EXECUTIVE SUMMARY
- MNI US-CHINA: Biden Admin Launches New Probe Into Chinese 'Legacy' Semiconductors
- MNI US: Trump Taps Miran As Top Economic Advisor
- MNI US DATA: New Home Sales Partially Rebound, But Prices Starting To Sag
- MNI US DATA: Volatile Aircraft Orders Cloud Improving Core Durable Trends
MNI US TSYS: TYH5 Briefly Through Technical Support, Yield Taps 4.5966% High
- Treasury futures continue to extend the low end of the day's range in late trade, TYH5 briefly traded through 108-16.5 support before bouncing to 108-17 after the bell. Curves steeper with short end rates outperforming (2s10s now at 25.015 vs. 19.960 low) - despite late 2s5s flattener block in late trade: 17,300 TUH5 102-21.38, slightly through the 102-21.25 post time offer vs. 15,300 FVH5 106-04.37, well through the 106-03.75 post time offer.
- Meanwhile, projected rate cuts into early 2025 look steady to slightly lower vs. this morning (*) as follows: Jan'25 steady at -2.1bp, Mar'25 -11.7bp (-13.7bp), May'25 -16.0bp (-18.8bp), Jun'25 -23.4bp (-25.3bp).
- Little reaction to a flurry of mixed data: November posted improved home sales figures compared with a soft October, but revised New home sales came in roughly as expected at 664k on a seasonally-adjusted annualized rate, up from 627k prior (upwardly revised from 610k), following on from data showing a 4.8% M/M increase in existing home sales in November to the highest level since March at 4.15M.
- Headline durable goods orders figure of -1.1% M/M, the "miss" vs -0.3% expected was offset by an upward revision to the prior growth reading to 0.8% from 0.3%. Transportation equipment - a typically volatile category - led the decline, falling -2.9% M/M, with nondefense aircraft/parts down 7.0%.
- Tsy $69B 2Y note auction (91282CME8) came out on the screws: 4.335% high yield vs. 4.335% WI; 2.73x bid-to-cover vs. 2.77x prior. Tuesday sees Tsy $28B 2Y FRN & $70B 5Y Note auctions.
NEWS
MNI US-CHINA: Biden Admin Launches New Probe Into Chinese 'Legacy' Semiconductors
US President Joe Biden’s Trade Representative, Katherine Tai, announced that the White House has launched an investigation into Chinese-made "legacy" semiconductors that could result in additional tariffs on 'mature-technology' chips that power autos, appliances, medical devices and other goods, according to Tai.
MNI US: Trump Taps Miran As Top Economic Advisor
US President-elect Trump has announced another round of executive nominations, including Stephen Miran to chair the Council of Economic Advisers – a three-member panel that advises the president on economic policy. Trump wrote on Truth Social: "Steve will work with the rest of my Economic Team to deliver a Great Economic Boom that lifts up all Americans".
MNI US-RUSSIA: Kremlin: 'Several Countries' Have Offered To Host Putin-Trump Talk
Reuters reporting that Kremlin foreign policy advisor Yuri Ushakov told reporters today that, "several countries had already offered to host talks between Russian President Vladimir Putin and U.S. President-elect Donald Trump, though he declined to say which."
MNI SECURITY: Progress Reported In Gaza Ceasefire Talks
Roi Kais at Kan reporting on X, per Saudi-owned Al-Sharq TV channel, that "there is significant progress," toward a ceasefire-for-hostage deal, "but there are still issues in dispute." Kais notes that, according to "informed Palestinian sources", Israel has agreed for the first time in the negotiations to "withdraw some of its forces from the Philadelphia axis, and also to withdraw completely from the Netzarim axis."
OVERNIGHT DATA
MNI US DATA: New Home Sales Partially Rebound, But Prices Starting To Sag
November posted improved home sales figures compared with a soft October, but revised New home sales came in roughly as expected at 664k on a seasonally-adjusted annualized rate, up from 627k prior (upwardly revised from 610k), following on from data showing a 4.8% M/M increase in existing home sales in November to the highest level since March at 4.15M.
- The October figure looks to have been depressed by hurricane activity, particularly in the South (which saw sales rebounding 14%). However, overall there has been some softening versus broader trends in activity, with the 2-month average existing sales at an 11-month low.
- Median new sales prices are down 6.3% Y/Y to the lowest since February 2022 ($402.6k) with supplies remaining robust: there are 8.9 months of inventory available, close to the 9.2 months in October, some of the highest figures seen outside of crises//immediately post-pandemic, and well above the 3.8 months of existing homes.
- High mortgage rates are impacting both new and existing home sales activities, but there remains greater stagnation on the existing side as current homeowners are finding the opportunity cost of moving too high. Conversely, homebuilders continue to provide incentives for new home buyers to help offset the high prevailing interest rates.
MNI US DATA: Volatile Aircraft Orders Cloud Improving Core Durable Trends
Indicators of durable goods activity were mixed in the November preliminary report, with headline figures disappointing amid upward revisions to prior data, and core indices beating expectations.
- On the headline durable goods orders figure of -1.1% M/M, the "miss" vs -0.3% expected was offset by an upward revision to the prior growth reading to 0.8% from 0.3%. Transportation equipment - a typically volatile category - led the decline, falling -2.9% M/M, with nondefense aircraft/parts down 7.0%.
- For perspective, the previous 6 months of % M/M nondefense aircraft orders starting in June were: -126.9%, -663.8%, -19.7%, -16.6%, 16.4%, and -7.0%.
- While durables ex-transportation orders likewise missed (-0.1% vs +00.3% expected, 0.2% prior unrevised), there were notable gains in core capital goods data for which orders rose 0.7% (0.1% expected, -0.1% prior upward rev 0.1pp) and shipments were up 0.5% (0.2% expected, 0.4% prior also rev up 0.1pp).
MNI CANADA DATA: Monthly Data Puts Q4 GDP On The Low Side Of BoC Expectations
GDP picked up by more than was anticipated in October, rising 0.3% M/M vs 0.2% survey for the highest readings since April - but this was overshadowed by the November advance estimate which showed the first monthly contraction of the year, at -0.1%.
- First looking at the October reading: the 3M/3M annual rate of GDP growth picked up to 1.7% (from 1.2% prior), with the annual rate rising to 1.9% (vs 1.7% prior, 1.6% expected), fastest sin 18 months. 12 of 20 sectors grew: sectors whose growth improved from September including manufacturing (0.3%, from 0.0% and highest since May), real estate (9-month high 0.5% M/M), and mining (2.4% for the first positive reading since June). The wholesale trade and retail sectors both decelerated but saw positive growth, with public administration relatively steady
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA down 26.41 points (-0.06%) at 42813.04
S&P E-Mini Future up 18.75 points (0.31%) at 6020
Nasdaq up 125.1 points (0.6%) at 19695.65
US 10-Yr yield is up 6.6 bps at 4.5885%
US Mar 10-Yr futures are down 14.5/32 at 108-16.5
EURUSD down 0.0025 (-0.24%) at 1.0405
USDJPY up 0.81 (0.52%) at 157.12
WTI Crude Oil (front-month) down $0.04 (-0.06%) at $69.43
Gold is down $11.69 (-0.45%) at $2611.14
European bourses closing levels:
EuroStoxx 50 down 9.35 points (-0.19%) at 4852.93
FTSE 100 up 18.11 points (0.22%) at 8102.72
German DAX down 35.98 points (-0.18%) at 19848.77
French CAC 40 down 2.16 points (-0.03%) at 7272.32
US TREASURY FUTURES CLOSE
3M10Y +6.943, 25.859 (L: 17.506 / H: 26.723)
2Y10Y +3.437, 24.209 (L: 19.96 / H: 25.015)
2Y30Y +2.272, 42.861 (L: 39.432 / H: 43.686)
5Y30Y -0.993, 33.37 (L: 32.026 / H: 35.211)
Current futures levels:
Mar 2-Yr futures down 1.875/32 at 102-20.625 (L: 102-20.375 / H: 102-23.25)
Mar 5-Yr futures down 8/32 at 106-2.5 (L: 106-01.75 / H: 106-11.75)
Mar 10-Yr futures down 14.5/32 at 108-16.5 (L: 108-15 / H: 109-00.5)
Mar 30-Yr futures down 26/32 at 113-22 (L: 113-18 / H: 114-19)
Mar Ultra futures down 36/32 at 119-2 (L: 118-29 / H: 120-07)
MNI US 10YR FUTURE TECHS: (H5) Trend Needle Points South
- RES 4: 112-02 Low Oct 14
- RES 3: 111-20+ High 6 and the bull trigger
- RES 2: 110-28 50-day EMA
- RES 1: 110-03+ 20-day EMA
- PRICE: 108-23 @ 1245 ET Dec 23
- SUP 1: 108-16+ Low Dec 19
- SUP 2: 108-12+ 1.382 proj of the Oct 1 - 14 - 16 price swing
- SUP 3: 108-00 1.500 proj of the Oct 1 - 14 - 16 price swing
- SUP 4: 107-19+ 1.618 proj of the Oct 1 - 14 - 16 price swing
The trend condition in Treasury futures remains bearish and short-term gains are considered corrective. Last week’s sell-off reinforces the current bear cycle. The contract has traded through key short-term support and the bear trigger at 109-02+, the Nov 15 low. The breach confirms a resumption of the downtrend and opens 108+12+, a Fibonacci projection. On the upside, initial firm resistance is at 110-03+, the 20-day EMA.
SOFR FUTURES CLOSE
Mar 25 -0.020 at 95.790
Jun 25 -0.025 at 95.875
Sep 25 -0.035 at 95.925
Dec 25 -0.035 at 95.960
Red Pack (Mar 26-Dec 26) -0.06 to -0.04
Green Pack (Mar 27-Dec 27) -0.075 to -0.065
Blue Pack (Mar 28-Dec 28) -0.08 to -0.075
Gold Pack (Mar 29-Dec 29) -0.09 to -0.08
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M +0.00220 to 4.33874
- 3M -0.00148 to 4.32594
- 6M -0.00462 to 4.27159
- 12M -0.01309 to 4.21088
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.30% (+0.00), volume: $2.330T
- Broad General Collateral Rate (BGCR): 4.28% (+0.02), volume: $849B
- Tri-Party General Collateral Rate (TGCR): 4.28% (+0.02), volume: $817B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $113B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $272B
FED Reverse Repo Operation
RRP usage climbs to $116.004B this afternoon from $98.356B last Friday - the lowest level since mid-April 2021. The number of counterparties climbs to 47 from 40 prior.
PIPELINE
12/16-12/23 No new issuance since December 12, $43.15B (likely) total issuance for December - better than December 2023 total of $28.1B.
MNI BONDS: EGBs-GILTS CASH CLOSE: Yields Head Higher Pre-Holiday
Bund and Gilt yields continued their ascent Monday.
- Core European FI dipped in the return from the weekend, with some pointing to commentary by ECB President Lagarde (telling the FT: "We’re getting very close to that stage when we can declare that we have sustainably brought inflation to our medium-term 2%"). OIS-implied ECB rates ticked only marginally higher, though.
- Bunds and Gilts would regain ground as oil prices faded and concerns over US-China trade tariffs simmered, but were weighed down by Treasuries toward the European cash close, with pre-Christmas US supply (2Y and 5Y today and Wednesday) eyed as a factor.
- There was little reaction to an unexpected softening in Q3 UK GDP in the final reading (0.1pp to 0.0%).
- Liquidity was thinned on account of the holidays, with Bund futures volumes at around 55% of typical recent levels.
- UK and German yields closed higher more or less in parallel, with the German short-end slightly outperforming.
- OATs underperformed, with French PM Bayrou set to unveil a new cabinet at 1730GMT/1830 local.
- There is a dearth of scheduled events Tuesday amid a limited session and ahead of Wednesday's holiday market closure.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 3bps at 2.057%, 5-Yr is up 3.8bps at 2.127%, 10-Yr is up 3.8bps at 2.323%, and 30-Yr is up 3.5bps at 2.553%.
- UK: The 2-Yr yield is up 3.4bps at 4.381%, 5-Yr is up 3.6bps at 4.326%, 10-Yr is up 3.6bps at 4.546%, and 30-Yr is up 4.9bps at 5.099%.
- Italian BTP spread up 0.9bps at 116.9bps / French OAT up 1.1bps at 81.5bps
MNI FOREX: USD Holds Firmer in Thin Trade
- The USD gained in thin trade on Monday, with volumes light and participation muted given the proximity to market closures on Dec24 for the holiday period. The USD Index retook the 108.00 handle after early weakness, keeping the cycle high and bull trigger within range at 108.541. Thinner markets were encapsulated by the soft volumes across currency futures posted Monday, evident in EUR futures trade holding over 25% below average, JPY futures 45% below average and GBP futures over 30% below expectations.
- Despite slippage into the Friday close, USDCAD remains well toward the upper-end of the recent range, with 1.4467 the initial target ahead of 1.4508 - the 3.236 proj of the Oct 17 - Nov 1 - 6 price swing. CAD GDP data did little to cap USD/CAD gains today, as political uncertainty (including the building argument within the Liberal Party for Trudeau to step down as prime minister. BoC minutes are due later today - covering the Dec11 rate decision at which the bank cut the lending rate by 50bps to 3.25%. Key for the release could be any expansion of the communications from the closing paragraphs of the Dec policy statement; that the BoC "will be evaluating the need for further reductions in the policy rate".
- The grind higher in US Treasury yields at the NY crossover added extra weight to GBP/USD, which ebbed lower slowly, but surely, over the European morning. The revision lower for Q3 GDP (down to flat for Q3) won't be helping, but the decline was been largely USD-led. The fade in the pair is still well clear of the Friday low, however prices are now back below the 1.2533 support - the 23.6% retracement for the post-Fed slip lower in the pair. Support seen more significant into 1.2476.
- The schedule Tuesday is understandably quiet, with many European markets closed, and an early close for UK assets. Markets don't return in earnest until Friday, Dec27.
TUESDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 24/12/2024 | 1330/0830 | ** |  US | Philadelphia Fed Nonmanufacturing Index |
| 24/12/2024 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 24/12/2024 | 1500/1000 | ** | US | Richmond Fed Survey |
| 24/12/2024 | 1630/1130 | * | US | US Treasury Auction Result for 5 Year Note |
| 24/12/2024 | 1630/1130 | ** | US | US Treasury Auction Result for 2 Year Floating Rate Note |