HIGHLIGHTS
- Treasuries continued to ebb Tuesday, curves bear steepen (2s10s +4.280 at 9.106) in the lead up to Wednesday's key CPI data.
- MN Fed President Kashkari suggests a high CPI read required for rate to remain on hold in December.
- Large SFRZ4 sale (over 50k 95.565) continued to temper year end rate cut chances. Projected rate cuts into early 2025 compared to early Tuesday levels (*): Dec'24 cumulative -15.5bp (-17.2bp), Jan'25 -23.0bp (-25.2bp).
MNI US TSYS: Treasury Yields Climb to Late July Levels Ahead Wednesday's Oct CPI
- Treasuries continued to ebb in the lead-up to Wednesday's key October CPI inflation data, followed by PPI on Thursday. From our October CPI preview out today (PDF) - sequential core CPI is seen coming in basically the same as prior (roughly 0.30%), with headline edging up (0.20% vs 0.18% September).
- Initial technical support of 109-07 (Low Nov 6 and the bear trigger) remained intact as Dec'24 10Y futures traded down to 109-10 low, Tsy yields are back at late July levels (10Y tapped 3.654%) while the 2s10s curve bear steepened by 4.307 to 9.133 in late trade.
- Large SFRZ4 sale (over 50k 95.565) continued to temper year end rate cut chances. Projected rate cuts into early 2025 compared to early Tuesday levels (*): Dec'24 cumulative -15.5bp (-17.2bp), Jan'25 -23.0bp (-25.2bp), Mar'25 -36.0bp (-38.2bp), May'25 -41.8bp (-44.3bp).
- Minneapolis Fed President Kashkari suggests that it could take significant upside inflation surprises in the next two months to cause the Fed to deviate from cutting rates a third consecutive time at the next meeting: “If we saw inflation surprises to the upside between now and then, that might give us pause...It’d be hard to imagine the labor market really heats up between now and December. There’s just not that much time...There’d have to be a surprise on the inflation front to change the outlook so dramatically.”
- Cross market roundup: crude trades near steady (WTI +0.02 at 68.06, Gold -19.03 at 2,599.79, USD continues to rise.
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.00879 to 4.60769 (-0.03552 total last wk)
- 3M +0.00063 to 4.51680 (-0.03812 total last wk)
- 6M +0.01153 to 4.41260 (-0.01091 total last wk)
- 12M +0.02088 to 4.23960 (+0.02768 total last wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.60% (-0.22), volume: $2.184T
- Broad General Collateral Rate (BGCR): 4.57% (-0.25), volume: $816B
- Tri-Party General Collateral Rate (TGCR): 4.57% (-0.25), volume: $785B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.58% (-0.25), volume: $103B
- Daily Overnight Bank Funding Rate: 4.58% (-0.25), volume: $287B
FED Reverse Repo Operation:
RRP usage inches up to $178.814B from $163.621B last Friday. Usage fell to $144.243B on Tuesday, November 5 -- the lowest since May 6, 2021. The number of counterparties at 59 from 56 prior.
US SOFR/TREASURY OPTION SUMMARY
Option desks reported heavy two-way SOFR and Treasury option trade Tuesday, mixed positioning ahead of Wednesday's key CPI inflation data. Underlying futures weaker, lower half of range. Large SFRZ4 sale (over 50k 95.565) continued to temper year end rate cut chances. Projected rate cuts into early 2025 compared to early Tuesday levels (*): Dec'24 cumulative -15.5bp (-17.2bp), Jan'25 -23.0bp (-25.2bp), Mar'25 -36.0bp (-38.2bp), May'25 -41.8bp (-44.3bp).
SOFR Options:
-10,000 SFRF5 95.75/95.87/96.00 put flys, 1.5 ref 95.755
Block, 5,000 SFRH5 96.87 calls, 1.25 ref 95.75
Block, 13,900 SFRF5 96.87 calls, 0.5 ref 95.75
Block, 10,000 SFRH5 96.50 calls, 2.25 ref 95.75
Block, +26,750 SFRF5 96.50 calls, 1.0 ref 95.75
Block, 5,000 SFRM5 96.50/97.50/98.50 call flys, 6.0 ref 95.895
Block, +34,000 0QM5 95.00/95.50 put spds 8.25/splits ref 96.145
Block, 5,000 SFRZ5 96.25 puts, 55.5 vs. 96.065/0.56%
+5,000 SFRH5 95.56/95.75 2x1 put spds 1.0 ref 95.78
+5,000 0QH5 97.87 calls 1.0 ref 96.12
+7,000 SFRU5 98.25 calls, 2.5 vs. 95.965/0.03%
+25,000 0QM5 95.12/95.37 put spds 4.0 ref 96.14
+18,000 SFRZ4 95.56/95.62 call spds, 3.25 ref 95.565/0.16%
+7,000 0QF5 96.25/96.75 call spds vs 95.87 put 0.0 net ref 96.10
+10000 SFRX4 95.50 puts, 0.75 ref 95.565
+13,000 0QM5 95.12/95.37 put spds 4.0 ref 96.135
+10,000 SFRX4 95.50 puts, 0.75
Block, 5,200 0QZ4 95.68/95.87 put spds, 4.0 ref 96.075
Block, +5,000 SFRF5 95.75/95.87/96.00 put flys, 1.5 ref 95.77
Block, 5,000 SFRX4 95.25/95.37/95.50/95.62 call condors, 5.5 vs. 95.565/0.60%
Block, -18,500 SFRF5 95.62/95.75 put spds, 5.25/splits ref 95.77 to -.765
+30,000 SFRZ4 95.56/95.62 call spds, 3.25 ref 95.565 to -.57/0.16%
2,000 0QX4 95.93/96.00/96.06/96.25 broken put condors ref 96.075
2,500 SFRZ5 94.25/94.75/95.25 put flys ref 96.08
Block/screen, 6,500 2QH5 96.50 puts ref 96.175
9,750 SFRX4/SFRZ4 95.68 put calendar spd
+6,000 2QM5 96.87/97.37 call spds, 7.0 vs. 96.18/0.10%
Block/screen, 5,800 SFRX4 95.25/95.37/95.50 put flys, ref 95.565
1,500 0QZ4 96.00/96.25/96.50 2x1x1 put trees
Block, -10,000 SFRZ4 95.37/95.43/95.50/95.62 broken put condors, 4.5 ref 95.57
3,400 SFRZ4 95.56/95.62/95.68 put flys, ref 95.565 to -.57
Treasury Options:
-20,000 TYF5 107 puts, 12 ref 109-26
-30,000 TYZ4 108.5 puts, 6-5
-5,750 TYZ4 108.75/111 call spds, 62 ref 109-20.5
-4,000 TYG5 114.5 calls, 8
-10,000 USZ4 121/124 call spds 3
2,500 TYZ4 111 calls, 7 ref 109-24
2,000 USZ4 118.5/120 1x2 call spds
2,000 USF5 115/116 put spds vs. 118/119 call spds ref 117-22
+20,000 TYF5 108/109 put spds, 18 ref 110-00.5
MNI BONDS: EGBs-GILTS CASH CLOSE: UK Short End / Belly Underperforms
UK yields rose sharply Tuesday, with Bunds/periphery EGBs weakening.
- UK labour market data was the early session focus, and showed slightly stronger wages but slightly softer quantity data, with our macro team suggesting that the readings shouldn't really change any of the MPC voting intentions. Later in the morning, comments by BoE chief economist Pill saw little reaction.
- Overall though the central driving theme to global markets was the post-US election shift toward higher inflation expectations and US Treasury yields, which weighed once again across EGBs and Gilts.
- ECB and BoE pricing saw a slight bias toward fewer cuts (1-3bp) further into 2025, more pronounced in the UK which weighed on the short end of the curve.
- The UK curve bear flattened overall, with the belly slightly underperforming, with Germany's twist steepening.
- Periphery EGB spreads widened modestly, with an early tightening move fully reversed in the afternoon as equities retreated.
- The global focus Wednesday will be on US CPI, with the European calendar including French labour market data and an appearance by BOE's Mann.
Closing Yields / 10-Yr Periphery EGB Spreads To Germany
- Germany: The 2-Yr yield is down 0.5bps at 2.132%, 5-Yr is up 2.9bps at 2.184%, 10-Yr is up 3.5bps at 2.362%, and 30-Yr is up 1.1bps at 2.573%.
- UK: The 2-Yr yield is up 8.3bps at 4.498%, 5-Yr is up 8.9bps at 4.405%, 10-Yr is up 7.4bps at 4.499%, and 30-Yr is up 4bps at 4.913%.
- Italian BTP spread up 1.2bps at 127.9bps / Spanish up 1.8bps at 75.3bps
MNI EGB OPTIONS: Varied Bund Structures Feature Tuesday
Tuesday's Europe rates/bond options flow included:
- RXZ4 134.00/135.00/135.50 broken call fly, sold at 6 in 2k
- RXF5 135/136.5/138c fly, bought for 18.5 in 4k.
- RXF5 131.5/136.5^^ sold at 69.5 in ~4.1k.
- ERF5 97.62/97.87/98.12c fly sold at 7.5 in 2.5k.
- ERM5 98.00/98.50cs vs 97.50/97.25ps, sold the cs at 12.5 in 2.5k.
MNI FOREX: Bloomberg Dollar Index Rises to Highest Level Since November 2022
- Higher US yields and pressure on major equities have prompted an extension higher for the greenback on Tuesday, with the Bloomberg dollar index rising to the highest level in almost two years above 1280.
- The greenback bid has been broad based across G10, however the higher beta currencies such as GBP, AUD and NZD have exhibited relative underperformance.
- GBP (-1.03%) cements its position as the key laggard, with another pullback low at 1.2719 in late trade - this extends the losses on the break of the 200-dma earlier this morning, which had held as solid support back in August.
- The greenback remains the key catalyst here, as markets shrugged off the higher-than-expected wages numbers out ahead of the UK open. Short-term support at 1.2799 has also given way, but 1.2665 is seen as a more significant level, marking the reversal low from August.
- For EURUSD (-0.41%), we have also printed a new low on the year of 1.0595, and daily closes below the 1.06 mark will be carefully monitored in coming sessions. The pair remains in a clear downtrend and Monday’s bearish start to the week, plus Tuesday’s move lower, reinforces the current trend condition. Below here, notable levels include 1.0568, the Nov 2 2023 low and 1.0448, the Sep 3 2023 low and a key support.
- The higher yields have also lent support to USDJPY (+0.72%) which makes a push towards the 155.00 handle and is yet to be negatively affected by the reversal lower for major US indices ahead of the APAC crossover.
- US inflation data is the key focus for global markets on Wednesday. Analyst forecasts for October's CPI report show a central expectation that sequential inflation will come in relatively steady compared with September.
FX OPTIONS: Expiries for Nov13 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0600-05(E1.8bln), $1.0625-30(E1.1bln), $1.0650(E1.2bln), $1.0700-20(E1.2bln), $1.1000-16(E2.0bln)
- USD/JPY: Y153.00($740mln), Y155.40-50($703mln)
- EUR/GBP: Gbp0.8300-05(E892mln)
- AUD/USD: $0.6525-40(A$502mln)
- USD/CNY: Cny7.1000($1.0bln), Cny7.2000($931mln)
MNI US STOCKS: Paring Second Half Losses
- Stocks are bouncing off second half lows late Tuesday, in-line with position squaring theme ahead key CPI inflation and PPI data the next two sessions. Currently, the DJIA trades down 238.57 points (-0.54%) at 44055.9, S&P E-Minis down 6 points (-0.1%) at 6025.75, Nasdaq up 7.5 points (0%) at 19305.07.
- Materials and Utilities sectors continued to underperform in late trade, metals and mining stocks weighing on the former: Mosaic -8.24%, Albemarle -5.82%, FMC Corp -5.65%. Independent energy providers weighed on the Utility sector: Constellation -4.01%, AES -3.60%, Vistra -3.47%, NRG Energy -2.83%.
- On the flipside, Information Technology and Communication Services outperform in late trade, semiconductor stocks rebounding from Monday's sell-off: Adobe +4.53%, Nvidia +2.18%, Fortinet +1.90%. Interactive media and entertainment buoyed the Communication Services sector: Live Nation +4.14%, Fox Corp +2.26%, News Corp +1.68% and Netflix +1.32%.
- Earnings expected after today's close: Occidental Petroleum, Skyworks Solutions. Cisco expected late Wednesday, followed by Walt Disney, Applied Materials, Williams-Sonoma, Copart and Cogent Biosciences on Thursday.
MNI EQUITY TECHS: E-MINI S&P: (Z4) Bulls Remain In The Driver’s Seat
- 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: 6053.25 High Nov 11
- PRICE: 6023.50 @ 1500 ET Nov 12
- SUP 1: 5927.25 High Oct 17 and a recent breakout level
- SUP 2: 5863.50/5724.25 20-day EMA / Low Nov 4
- SUP 3: 5675.25 Low Sep 18
- SUP 4: 5658.00 Low Sep 13
Bullish conditions in S&P E-Minis remain intact and the contract is holding on to its recent gains. A key short-term support has been defined at 5724.25, the Nov 4 low. The latest rally resulted in a breach of the bull trigger at 5927.25, Oct 17 high, confirming a resumption of the primary uptrend. The 6000.0 psychological handle has been pierced. Sights are on 6070.16, a Fibonacci projection. Initial support is at 5927.25, the Oct 17 high.
MNI COMMODITIES: Gold Corrective Bear Cycle Extends, Crude Closing Higher
- Spot gold has fallen by another 0.7% to $2,600/oz, as higher US yields and pressure on major equity indices has prompted further gains for the US dollar.
- The move brought the yellow metal below the $2,600 level earlier for the first time since September 20, down more than 5% since last week’s US election.
- The latest pullback appears to be corrective, although recent weakness has resulted in a breach of the 50-day EMA, signalling scope for a deeper retracement towards $2,547.0, the Sep 18 low.
- Meanwhile, copper has fallen by another 2% to $414/lb, its lowest level for two months.
- The move reinforces a bearish theme, with attention turning to $404.20, the Sep 5 low.
- Crude has oscillated between gains and losses today but is closing the day trading higher. Demand remains the key focus amid OPEC’s further reduction growth forecast. Meanwhile, soft China economic data and the continued USD strength also weigh on prices.
- WTI Dec 24 is up by 0.4% at $68.3/bbl.
- OPEC cut its oil demand growth forecast for a fourth consecutive month. It expects demand to grow by 1.82mn bpd this year and 1.54mn bpd next year, down from 1.93mn bpd and 1.64mn bpd, respectively.
- A bearish theme in WTI futures remains intact and an extension lower would expose $65.99, the Oct 1 low. Initial resistance is $72.88, the Nov 7 high.
WEDNESDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 13/11/2024 | 0945/0945 |  GB | BOE's Mann at Female Central Bankers panel | |
| 13/11/2024 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 13/11/2024 | 1200/0700 | ** |  US | MBA Weekly Applications Index |
| 13/11/2024 | 1330/0830 | *** | US | CPI |
| 13/11/2024 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 13/11/2024 | 1445/0945 | US | Dallas Fed's Lorie Logan | |
| 13/11/2024 | 1800/1300 | US | St. Louis Fed's Alberto Musalem | |
| 13/11/2024 | 1830/1330 | US | Kansas City Fed's Jeffrey Schmid | |
| 13/11/2024 | 1900/1400 | ** | US | Treasury Budget |
| 14/11/2024 | 0030/1130 | *** |  AU | Labor Force Survey |