HIGHLIGHTS
- Treasuries recovered more than half of Friday's decline Monday as accounts moved to square positions ahead of Tuesday's Presidential election and the next FOMC rate announcement on Thursday.
- September's final report on Manufacturers’ Shipments, Inventories, and Orders showed continued weakness in recent demand for manufacturing orders and durable goods production.
- Projected rate cuts into early 2025 have receded from this morning's highs (*): Nov'24 cumulative at -24.6bp, Dec'24 -45.3bp (-45.8bp), Jan'25 -59.2bp (-60.3bp), Mar'25 -75.6bp (-77.1bp).
MNI US TSYS: Treasury Yields Recede Ahead Election, FOMC Event Risk
- Treasuries recovered more than half of Friday's sell-off Monday, trimmed gains after September's final report on Manufacturers’ Shipments, Inventories, and Orders showed continued weakness in recent demand for manufacturing orders and durable goods production.
- At the moment, the Dec'24 10Y futures contract trades +11 at 110-12, 10Y yield -.0788 at 4.3049%, curves flatter: 2s10s -4.154 at 13.050, 5s30s -2.332 at 32.829.
- Treasuries extended lows after the $58B 3Y note auction tailed 0.7bp: 4.152% high yield vs. 4.145% WI; 2.60x bid-to-cover vs. 2.45x prior. Peripheral stats see indirect take-up rebounds 70.62% vs. 56.87% prior; direct bidder take-up falls to new low of 9.62% vs. 23.97% prior; primary dealer take-up 19.75% vs. 19.17% prior.
- Option desks reported better SOFR/Treasury put option volumes for the most part Monday, carry over from overnight as accounts continued to hedge or cover downside risk ahead of Tuesday's Presidential election and Thursday's FOMC rate announcement. Underlying futures remain firmer after midmorning gains trimmed.
- Projected rate cuts into early 2025 have receded from this morning's highs (*): Nov'24 cumulative at -24.6bp, Dec'24 -45.3bp (-45.8bp), Jan'25 -59.2bp (-60.3bp), Mar'25 -75.6bp (-77.1bp).
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.01155 to 4.64045 (-0.05530 total last wk)
- 3M -0.02265 to 4.53164 (-0.05035 total last wk)
- 6M -0.03031 to 4.38167 (-0.01874 total last wk)
- 12M -0.04836 to 4.14268 (+0.03814 total last wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.86% (-0.04), volume: $2.164T
- Broad General Collateral Rate (BGCR): 4.84% (-0.01), volume: $788B
- Tri-Party General Collateral Rate (TGCR): 4.84% (-0.01), volume: $761B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.83% (+0.00), volume: $99B
- Daily Overnight Bank Funding Rate: 4.83% (+0.00), volume: $257B
FED Reverse Repo Operation:
RRP usage bounces to $171.885B after falling below $200B last Friday to $155.476B -- the lowest since May 6, 2021. The number of counterparties bounces to 57 from 41 prior.
US SOFR/TREASURY OPTION SUMMARY
Option desks reported better SOFR/Treasury put option volumes for the most part Monday, carry over from overnight as accounts continued to hedge or cover downside risk ahead of Tuesday's Presidential election and Thursday's FOMC rate announcement. Underlying futures remain firmer after midmorning gains trimmed. Projected rate cuts into early 2025 have receded from this morning's highs (*): Nov'24 cumulative at -24.6bp, Dec'24 -45.3bp (-45.8bp), Jan'25 -59.2bp (-60.3bp), Mar'25 -75.6bp (-77.1bp).
SOFR Options
+16,000 2QX4 96.00/96.25 3x1 put spds, 0.5 net/1 leg over ref 96.375
+5,000 2QZ4 95.50 puts, 2.0 vs. 96.325/0.10%
4,000 SFRX4 95.37 puts
Block, 10,000 SFRH5 95.50/95.75 put spds 7.0 ref 95.945
4,000 2QX4 96.43/96.75 1x2 call spds ref 96.355
3,000 0QZ4 95.25/95.87/96.25 broken put flys ref 96.345
1,500 0QF5 95.75/96.12 put spds vs. SFRF5 95.50 puts
3,800 3QZ4 96.75 calls 4.0 ref 96.32
8,575 0QX4 95.56/95.62 put spds ref 95.64
12,000 SFRX4 95.56/95.62 put spds
12,850 SFRZ4 95.50/95.62 put spds ref 95.63
Treasury Options:
-4,250 TYF4 109/112.5 strangles, 123
total over 51,000 wk2 TY 109 13-14 (expire this Friday)
5,000 TYZ4 110.75/112.5 1x2 call spds, 18 ref 110-07.5
Block, +10,000 TYZ4 112.5/113.5 call spds, 10
Block, +9,300 FVZ4 105.25/106.25 put spds, 10.5
9,000 FVZ4 105.5/106.25 put spds ref 107-10.5
over 13,500 USZ4 109 puts, 7 last, open interest 35,809 coming into the session
7,700 Monday wkly 10Y 112/113 call spds, expire Mon. Nov 11
6,000 wk2 TY 111.5 calls, 20 ref 110-15.5
over 8,400 FVZ4 106 puts, 12 last
5,000 FVZ4 106.75 puts
9,000 FVZ4 109 calls, 7.5 last
2,000 TYZ4 106/107.5/109 put trees ref 110-16
over 4,800 FVZ4 106 puts, 12 ref 107-08
3,500 TYZ4 108.5/111.5 strangles
2,000 wk2 TY 114.5/115 put spds
over 8,300 TYZ4 108 puts, 15 last ref 110-13
8,200 TYZ4 109 puts
EGBS
MNI BONDS: EGBs-GILTS CASH CLOSE: Gilts Maintain Underperforming Theme
European bonds traded mixed Monday with long-end Gilts underperforming, ahead of a sequence of key risk events this week.
- Treasuries led an early global bid for bonds, as the recent US election-related sell-off lost some steam amid a paring back of implied probability that Donald Trump will win the American presidency.
- However the session brought little impactful data or macro headlines, keeping instruments trading within last week's ranges. Gilts underperformed Bunds, with light bear steepening in the curve (vs German twist flattening), as last week's UK fiscal developments continued to weigh.
- 10Y Gilts now trade 206bp outside Bunds, a fresh closing wide post-Oct 2022 (which was also part of a fiscal-related move).
- Periphery EGBs traded mixed. with BTP and SPGB spreads modestly tighter.
- Tuesday brings French industrial production and Spanish labor market data, along with multiple ECB speakers. The main event is the US election, though its impact is more likely to be felt on European markets early Wednesday. Later in the week we get multiple central bank decisions including the BoE and the Fed on Thursday (25bp cuts almost unanimously expected in both cases).
Closing Yields / 10-Yr Periphery EGB Spreads To Germany
- Germany: The 2-Yr yield is up 1.7bps at 2.264%, 5-Yr is up 0.3bps at 2.258%, 10-Yr is down 1bps at 2.395%, and 30-Yr is down 4.9bps at 2.582%.
- UK: The 2-Yr yield is up 0.5bps at 4.435%, 5-Yr is up 1.3bps at 4.334%, 10-Yr is up 1.3bps at 4.458%, and 30-Yr is up 2.5bps at 4.924%.
- Italian BTP spread down 0.7bps at 127.2bps / Spanish down 0.8bps at 70.8bps
MNI EGB OPTIONS: Largely Mixed Euribor Trade Seen Monday
Monday's Europe rates/bond options flow included:
- OEZ4 117.75/117.25 put spread paper paid 19.5 on 3K
- ERM5 98.00 / 98.50 call spread, bought for 12.5 in 10k vs 97.855 (23% delta).
- ERM5 98.12/98.37 call spread 4K given at 6.25.
- 0RZ4 97.875 puts vs 97.955 (40%d) paper sells 22.5k all day across 10.5 & 10.25.
MNI FOREX: USD Index Consolidates Opening Gap Lower as Presidential Election Looms
- US election odds narrowed this weekend, leaving the outcome of this week’s vote even more on a knife edge. With US 10 year yields roughly 10bps lower on the session, the USD index has held on to the majority of it’s opening gap lower, down around 0.4% as we approach the APAC crossover.
- This has created some notable gaps for the majors, most pronounced for the likes of USDJPY (-0.67%) and USDCHF (-0.78%), owing to their sensitivity to adjustments in core yields.
- USDJPY sits exactly 100 pips lower from last Friday’s close at 152.00, although the pullback appears technically corrective at this juncture with the trend condition remaining bullish. Firm support remains much further down at 148.99, the 50-day EMA, with initial support residing at 150.73 (20-day EMA).
- Slightly more moderate moves in EURUSD, although the pair did once again flirt above the 1.0900 handle for a lot of the session. Price hovers just above 1.0880, the 20-day EMA and a clear break of it would signal scope for a stronger recovery, towards the 50-day EMA at 1.0940 and the early October highs around the 1.10 mark.
- There were also some punchy range in EM, including notable recoveries for the likes of MXN and BRL following their very weak closes on Friday. USDMXN dipped as much as 1.68% to 19.96 before recovering to 20.10 in late trade, perhaps providing early signs of the likely volatility for the pair that has been such a feature of the past two US elections.
- Tuesday’s calendar highlights will be the RBA decision and US ISM Services PMI, however, market moves are likely to be contained as participants look ahead to not only the particularly consequential US election results, but the Fed and BoE decisions also later this week.
FX OPTIONS: Expiries for Nov05 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0830-50(E1.6bln), $1.0900(E1.3bln), $1.0915-30(E727mln), $1.0940-60(E1.5bln)
- USD/JPY: Y152.00($826mln), Y152.50($1.0bln), Y153.20-25($621mln), Y153.65($751mln)
- GBP/USD: $1.3000(Gbp523mln), $1.3115-30(Gbp1.0bln)
- AUD/USD: $0.6530-40(A$533mln), $0.6600-10(A$1.8bln)
EQUITIES
MNI US STOCKS: Late Equities Roundup: FERC Rejects Amazon Nuclear Power Plans
- Stocks have bounced off midday lows, S&P Eminis and Nasdaq indexes near steady while the DJIA continues to trade in the red late Monday. Little has changed since the last summary with Utilities and Communication Services sectors underperforming. Currently, the DJIA trades down 251.64 points (-0.6%) at 41800.92, S&P E-Minis down 11.25 points (-0.2%) at 5746.75, Nasdaq down 25.4 points (-0.1%) at 18214.46.
- Event risk tied to Tuesday's Presidential election and Thursday's FOMC rate decision has many accounts close to the sidelines, while the current earnings cycle still has a way to go. Expected after today's close: Diamondback Energy, AIG, Illumina, Vertex Pharmaceuticals, Wynn Resorts and Palantir Technology.
- Independent power and multi-energy providers weighed on the Utility sector after the Federal Energy Regulatory Commission voted against a proposed deal for a nuclear plant to be restarted to power an Amazon data center: Constellation Energy -11.51%, Public Service Enterprise Group -6.52, Vistra -3.01%. Interactive media and entertainment shares continued to weigh on the Communication Services sector: Comcast -2.16%, Alphabet -1.01%, Paramount -0.96%.
- Conversely, Energy and Real Estate sectors led gainers, oil and gas stocks underpinned by a rise in crude prices (WTI +2.01 at 71.50): EQT +4.10%, Exxon Mobil +2.76%, Diamondback Energy +2.4%. Real Estate investment trusts gaining: Simon Property Group +1.68%, UDR Inc +1.62%.
MNI EQUITY TECHS: E-MINI S&P: (Z4) Short-Term Bearish Threat
- RES 4: 6012.75 1.00 projection of the Aug 5 - Sep 3 - 6 price swing
- RES 3: 6000.00 Psychological handle
- RES 2: 5961.00 1.00 projection of the Sep 6 - 17 - 18 price swing
- RES 1: 5824.59/5927.25 20-day EMA / High Oct 17 and bull trigger
- PRICE: 5772.50 @ 07:10 GMT Nov 4
- SUP 1: 5732.50 Low Nov 1
- SUP 2: 5724.00 Low Oct 2
- SUP 3: 5637.60 38.2% retracement of the Aug 5 - Oct 17 bull cycle
- SUP 4: 5600.25 Low Sep 12
S&P E-Minis traded sharply lower last Thursday but the contract has found some support for now. Price has cleared both the 20- and 50-day EMAs - an important short-term bearish development. The break lower signals scope for an extension and has exposed the next support at 5724.00, the Oct 2 low. Clearance of this level would open 5637.60, a Fibonacci retracement. Initial firm resistance is 5824.59, the 20-day EMA.
MNI COMMODITIES: WTI Rises As OPEC Delays Unwind Of Production Cut
- Crude oil prices have rallied today, driven by OPEC’s decision to delay the start of its cut unwinding. A weaker USD is also supportive.
- WTI Dec 24 is up by 2.9% at $71.5/bbl.
- OPEC+ had originally planned to gradually return output of 2.2mb/d, starting with a 180kb/d increase in December.
- For WTI futures, initial resistance is at $72.34, the Oct 24 high, with key short-term resistance at $77.70, the Oct 8 high.
- Meanwhile, spot gold is broadly unchanged today, with the yellow metal less than 0.1% higher at $2,738/oz.
- The pullback from last week’s record high at $2,790 is considered corrective for now.
- Last week’s gains resulted in a breach of $2,685.6, the Sep 26 high, confirming a resumption of the primary uptrend. Sights are on the $2,800.0 handle next. Firm support is $2,712.8, the 20-day EMA.
- In contrast, copper has rallied by 1.4% to $443/lb today, amid renewed China stimulus hopes.
- China’s National People’s Congress Standing Committee held a meeting today where it discussed a plan to increase local governments’ debt ceiling to swap out their hidden debt, according to Bloomberg.
- A continuation higher would refocus attention on key resistance at $479.00, the Sep 30 high.
TUESDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 05/11/2024 | 0645/0745 | ** |  CH | Unemployment |
| 05/11/2024 | 0745/0845 | * |  FR | Industrial Production |
| 05/11/2024 | 1000/1000 | ** |  GB | Gilt Outright Auction Result |
| 05/11/2024 | - |  EU | ECB's De Guindos participate in ECOFIN Meeting | |
| 05/11/2024 | - |  US | US Presidential Election | |
| 05/11/2024 | 1330/0830 | ** | US | Trade Balance |
| 05/11/2024 | 1330/0830 | ** |  CA | International Merchandise Trade (Trade Balance) |
| 05/11/2024 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 05/11/2024 | 1430/1530 | EU | ECB's Lagarde speech at French Competition Authority's event | |
| 05/11/2024 | 1500/1000 | *** | US | ISM Non-Manufacturing Index |
| 05/11/2024 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 05/11/2024 | 1800/1300 | ** | US | US Note 10 Year Treasury Auction Result |
| 05/11/2024 | 1830/1330 | CA | BOC Minutes (Summary of Deliberations) | |
| 05/11/2024 | 1830/1930 | EU | ECB's Schnabel speech on Macroeconomic Policy | |
| 06/11/2024 | - |  SE | Riksbank Meeting |