HIGHLIGHTS
- Treasuries recede to three week lows Friday, 10Y yield rising to 4.4046% as markets set sites on next Wednesday's final FOMC policy announcement for 2024.
- Curves bear steepened (2s10s +2.272 at 15.568) short end rates outperformed as another 25bp rate cut is widely expected but not certain amid current macro and political uncertainty.
- That said, the latest unemployment and inflation data have kept the FOMC on track to cut the federal funds rate by 25bp (to 4.25-4.50%) next Wednesday.
MNI US TSYS: Extending Late Session Lows, Curves Bear Steepen Ahead Next Wed's FOMC
- Treasuries traded steadily lower throughout Friday's session, initially mirroring weak action in Bunds and Gilts. By the close, the Mar'25 10Y contract slipped to 109-26 (-18) the lowest level since November 22, 10Y yield rising to 4.4046% high (+.0768).
- Initial technical support at 109-22 (76.4% Nov 15 - Dec 6 Upleg) followed by 109-20 (Low Nov 20/21).
- Curves bear steepened: 2s10s +2.272 at 15.568 as short end rates outperformed ahead of next week's FOMC policy announcement where another 25bp rate cut was expected but not certain amid current macro and political uncertainty. That said, the latest unemployment and inflation data have kept the FOMC on track to cut the federal funds rate by 25bp (to 4.25-4.50%) next Wednesday.
- Projected rate cuts into early 2025 look near steady to lower vs. this morning levels (*) as follows: Dec'24 cumulative -24.3bp (-23.7bp), Jan'25 -28.6bp (-29.6bp), Mar'25 -42.2bp (-43.9bp), May'25 -48.4bp (-50.5bp).
- No reaction to this morning's import/export prices, Monday brings flash S&P Global PMIs, Retail Sales, IP & Cap-U on Tuesday.
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.01527 to 4.38182 (-0.09548/wk)
- 3M -0.00985 to 4.34872 (-0.07800/wk)
- 6M -0.00004 to 4.26041 (-0.06901/wk)
- 12M +0.01441 to 4.13579 (-0.04500/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.62% (+0.00), volume: $2.262T
- Broad General Collateral Rate (BGCR): 4.60% (+0.00), volume: $842B
- Tri-Party General Collateral Rate (TGCR): 4.60% (+0.00), volume: $812B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.58% (+0.00), volume: $111B
- Daily Overnight Bank Funding Rate: 4.58% (+0.00), volume: $259B
FED Reverse Repo Operation
RRP usage falls to $135.777B Friday afternoon from $165.025B prior. Nearing last Friday's multi-year low of $130.014B (last seen at May 3 2021: $129.724B). The number of counterparties falls to 44 from 49 prior.
US SOFR/TREASURY OPTION SUMMARY
Option desks reported better two-way SOFR put interest on net Friday after early call interest became scarce as underlying futures continued to trade weaker in late trade, better 5- and 10Y Treasury put option interest as well. Projected rate cuts into early 2025 look near steady to lower vs. this morning levels (*) as follows: Dec'24 cumulative -24.3bp (-23.7bp), Jan'25 -28.6bp (-29.6bp), Mar'25 -42.2bp (-43.9bp), May'25 -48.4bp (-50.5bp).
SOFR Options
Block, 5,000 2QG5 96.37/96.62 call spds 5.5 ref 96.175
+4,000 SFRG5 95.87/96.00/96.12 call flys, 1.25
-7,000 0QH5 96.12 puts, 21 vs. 96.145/0.46%
+5,000 SFRF5 95.75/95.87 put spds, 5.5
+7,000 SFRG5 95.68/95.81/95.93/96.00 put condors, 0.75
-7,500 SFRH5 95.75 puts 5 vs 95.86/0.32%
+5,000 SFRH6 95.37 puts, 19.0 vs. 96.16/0.24%
+5,000 SFRZ5 95.62/96.12 2x1 put spds, 1.5
-2,000 SFRH5 95.87 calls, 9.5
+6,000 SFRG5 96.00/96.12/96.25 call flys, 1.0 95.89/0.05%
+5,000 SFRM5/SFRU5 97.00 call spds, 5.75
+4,000 SFRG5 96.00/96.12/96.25 call fly w/ SFRU5 96.25/96.50 call strip, 8.0 total db
-5,000 SFRZ4 95.62/95.68 call spds, 2.25
8,000 SFRF96.00/96.25 call spds, 1.75
+5,000 SFRH5 95.75/95.93/96.18 call flys, 4
Treasury Options:
2,500 TYG5 114/115 2x3 call spds ref 109-27.5
+5,000 TYF5 109.5 puts, 16 vs. 109-28/0.35%, total volume over 18k
3,000 TUH5 114 calls, 9 ref 109-28
over +13,500 TYF 110/111 call spds, 20 vs. 110-00.5/0.30%
3,500 FVF5 107/107.5/107.75/108.25 call condors ref 106-28
5,000 FVF5 107/107.5 2x3 call spds ref 106-29 to -28.75
4,000 TYF5/TYG5 110 straddle spds ref 110-02
15,000 TYF5 107.75/108.25/108.75 put flys ref 110-06.5
+/-7,000 wk2 TY 110.25 puts, 7-8
+5,000 wk3 TY 110.75/111.25 call spds 5 vs. 110-06/0.15%
-3,000 USU 116 puts, 27
MNI FOREX: EURJPY Extends Recovery, Rises 1% Back Above 161.00
- Higher core yields have further weighed on the Japanese Yen on Friday, boosting the latest USDJPY recovery comfortably back above 153.50, to the highest level since November 26. In similar vein, outperformance for the single currency has prompted a sharp 1% rally for EURJPY, with the cross briefly reaching initial resistance at the 50-day EMA, intersecting at 161.58.
- EURUSD printed a 1.0453 low overnight, however, notable expiries between 1.0500-1.0600 have helped the pair gravitate 0.25% higher on the session.
- GBP/USD traded to a new intraday low just ahead of the London close - placing the pair through the Dec02 low. 1.2563 is moderate support ahead of the bear trigger at 1.2487 - below which the underlying primary downtrend resumes. Momentum remains pointed lower, evident in the imminent formation of a death cross (50-dma < 200-dma) for GBP/USD in the coming sessions, the first since October last year - and only the third since the onset of the COVID pandemic in 2020.
- GBP weakness today comes on the back of the poor monthly UK GDP read this morning, but is more likely underpinned by strong demand for EUR/GBP off the lows, which re-entered an area of strong demand on this week's break lower - finding decent support as a result and rising back above 0.83 ahead of the weekend close.
- EURCHF is now ~100 pips above pre-SNB announcement levels, gathering momentum above the 50-day exponential moving average on Friday, placing the cross at its highest level in four weeks. A weekly close above this average would signal scope for a stronger recovery, targeting the early November highs at 0.9447 initially, before the 0.9500 handle.
- Focus next week will be on the central bank slate, with the FOMC and BOJ rate decisions. Eurozone flash PMIs are a notable data highlight.
MNI US STOCKS: Late Equities Roundup: Late Recover, Tech Stocks to the Fore
- Major averages drifted off midday lows late Friday, Nasdaq outperforming the DJIA and SPX Eminis as support for Information Technology sector shares gained momentum. Currently, the DJIA trades down 44.71 points (-0.1%) at 43870.08, S&P E-Minis down 3 points (-0.05%) at 6057.75, Nasdaq up 21.9 points (0.1%) at 19924.64.
- Technology stocks continued to lead gainers after Broadcom announced better than expected earnings and a huge jump in revenue tied to AI this morning, currently trading up over 24.45%. Knock on support carried over to Arista Networks +4.93%, Micron +3.26%, Teradyne +2.28%.
- Not all tech stocks continued to benefit, however, as Nvidia swung from +1.2% to -2.13%, Super Micro Computer -4.72%, AMD -3.60% and Microchip Technology -2.44%.
- Otherwise, Consumer Discretionary and Health Care sectors lead gainers in late trade, autos and apparel supported the former with Tesla +3.32%, Tapestry +2.70%, Deckers Outdoor +0.59%.
- Late support for the Health Care sector was driven by Centene Corp +3.93% after UBS analysts upgraded the provider to a buy, Molina +2.30%, UnitedHealth Group +2.16%.
- Metals and mining shares continued to weigh on the Material sector with Nucor declining another 4.82% after losing 5% on Thursday following several downgrades after raising quarterly dividends slightly ($0.54 to 0.55), Albemarle -4.63% and Steel Dynamics -3.81% on lower demand.
- Interactive media and entertainment shares weighed on the Communication Services sector with Paramount Global -3.48%, Electronic Arts -3.34% after a Cowen analyst estimated lower mobile revenues in Q4, Warner Brothers -3.16%, Charter Communications -2.55%.
- Slowing down into year end, still some notable earnings announcements expected next week from General Mills, Micron, Lennar, CarMax, Conagra, Cintas, FedEx, Nike and Carnival.
MNI EQUITY TECHS: E-MINI S&P: (Z4) Trend Needle Points North
- RES 4: 6200.00 Round number resistance
- RES 3: 6184.00 1.000 proj of the Nov 4 - 11 - 19 price swing
- RES 2: 6145.26 1.236 proj of the Aug 5 - Sep 3 - 6 price swing
- RES 1: 6111.00 High Dec 6 and the bull trigger
- PRICE: 6063.25 @ 15:26 GMT Dec 13
- SUP 1: 6028.33 20-day EMA
- SUP 2: 5976.25/5936.16 Low Nov 26 / 50-day EMA
- SUP 3: 5855.00 Low Nov 19
- SUP 4: 5814.75 Low Nov 6
The S&P E-Minis contract remains bullish and the latest pullback is considered corrective. Recent gains confirm a resumption of the uptrend and signal scope for a continuation near-term. Note that moving average studies are in a bull-mode set-up, highlighting a dominant uptrend and positive market sentiment. A resumption of the uptrend would open 6145.26, a Fibonacci projection. Initial support to watch lies at 6028.33 the 20-day EMA.
MONDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 16/12/2024 | 0700/0800 |  EU | ECB's Lagarde press conference with Bank of Lithuania | |
| 16/12/2024 | 0815/0915 | ** |  FR | S&P Global Services PMI (p) |
| 16/12/2024 | 0815/0915 | ** | FR | S&P Global Manufacturing PMI (p) |
| 16/12/2024 | 0815/0915 | EU | ECB's Lagarde speech on resilience amid geopolitical shift | |
| 16/12/2024 | 0830/0930 | ** |  DE | S&P Global Services PMI (p) |
| 16/12/2024 | 0830/0930 | ** | DE | S&P Global Manufacturing PMI (p) |
| 16/12/2024 | 0830/0930 | EU | ECB's Lagarde in panel on pillars of resilience | |
| 16/12/2024 | 0845/0945 | EU | ECB's De Guindos remarks at Madrid Foro Empresarial | |
| 16/12/2024 | 0900/1000 | ** |  IT | Italy Final HICP |
| 16/12/2024 | 0900/1000 | ** | EU | S&P Global Services PMI (p) |
| 16/12/2024 | 0900/1000 | ** | EU | S&P Global Manufacturing PMI (p) |
| 16/12/2024 | 0900/1000 | ** | EU | S&P Global Composite PMI (p) |
| 16/12/2024 | 0930/0930 | *** |  GB | S&P Global Manufacturing PMI flash |
| 16/12/2024 | 0930/0930 | *** | GB | S&P Global Services PMI flash |
| 16/12/2024 | 0930/0930 | *** | GB | S&P Global Composite PMI flash |
| 16/12/2024 | - |  CA | Canada presents fiscal update, time TBD. | |
| 16/12/2024 | 1315/0815 | ** | CA | CMHC Housing Starts |
| 16/12/2024 | 1330/0830 | ** |  US | Empire State Manufacturing Survey |
| 16/12/2024 | 1400/0900 | * | CA | CREA Existing Home Sales |
| 16/12/2024 | 1445/0945 | *** | US | S&P Global Manufacturing Index (Flash) |
| 16/12/2024 | 1445/0945 | *** | US | S&P Global Services Index (flash) |
| 16/12/2024 | 1630/1730 | EU | ECB's Schnabel speech at CEPR symposium | |
| 16/12/2024 | 1630/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 16/12/2024 | 1630/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 16/12/2024 | 2020/1520 | CA | BOC Governor Macklem speaks in Vancouver. |