Source: AP, MNI, mapchart.net
US
MNI US ELECTIONS: AP Calls Presidency For Trump
The Associated Press has called the presidential election for former President Donald Trump. The call on the presidency comes after AP called Wisconsin for Trump, putting him on 277 electoral college votes, over the 270 threshold. The AP call is viewed as the 'gold standard' of election declarations in the US.
- A second term in the Oval Office for Trump comes alongside the Republicans retaking control of the Senate with at least 51 seats with seven seats still to be called. Focus now turns to the House and whether a the GOP can achieve a clean sweep.
- After pre-election expectations of one of the closest contests in history, the relatively swift calling of the election (notably in comparison to 2020) has come as something of a surprise to many observers. Rather than Trump and Democratic nominee Kamala Harris splitting the sun belt and rust belt states between them, Trump looks on course to win all seven states highlighted as battleground states before the vote.
- Concerns of civil unrest around the election do not look set to be borne out, with the efficient and transparent count in many states limiting the prospect of accusations of malign interference.
- DDHQ gives a 57.9% probability that the Republicans win a majority in the House, but with the caveat that the advantage could be the most slender 218-217 member margin. If this scenario comes to fruition it could make policy enactment difficult despite the GOP holding the presidency and both chambers of Congress. This is given the experience over the past two years of recalcitrant GOP Reps. voting against Republican speakers on key legislation.
NEWS
MNI BRIEF: Must See US Policies Before Assessing-ECB's Guindos
ECB policymakers will need to assess the policies of the incoming administration of President Donald Trump before any adjustments to its own policy considerations, ECB vice president Luis de Guindos said Wednesday. "I cannot make an assessment of the U.S. policies now, obviously, but we must wait to see them," he told a conference in London hosted by the European Economics and Financial Centre. "To speculate now is a little premature, let’s wait and see."
MNI POLITICAL RISK: Germany Set For Snap Election By End-March
Confirming earlier wire headlines, German Chancellor Scholz tells reporters from multiple outlets that he will call for a snap election by the end of March 2025, with a vote of confidence to be held on January 15. This comes after Scholz dismissed Finance Minister Lindner following the collapse of Traffic Light coalition (SPD, Greens, FDP) talks late Wednesday.
- Speculation over the collapse of the coalition had been swirling, though a gov't spokesman had said Monday that the coalition had been expected to continue until the next regular election. Scholz's decision brings forward the election from its next scheduled date of September 2025. Coming into this week, analysts had eyed March 9 as a possible early election date.
MNI US TSYS: Kamala Concedes, Focus Turns To Thursday's FOMC
- Treasuries look to finish broadly weaker but off lows in heavy post-election trade (TYZ4>3.8M). Vice President Harris reportedly called Trump to concede and is expected to address the nation later this evening.
- The Dec'24 10Y contract tapped 109-07 low (10Y yld 4.4768% high) before see-sawing to session high of 109-23.5 high briefly after a strong $25B 30Y Bond auction stopped 2.2bp through (4.608% high yield vs. 4.630% WI; 2.64x bid-to-cover vs. 2.50x in the prior month).
- Spot gold has fallen by 2.8% to $2,666/oz today, reflecting the impact of higher US yields and associated greenback strength, as well as heavy positioning, following the outcome of the US election.
- Some late session volatility amid headlines that German Chancellor Scholz has asked the president to dismiss the Christian Ludner, the current finance minister.
- Focus turns to Thursday's FOMC policy announcement. While chances of a a 25bp cut hold steady, projected rate cuts into early 2025 have cooled vs. late Tuesday levels (*): Nov'24 cumulative steady at -24.6bp, Dec'24 -42.7bp (-44.2bp), Jan'25 -52.7bp (-57.7bp), Mar'25 -68.4bp (-74.6bp).
OVERNIGHT DATA
MNI US DATA: Refis Slide Further On Continued Mortgage Rates Climb
- MBA composite mortgage applications slid -10.8% last week (sa), a sixth consecutive weekly decline after broadly pausing the week prior when higher new purchase applications offset lower refis.
- The story was much clearer cut this week, with refis tumbling -18.5% after -6.3% and new purchases -5.1% after +5.0%.
- Refi applications have more than halved since late September for their lowest since May, unwinding a rebound that had been seen as mortgage holders had looked to benefit from lower rates.
- Instead, 30Y conforming rates increased a further 8bp to 6.81% after the prior week’s 21bp jump, for a 67bp increase from late September levels. A further headwind is in store for applications with 10Y Treasury yields currently 18bps higher than the 4.28% averaged in the week to Nov 1.
- Note that on regular-jumbo loan spreads, the previous week’s sizeable increase to -4bps looks to have been an anomaly with the spread widening back to a more typical -17bps.
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA up 1507.82 points (3.57%) at 43739.06
S&P E-Mini Future up 144.25 points (2.48%) at 5958.25
Nasdaq up 523 points (2.8%) at 18966
US 10-Yr yield is up 16.5 bps at 4.4354%
US Dec 10-Yr futures are down 29.5/32 at 109-15.5
EURUSD down 0.0196 (-1.79%) at 1.0734
USDJPY up 2.92 (1.93%) at 154.54
WTI Crude Oil (front-month) down $0.04 (-0.06%) at $71.95
Gold is down $83.07 (-3.03%) at $2660.87
European bourses closing levels:
EuroStoxx 50 down 69.7 points (-1.43%) at 4800.63
FTSE 100 down 5.71 points (-0.07%) at 8166.68
German DAX down 216.96 points (-1.13%) at 19039.31
French CAC 40 down 37.54 points (-0.51%) at 7369.61
US TREASURY FUTURES CLOSE
3M10Y +16.056, -10.503 (L: -30.182 / H: -7.273)
2Y10Y +6.489, 15.498 (L: 6.787 / H: 19.299)
2Y30Y +7.778, 33.009 (L: 23.21 / H: 39.333)
5Y30Y +4.357, 32.743 (L: 26.572 / H: 37.314)
Current futures levels:
Dec 2-Yr futures down 4.75/32 at 102-23.125 (L: 102-21.375 / H: 102-29.75)
Dec 5-Yr futures down 14.5/32 at 106-21.75 (L: 106-15.5 / H: 107-09.5)
Dec 10-Yr futures down 30/32 at 109-15 (L: 109-07 / H: 110-21.5)
Dec 30-Yr futures down 67/32 at 116-2 (L: 115-10 / H: 118-21)
Dec Ultra futures down 108/32 at 122-20 (L: 121-13 / H: 126-25)
MNI US 10YR FUTURE TECHS: (Z4) Southbound
- RES 4: 112-22 High Oct 16 and a key short-term resistance
- RES 3: 112-11+ 50-day EMA
- RES 2: 112-07 High Oct 21
- RES 1: 110-21+/111-12+ Intraday high / 20-day EMA
- PRICE: 109-16 @ 1520 ET Nov 6
- SUP 1: 109-07 Intraday low
- SUP 2: 109-05 76.4% retracement of the Apr - Sep bull cycle (cont)
- SUP 3: 109-00 Round number support
- SUP 4: 108-15 2.0% 10-dma envelope
A bear cycle in Treasuries remains in play and today's extension reinforces current conditions. The contract has cleared the 110.00 handle and this signals scope for a move towards 109-05 next, the 76.4% retracement of the Apr - Sep bull cycle (cont). The 109-00 handle remains exposed too. Initial firm resistance is seen at 111.12+, the 20-day EMA. Short-term gains would be considered corrective.
SOFR FUTURES CLOSE
Dec 24 -0.025 at 95.590
Mar 25 -0.065 at 95.845
Jun 25 -0.090 at 96.015
Sep 25 -0.105 at 96.105
Red Pack (Dec 25-Sep 26) -0.125 to -0.11
Green Pack (Dec 26-Sep 27) -0.145 to -0.13
Blue Pack (Dec 27-Sep 28) -0.175 to -0.155
Gold Pack (Dec 28-Sep 29) -0.19 to -0.18
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M +0.00248 to 4.63256 (-0.01944/ wk)
- 3M -0.00040 to 4.52226 (-0.03203/wk)
- 6M +0.01611 to 4.39641 (-0.01557/wk)
- 12M +0.04832 to 4.19947 (+0.00843/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.82% (+0.00), volume: $2.235T
- Broad General Collateral Rate (BGCR): 4.81% (-0.01), volume: $803B
- Tri-Party General Collateral Rate (TGCR): 4.81% (-0.01), volume: $778B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.83% (+0.00), volume: $96B
- Daily Overnight Bank Funding Rate: 4.83% (+0.00), volume: $230B
FED Reverse Repo Operation
RRP usage bounces to $177.871B from Tuesday's $143.243B -- the lowest since May 6, 2021. The number of counterparties rise to 57 from 50 prior.
EGBS
MNI BONDS: EGBs-GILTS CASH CLOSE: German Curve Twist Steepens On US Election Impact
Bunds outperformed Gilts Wednesday in the wake of the US election, with periphery EGB spreads widening sharply.
- With the election delivering an apparent "Republican Sweep" of the presidency and US Congress, EGBs began pricing in the negative impact on Eurozone growth from Trump administration policies (including tariffs) and relatively higher economic growth/inflation in the US. This translated into more aggressive ECB cut pricing, leading to a rally at the short end of core EGB curves.
- ECB's de Guindos said the bank would need time to incorporate the trade policy shifts into its projections. Even so, December cut pricing extended 4bp to ~32bp (28% prob of a 50bp cut) but pared that slightly to 30bp by the close. Still, there has now been 17bp of cuts added to the ECB cut path through Sept 2025 (133bp of cuts now seen vs 116bp at Tuesday's close).
- Gilts were relatively less affected, with the UK seen as less impacted by US post-election policy than the Eurozone.
- Stronger-than-expected German factory orders data was shrugged off in comparison to the post-election macro concerns for growth.
- Both the UK and German curves twist steepened. Despite the move in ECB implied, risk-off sentiment in Europe dominated for periphery EGBs, with BTPs leading spread widening (10Y/Bund +8bp).
- Thursday's schedule is highlighted by central banks, including the BoE (preview here) and Fed. We would be very surprised by anything other than a 25bp cut from the BoE (and Fed) Thursday, but we will be eying whether the Bank's inflation forecasts come in higher than expected.
Closing Yields / 10-Yr Periphery EGB Spreads To Germany
- Germany: The 2-Yr yield is down 12.7bps at 2.176%, 5-Yr is down 8.5bps at 2.207%, 10-Yr is down 2bps at 2.405%, and 30-Yr is up 4.1bps at 2.65%.
- UK: The 2-Yr yield is down 0.3bps at 4.51%, 5-Yr is up 1.1bps at 4.445%, 10-Yr is up 3.3bps at 4.563%, and 30-Yr is up 5.5bps at 5.013%.
- Italian BTP spread up 8.1bps at 132.7bps / Spanish up 4.5bps at 74.8bps
MNI FOREX: USD Index Consolidating 1.65% Advance Following US Election
- The substantial victory for Donald Trump in the US election has prompted a surge of greenback strength. The USD index is currently 1.65% higher on the session, and the most notable underperformers are the Euro and the Japanese yen, reacting to the significant hawkish repricing in US rates.
- Today's EURUSD (-1.78%) slide is the largest since the onset of COVID, and the pickup in downside momentum has resulted in a break of a long-held trendline support drawn off the October '23 low (crossing at 1.0774 today).
- Below here, attention turns to 1.0666, the June 26 low and a key support. Protracted weakness would place focus on 1.0611, the 38.2% retracement of the Sep ‘22 - Jul ‘23 bull cycle.
- The USDJPY trend needle continues to point north, and today’s rally reinforces current conditions. The pair has extended above 153.88, the Oct 28 high, to highlight a resumption of the uptrend.
- A continuation higher would open 155.27, a Fibonacci projection. This level matches closely to the July 30 high of 155.22, a level traded one day prior to the BOJ hike and ensuing sharp move lower for USDJPY across early August.
- Central bank’s headline the G10 calendar on Thursday, with the Riksbank, Norges Bank, the BOE and the Fed all deciding on rates. The FOMC is on course to cut the Fed funds rate by 25bp as it takes another step in paring back restraint.
THURSDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 07/11/2024 | 0700/0800 | ** |  DE | Trade Balance |
| 07/11/2024 | 0700/0800 | ** | DE | Industrial Production |
| 07/11/2024 | 0700/0800 |  SE | Flash CPI | |
| 07/11/2024 | 0800/0900 | ** |  ES | Industrial Production |
| 07/11/2024 | 0810/0910 |  EU | ECB's Schnabel remarks at Money Market conference | |
| 07/11/2024 | 0830/0930 | *** | SE | Riksbank Interest Rate Decison |
| 07/11/2024 | 0830/0930 | ** | EU | S&P Global Final Eurozone Construction PMI |
| 07/11/2024 | 0900/1000 | *** |  NO | Norges Bank Rate Decision |
| 07/11/2024 | 1000/1100 | ** | EU | Retail Sales |
| 07/11/2024 | 1045/1145 | EU | ECB's Elderson in panel on climate leadership | |
| 07/11/2024 | 1200/1200 | *** |  GB | Bank Of England Interest Rate |
| 07/11/2024 | 1200/1200 | *** | GB | Bank Of England Interest Rate |
| 07/11/2024 | 1230/1230 | GB | BoE Press Conference | |
| 07/11/2024 | - | *** |  CN | Trade |
| 07/11/2024 | 1330/0830 | *** |  US | Jobless Claims |
| 07/11/2024 | 1330/0830 | ** | US | Preliminary Non-Farm Productivity |
| 07/11/2024 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 07/11/2024 | 1330/1430 | EU | ECB's Lane speech on Public Debt | |
| 07/11/2024 | 1400/1400 | GB | Monthly Decision Maker Panel Data | |
| 07/11/2024 | 1400/0900 |  CA | BOC Deputy Mendes gives opening remarks before a lecture. | |
| 07/11/2024 | 1430/1530 | EU | ECB's Lane in panel on Lesson Learnt in Past Crises | |
| 07/11/2024 | 1500/1000 | ** | US | Wholesale Trade |
| 07/11/2024 | 1530/1030 | ** | US | Natural Gas Stocks |
| 07/11/2024 | 1630/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 07/11/2024 | 1630/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 07/11/2024 | 1900/1400 | *** | US | FOMC Statement |
| 07/11/2024 | 2000/1500 | * | US | Consumer Credit |
| 08/11/2024 | 2330/0830 | ** |  JP | Household spending |
| 08/11/2024 | 0001/0001 | ** | GB | KPMG/REC Jobs Report |
| 08/11/2024 | 0230/0230 | GB | BOE's Breeden at Singapore Fintech Festival |