for grabs but leaning towards former Fed Governor Kevin Warsh, deemed a both a fiscal and monetary hawk.
MNI US TSYS: Tsys Off Lows, Focus on President Elect Cabinet Positions
- Treasuries look mixed after the bell, well off early session lows with 2s-10s making modest gains. Curves mixed, however, 2s10s -.053 at 13.140, 5s30s +1.954 at 32.802.
- Muted reaction to data: NAHB housing market index surprised higher at 46 (cons 42) in November after 43, for its highest since April. The 3pt increase was driven by expectations for future sales (+7) which at 64 is now its highest since Apr 2022.
- Market focus remains on Trump's cabinet picks, with the Treasury Secretary position still up for grabs. Latest reports suggest that Trump's shortlist is growing, and he is to hold interviews this week with the leading candidates, including (but not limited to) Scott Bessent, Howard Lutnick, Kevin Warsh and Marc Rowan.
- Their perceived support for Trump's tariff regime will prove key to any market reaction on the formal appointment. Midmorning headlines announced the Trump team supports Fed Governor Kevin Warsh, deemed a both a fiscal and monetary hawk
- On tap for Tuesday: Building Permits & Housing Starts at 0830ET, BLS releases State-level payrolls and unemployment data for Oct at 1000ET. US Treasury auctions $80B 42D CMBs. Fed speak: KC Fed Schmid economic outlook (text TBA, Q&A) at 1310ET.
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.00428 to 4.60617 (-0.00603 total last wk)
- 3M +0.02987 to 4.52100 (-0.02504 total last wk)
- 6M +0.03959 to 4.43150 (-0.00916 total last wk)
- 12M +0.04592 to 4.28835 (+0.02371 total last wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.57% (-0.01), volume: $2.425T
- Broad General Collateral Rate (BGCR): 4.56% (-0.01), volume: $833B
- Tri-Party General Collateral Rate (TGCR): 4.56% (-0.01), volume: $799B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.58% (+0.00), volume: $104B
- Daily Overnight Bank Funding Rate: 4.58% (+0.00), volume: $282B
FED Reverse Repo Operation
RRP usage climbs to $200.030B this afternoon from $172.400B Friday. Compares to $144.243B on Tuesday, November 5 -- the lowest since May 6, 2021. The number of counterparties rises to 59 from 51 prior.
US SOFR/TREASURY OPTION SUMMARY
Option desks reported mixed SOFR & Treasury options Monday: a fair amount of position unwinds and vol sales (TYF5 109.5/110 strangles). Off morning lows, underlying futures are making modest gains in short to intermediate durations, bonds underperforming. Projected rate cuts into early 2025 look largely steady vs. early Monday levels (*) : Dec'24 cumulative -14.6bp (-14.6bp), Jan'25 -22.6bp (-22.6bp), Mar'25 -37.2bp (-37bp), May'25 -45.4bp (-44.2bp).
SOFR Options:
-5,000 SFRM5 95.25/96.00 2x1 put spds, 20.0 vs. 95.975/0.28%
-11,000 SFRZ4 95.50/95.68 call spds w/ SFRZ4 95.56/95.68 call spd strip, 10.75
-4,000 SFRH5 95.81 straddles vs. SFRH5 96.06 calls, 26.0 95.775
-3,000 SFRF5 95.75/96.12/96.50 Iron Fly 25.25 ref 95.775
+2,500 SFRJ5 96.00/96.50 1x2 call spds, 3.5 ref 95.96
+4,000 SFRZ5 95.75/96.50 strangle vs SFRM6 95.50 put, 27.0 net ref 96.155/0.30%
+2,500 SFRZ4 95.50/95.62 call spds 6.25 ref 95.545
+2,500 SFRM5 95.50/95.62/95.87 put trees, 2.0 ref 95.96
+12,000 SFRZ4 95.56/95.62/95.68 call flys, 1.75 ref 95.547
11,000 SFRZ4 95.50 puts ref 95.547
over 18,500 SFRZ4 95.50 calls
over 28,000 SFRZ4 95.62 calls
Block, -10,000 SFRH5 95.37/95.50/95.62 put trees, 1.0 net ref 95.785
10,000 SFRF5 95.37/95.50/95.63 put trees ref 95.785
Block, 3,500 3QG5 95.75/95.87 put spds, 3.0 ref 96.18/0.07%
Treasury Options:
-17,000 TYF5 109.5/110 strangles, 139
2,000 TYZ4 109.5 straddles, 39
over 9,500 TYZ4 111 calls, 1
-5,500 TYZ4 109.5 puts vs. TYF5 107 puts, 7 net bear curve steepener
2,800 TYZ 109/109.5 strangle vs. TYF5 108.5/109.5 strangles
2,300 FVZ4 106 puts vs. 106.5/107.25 call spds ref 106-13.25
over 6,900 TYZ4 108.5 puts, 3-4 ref 109-10
MNI BONDS: EGBs-GILTS CASH CLOSE: Bear Flattening In Germany As ECB Cuts Fade
European curves flattened Monday, with Bunds underperforming Gilts.
- Yields rose for most of the morning session , with pronounced weakness at the German short end as ECB rate cut pricing pulled back some of its recent increase.
- ECB's Stournaras noted that a December cut was more or les a "done deal" - drawing a hawkish reaction given partial market pricing for a 50bp cut, and Stournaras's pointing out that neutral rates could lie at 2% (115bp from here). At one point just 136bp of further cuts were seen through 2025.
- Bonds stabilized in the afternoon, shrugging off a supply-disruption related jump in oil prices, as equities and the US dollar softened.
- The German curve bear flattened, with the UK's twist flattening. Periphery EGB spreads tightened slightly, after widening midway (BTPs/Bunds came in 3+bp from session wides).
- Tuesday's calendar includes Eurozone current account data and final October HICP, as well as appearances by senior BOE members including Gov Bailey. The week's European data highlights come Wednesday (UK CPI) and Friday (November flash PMIs).
Closing Yields / 10-Yr Periphery EGB Spreads To Germany
- Germany: The 2-Yr yield is up 5.9bps at 2.181%, 5-Yr is up 2.7bps at 2.203%, 10-Yr is up 1.7bps at 2.373%, and 30-Yr is up 0.5bps at 2.579%.
- UK: The 2-Yr yield is up 1.8bps at 4.417%, 5-Yr is up 0.8bps at 4.336%, 10-Yr is down 0.6bps at 4.465%, and 30-Yr is down 1.2bps at 4.912%.
- Italian BTP spread down 0.2bps at 119.6bps / Spanish down 0.4bps at 69.7bps
MNI FOREX: Softer Greenback Sees EURUSD Edge Back Towards 1.06
- Following the greenback rally pausing for breath on Friday, the USD index also trades softer to start the week, currently down around 0.35% as we approach the APAC crossover. The price action has been assisted by a more stable backdrop for global equity indices, as well as the US 10-year yield once again firmly rejecting the 4.50 level and now residing lower on the day.
- The EUR trades more optimistically, rising to levels around 1.0600 against the dollar, the notable breakdown point during last week’s trade. The 0.5% move higher for EURUSD does little to alter the overall bearish backdrop, and might be allowing an oversold condition to unwind. On the downside, focus remains on a move to 1.0448, the Sep 3 2023 low and a key support, whereas initial firm resistance to watch is 1.0742, the 20-day EMA.
- The JPY is among the weakest in G10, briefly helping USDJPY gravitate back above the 155.00 handle, with the currency receiving little support from an appearance from BoJ's Ueda, who declined to provide a clear indication or time-linked path for the next BoJ rate hike.
- USDCAD has continued its pullback today with a now sizeable drop settling around the 1.4030 level (-0.43%). CAD gains closely follow other growth sensitive peers in the AUD and NOK, along with EUR, potentially offering a slightly less stretched level heading into tomorrow’s Canada inflation report. Support isn’t seen until 1.3959 (Nov 1 and 6 highs)
- Market focus remains on Trump's cabinet picks, with the Treasury Secretary position still up for grabs. Latest reports suggest that Trump's shortlist is growing, and he is to hold interviews this week with the leading candidates, including (but not limited to) Scott Bessent, Howard Lutnick, Kevin Warsh and Marc Rowan. Their perceived support for Trump's tariff regime will prove key to any market reaction on the formal appointment.
- RBA minutes headline the docket overnight before the final readings of Eurozone CPI on Tuesday. Attention will then turn to Canada CPI and US building permits data.
MNI FX OPTIONS: Expiries for Nov19 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0500-20(E707mln), $1.0540-50(E1.1bln), $1.0590-00(E973mln), $1.0650(E2.0bln)
- AUD/USD: $0.6600(A$1.7bln)
MNI US STOCKS: Late Equities Roundup: Transportation, Pharmaceuticals Weighing
- Close to prior levels in late Monday trade, stocks remain mixed with S&P EMINIS and Nasdaq outperforming modestly lower DJIA prices. Currently, the DJIA trades down 53.26 points (-0.12%) at 43392.89, S&P E-Minis up 22.75 points (0.39%) at 5919.75, Nasdaq up 116.6 points (0.6%) at 18797.16.
- Industrials and Health Care sectors underperformed in the second half, as the former displaced the Financial sector shares. Transportation and shipping stocks led laggers: Uber -6.33% reportedly tied to talk president elect Trump will curtail autonomous driving restrictions. Meanwhile, Delta trades -1.17%, Southwest -1.07%, United Air -0.70%.
- Pharmaceutical stocks continued to weigh on the Health Care sector, carry-over weakness after President elect Trump's choice of RF Kennedy Jr to head the Dept of Health & Human Services was announced last week: Eli Lilly -3.88%, West Pharmaceuticals -2.72%, Thermo Fisher -2.60%.
- Conversely, Energy and Communication Services sectors outperformed late Monday, oil and gas shares bid on the back of higher crude prices (WTI +2.12 at 69.14): Diamondback Energy +3.06%, ONEOK +2.23%, Valero +2.24%.
- Interactive media and entertainment shares continued to buoy the Communication Services sector: Netflix +2.49%, Take Two Interactive +2.39%, Warner Bros +2.22% after resolving a dispute with the NBA and agreeing to a lucrative 11 year contract.
- Big names still to report earnings this week include: Jacobs Solutions, Lowe's, Walmart, Target, Williams-Sonoma, TJX, Nvidia, Palo Alto Networks, Intuit, Copart and the Gap.
MNI EQUITY TECHS: E-MINI S&P: (Z4) Corrective Cycle
- RES 4: 6145.26 1.236 proj of the Aug 5 - Sep 3 - 6 price swing
- RES 3: 6103.88 1.500 projection of the Sep 6 - 17 - 18 price swing
- RES 2: 6070.16 1.382 projection of the Sep 6 - 17 - 18 price swing
- RES 1: 5974.25/6053.25 High Nov 15 / 11 and the bull trigger
- PRICE: 5918.00 @ 1500 ET Nov 18
- SUP 1: 5876.75 20-day EMA
- SUP 2: 5826.69 50-day EMA
- SUP 3: 5724.25 Low Nov 4 and a key support
- SUP 4: 5675.25 Low Sep 18
The move lower last week in S&P E-Minis appears corrective. Medium-trend signals such as moving average studies, continue to highlight a dominant uptrend. The contract has traded through the 20-day EMA. The next key support to monitor is 5826.69, the 50-day EMA. A clear break of this level would signal scope for a deeper retracement. A resumption of gains would refocus attention on the bull trigger at 6053.25, the Nov 11 high.
MNI COMMODITIES: Crude, Precious Metals Rally Amid Pullback In Dollar
- Crude has rallied, supported by the escalation in the Russia-Ukraine situation after President Biden permitted Ukraine to strike inside Russia with US missiles. A weaker USD on the day, with the Bloomberg dollar spot index down 0.4%, is also adding upside.
- WTI Dec 24 is up by 3.2% at $69.2/bbl.
- A bearish theme in WTI futures remains intact, with attention on $65.99, the Oct 1 low.
- On the upside, initial firm resistance is at $72.88, the Nov 7 high.
- Precious metals have also benefitted from the pullback in the dollar today, with spot gold rising by 1.8% to $2,609/oz.
- The move comes as Goldman Sachs reiterated its forecast for gold to reach $3,000/oz next year, noting that the recent sell-off provided an attractive entry point to buy the yellow metal.
- The long-term trend condition in gold remains bullish, with firm resistance seen at $2,653.2, the 20-day EMA.
- Meanwhile, silver is outperforming and is up by 2.7% at $31.1/oz.
- For silver, bullish conditions remain intact and the bear cycle that started on Oct 23 appears to be a correction - for now. Initial firm resistance to watch is $31.594, the 20-day EMA.
TUESDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 19/11/2024 | 0845/0945 |  EU | ECB's Elderson at 10th Green Finance Forum | |
| 19/11/2024 | 0900/1000 | ** | EU | EZ Current Account |
| 19/11/2024 | 1000/1100 | *** | EU | HICP (f) |
| 19/11/2024 | 1000/1000 | ** |  GB | Gilt Outright Auction Result |
| 19/11/2024 | 1000/1000 | GB | BOE's Bailey, Lombardelli, Mann and Taylor at TSC | |
| 19/11/2024 | 1330/0830 | *** |  CA | CPI |
| 19/11/2024 | 1330/0830 | *** |  US | Housing Starts |
| 19/11/2024 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 19/11/2024 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 19/11/2024 | 1810/1310 | US | Kansas City Fed's Jeff Schmid | |
| 20/11/2024 | 2350/0850 | ** |  JP | Trade |
| 20/11/2024 | 0001/0001 | * | GB | Brightmine pay deals for whole economy |