EXECUTIVE SUMMARY
- MNI BRIEF: December Fed Cut 'Absolutely Not' Off Table - Daly
- MNI SOUTH KOREA: National Assembly Passes Resolution To Lift Martial Law
- MNI SOUTH KOREA: Martial Law Commander Threatens Crackdown On Any Protest & Strikes
- MNI US TSYS: Curves Twist Steeper As Geopol Risk Eases, Focus on ADP, Chair Powell
- MNI US DATA: JOLTS Quits Rate Sees First Rounded Increase Since May 2023
US
MNI BRIEF: December Fed Cut 'Absolutely Not' Off Table - Daly
A December interest rate cut is "absolutely not" off the table despite recent bumpy progress in bringing inflation back to 2%, as the Fed's benchmark overnight rate remains well above her estimate of neutral at around 3%, Federal Reserve Bank of San Francisco President Mary Daly said Tuesday.
- "In order to keep the economy in a good place, we have to continue to recalibrate policy now, whether it'll be in December or sometime later. That's a question we'll have a chance to debate and discuss at our next meeting. But the point is, we have to keep policy moving down to accommodate the economy, because we want a durable expansion with low inflation," she said in a Fox Business interview.
MNI BRIEF: Fed's Goolsbee Sees Rates Down 'Fair Amount' In '25
Federal Reserve Bank of Chicago President Austan Goolsbee reiterated interest rates over the next year need to come down "a fair amount" from where they are now, citing a labor market near full employment and inflation on a path to 2%. "Over the next year, it feels like rates come down a fair amount from where they are now," he said at a Crain's Chicago event, stressing the importance of lags in the impact of policy. "If your approach is I'm just going to wait until I see that it's already been accomplished – that the trailing 12 months of inflation is already 2% – almost certainly it will be too late and and the negative impact will still be to come."
MNI: Fed’s Kugler-Policy 'Well Positioned' For Uncertainty
Federal Reserve policy is in a good place to deal with possible risks to the central bank’s dual mandate of stable prices and maximum employment, Fed Governor Adriana Kugler said Tuesday. “It is important to emphasize that policy is not on a preset course. I will make decisions meeting by meeting and carefully assess incoming data, the evolving outlook, and the balance of risks. I view our current policy setting as well positioned to deal with any uncertainties we face in pursuing both sides of our dual mandate," she said in prepared remarks to the Detroit Economic Club.
NEWS
MNI US: GOP To Pass Reconciliation Bill Within 30 Days Of Trump Presidency, Thune
Incoming Senate Majority Leader John Thune (R-SD) "laid out an ambitious timeline" for budget reconciliation during a five-hour all-conference Republican policy retreat today, according to Punchbowl News. Thune said he wants to pass a non-tax reconciliation bill within the first 30 days of the Trump administration, referring to the manoeuvre by which the party in control of Congress can pass legislation without support from the minority party.
MNI SOUTH KOREA: National Assembly Passes Resolution To Lift Martial Law
Yonhap is reporting that the National Assembly has passed a resolution lifting the imposition of martial law by President Yoon Suk-yeol. Yonhap: "the resolution demanding the lifting of martial law was passed with 190 votes in favor [...] out of 190 members present. The Speaker's Office said, "The declaration of martial law is invalid with the passage of the resolution to lift martial law." Yonhap: "Article 77, Paragraph 5 of the Constitution states that "When the National Assembly requests the lifting of martial law with the consent of a majority of its members, the President must lift it."
MNI SOUTH KOREA: YTN-Def Min Says Martial Law Remains In Place Until Pres. Lifts It
South Korean outlet YTN is reporting that according to the Ministry of National Defense, martial law will remain in place until the president lifts the measures. Below is an abridged transcript from YTN. The situation remains fluid with all focus now on President Yoon (on whether he issues orders to lift martial law) and the Ministry of National Defense and the leadership of the armed forces (on whether they maintain their stance of waiting for the president's orders or follow the National Assembly's instructions to lift martial law).
MNI SOUTH KOREA: KRW NDFs Probe Multiyear Highs - FinMin/CB Response Awaited
Martial law headlines continuing to make themselves felt across KRW markets and beyond - spot KRW is markedly weaker, as markets clearly concerned over the ramifications of the measures. The installation of martial law effectively means that all activities at Parliament are banned going forward, and all media and publishers are now under direct control of the military.
MNI SOUTH KOREA: Martial Law Commander Threatens Crackdown On Any Protest & Strikes
Army Chief of Staff Gen. Park An-soo, appointed by President Yoon Suk-yeol as commander of martial law, has issued the first official proclamation under said martial law. The proclamation states "All political activities, including activities of the National Assembly, local assemblies, political parties, political associations, rallies, and demonstrations, are prohibited." Park: "Any act that denies or attempts to overthrow the liberal democratic system is prohibited, and fake news, manipulation of public opinion, and false propaganda are prohibited...all media and publications are under martial law control."
MNI ECB: Holzmann Sees Likelihood Of December Rate Cut
Bloomberg reports Austria Central Bank Governor Holzmann saying in an interview with Oberoesterreichische Nachrichten that he sees a likelihood for a moderate rate cut in December. It’s admittedly nothing hugely new, seeing as he said on Nov 21 that a December cut was the likeliest outcome but not certain as he saw a need for policy to stay restrictive amid price risks, although it’s still coming from one of the ECB’s ardent hawks.
MNI BRIEF: Eurogroup To Call For Discipline As France In Crisis
Eurozone finance ministers will call for "discipline, commitment and respect" for EU fiscal rules when they meet in Brussels on Monday, in a message which while not mentioning France’s government crisis will be meant partly as a plea to that country’s politicians, officials in Brussels told MNI. While there will be "big discussion" on France in the room during the Eurogroup meeting it is likely to be a very live topic "in the corridors", one official said, in response to news the French government faces a confidence vote after refusing to soften plans for EUR60 billion in fiscal tightening in 2025.
MNI SECURITY: Netanyahu: "We Are In Ceasefire With Hezbollah, Not End Of War"
Reuters reporting comments from Israeli Prime Minister Benjamin Netanyahu amid signs of strain in the ceasefire with Hezbollah, enacted last Wednesday. Netanyahu says: "We are currently in a ceasefire with Hezbollah, not the end of the war." Adds: "We are enforcing this ceasefire with an iron fist, acting against any violation - minor or serious."
MNI US TSYS: Curves Twist Steeper As Geopol Risk Eases, Focus on ADP, Chair Powell
- Treasuries look to finish mostly lower Tuesday, at/near late session lows, curves steeper with the short end bucking the move - well bid on the back of additional dovish Fed speak.
- Currently, Mar'25 2Y futures are +1.5 at 103-01.62, 10s -5.5 at 110-30 -- well off this morning's gap bid in response to South Korea President Yoon Suk Yeol surprise emergency martial law declaration, "accusing the country’s opposition of controlling the parliament, sympathizing with North Korea and paralyzing the government with anti-state activities" (APW).
- Dec'24 10Y futures tap 111-11 high (+8), through initial resistance at 111-09 (yesterday's high) focus on 111-13 (50-day EMA) followed by 111-26 (High Oct 22).
- Curves finishing steeper near highs as intermediate to long end underperforms, 2s10s +10.960 at 1.558 vs. 3.330 high, after the SK President rescinded the martial law order.
- Treasury futures pare support after broadly higher than expected JOLTS job gains data: Job openings were higher than expected in October at 7.744m (cons 7.52m) after a modestly downward revised 7.37m (initial 7.44m) in September, leaving them back closer to the 7.86m in August. Quits rate: 2.09% after 1.95 (initial 1.93) in July. 2019 av 2.33, 2017-18 av 2.20.
- While markets keep an eye on South Korea overnight, US focus turns to ADP private employment and ISM data Wednesday while Fed Chairman Powell will speak at a moderated policy discussion at 1340ET.
OVERNIGHT DATA
MNI US DATA: JOLTS Quits Rate Sees First Rounded Increase Since May 2023
The JOLTS report saw higher-than-expected job openings in Oct that were partly offset by a downward revision to Sept. The quits rate data were more notable, lifting from 1.95 to 2.09% for the highest since May and its first monthly increase on a rounded basis since May 2023 (it had seen four unrounded increases since that didn't alter a clear downward trend). It’s an increase off what had been the lowest quit rates since 1H15.
- Job openings were higher than expected in October at 7.744m (cons 7.52m) after a modestly downward revised 7.37m (initial 7.44m) in September, leaving them back closer to the 7.86m in August.
- The rate to unemployed nudged up to 1.11 after 1.08 (initial 1.09). There was an approximately 0.02pp downward bias to this ratio from the already known 150k increase in unemployment in October.
- The ratio to unemployment has stabilized at ~1.1 since July at levels last seen in mid-2021. It clearly remains low by recent standards having averaged 1.21 in Q2 for close to the 1.19 seen in 2019 although is still elevated compared to earlier pre-pandemic years such as the 1.00 averaged in 2017-18.
- Quits rate: 2.09% after 1.95 (initial 1.93) in July. 2019 av 2.33, 2017-18 av 2.20.
- Private quits: 2.32% after 2.15 (initial 2.13) in May. 2019 av 2.59, 2017-18 av 2.45.
MNI: US REDBOOK: NOV STORE SALES +5.5% V YR AGO MO
- US REDBOOK: STORE SALES +7.4% WK ENDED NOV 30 V YR AGO WK
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA down 75.9 points (-0.17%) at 44706.4
S&P E-Mini Future up 2.5 points (0.04%) at 6064
Nasdaq up 76.5 points (0.4%) at 19479.84
US 10-Yr yield is up 4.1 bps at 4.2303%
US Mar 10-Yr futures are down 7/32 at 110-28.5
EURUSD up 0.001 (0.1%) at 1.0509
USDJPY down 0.12 (-0.08%) at 149.48
WTI Crude Oil (front-month) up $1.91 (2.8%) at $70.01
Gold is up $3.01 (0.11%) at $2642.21
European bourses closing levels:
EuroStoxx 50 up 31.78 points (0.66%) at 4878.51
FTSE 100 up 46.52 points (0.56%) at 8359.41
German DAX up 83.13 points (0.42%) at 20016.75
French CAC 40 up 18.53 points (0.26%) at 7255.42
US TREASURY FUTURES CLOSE
3M10Y +5.481, -22.772 (L: -31.352 / H: -22.19)
2Y10Y +4.682, 5.28 (L: 0.804 / H: 5.875)
2Y30Y +5.074, 22.875 (L: 18.244 / H: 23.643)
5Y30Y +2.031, 29.381 (L: 27.289 / H: 30.182)
Current futures levels:
Mar 2-Yr futures up 1.25/32 at 103-1.375 (L: 103-00.375 / H: 103-03.5)
Mar 5-Yr futures down 2.75/32 at 107-14 (L: 107-13.5 / H: 107-22)
Mar 10-Yr futures down 7/32 at 110-28.5 (L: 110-27.5 / H: 111-11)
Mar 30-Yr futures down 23/32 at 118-31 (L: 118-29 / H: 120-00)
Mar Ultra futures down 34/32 at 126-17 (L: 126-13 / H: 127-31)
MNI US 10YR FUTURE TECHS: (H5) Resistance At The 50-Day EMA Remains
- RES 4: 112-31 High Oct 16 and a key short-term resistance
- RES 3: 111-26 High Oct 22
- RES 2: 111-13 50-day EMA
- RES 1: 111-11 High Dec 03
- PRICE: 111-01+ @ 1210 ET Dec 2
- SUP 1: 110-01/109-20 Low Nov 25 / Low Nov 20/21
- SUP 2: 109-02+ Low Nov 15 and the bear trigger
- SUP 3: 108-28 1.236 proj of the Oct 1 - 14 - 16 price swing
- SUP 4: 108-12+ 1.382 proj of the Oct 1 - 14 - 16 price swing
A bull cycle in Treasuries remains in play and the contract is holding on to the bulk of its latest gains. Price has recently cleared the 20-day EMA and sights are on the 50-day EMA, at 111-13. This EMA marks the next important resistance, a clear break of it would signal scope for a stronger recovery near-term. For bears, a reversal lower would highlight the end of a corrective cycle and open the bear trigger at 109-02+, the Nov 15 low.
SOFR FUTURES CLOSE
Dec 24 +0.033 at 95.588
Mar 25 +0.065 at 95.825
Jun 25 +0.065 at 96.010
Sep 25 +0.045 at 96.125
Red Pack (Dec 25-Sep 26) -0.025 to +0.025
Green Pack (Dec 26-Sep 27) -0.045 to -0.035
Blue Pack (Dec 27-Sep 28) -0.045 to -0.045
Gold Pack (Dec 28-Sep 29) -0.045 to -0.04
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M +0.00142 to 4.52539 (-0.00696/wk)
- 3M +0.00706 to 4.47178 (-0.00148/wk)
- 6M +0.01804 to 4.39344 (+0.00985/wk)
- 12M +0.02655 to 4.26085 (+0.00696/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.64% (+0.05), volume: $2.440T
- Broad General Collateral Rate (BGCR): 4.60% (+0.02), volume: $841B
- Tri-Party General Collateral Rate (TGCR): 4.60% (+0.02), volume: $791B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.58% (+0.00), volume: $92B
- Daily Overnight Bank Funding Rate: 4.58% (+0.00), volume: $256B
FED Reverse Repo Operation
RRP usage rebounds to $161.752B this afternoon from Monday's multi year low of $135.858B (early May 2021 lows). The number of counterparties climbs to 65 from 56 prior.
MNI PIPELINE: Late Corporate Debt Issuance Roundup: $10.3B Total
$10.3B Corporate Debt to price Tuesday
- Date $MM Issuer (Priced *, Launch #)
- 12/03 $3B #CVS $2.25B 30.25NC5.25 7%, $750M 30NC10 6.75%
- 12/03 $1.5B #Canadian Natural Resources $750M 5Y +90, $750M 10Y +120
- 12/03 $1.5B #Coterra Energy $750M 10Y +122, $750M 30Y +152
- 12/03 $1.5B #Avolon $850M +3Y +97, $650M +3Y SOFR+110
- 12/03 $1.2B *Iron Mountain 8NC3 6.25% -- significantly upsized from $750M
- 12/03 $600M *Public Service of Oklahoma 10Y+100
- 12/03 $500M *Sammons Financial 5Y +103
- 12/03 $500M *RGA Global Funding 7Y +95
- 12/03 $Benchmark Tapestry investor calls
MNI BONDS: EGBs-GILTS CASH CLOSE: Mid-Session Core FI Gains Fade
Periphery/semi-core EGB spreads tightened with Bund and Gilt yields rising Tuesday.
- The declaration of martial law in South Korea spurred a risk-off rally in global safe-haven instruments, seeing Bund and Gilt yields touch session lows.
- The move fully reversed by the cash close however as the South Korean assembly voted to lift martial law, while US job openings data proved a little more positive than expected.
- 10Y Gilts hit a post-Oct 23 low (4.19%) before closing higher; Bunds likewise, after hitting a post-Oct 1 low (2.029%). The German curve bear flattened with the UK's bear steepening, with Gilts underperforming overall.
- Periphery/semi-core EGBs outperformed core counterparts throughout, as equities strengthened.
- OATs in particular were early outperformers, ahead of Wednesday's no-confidence vote - after the cash close, French President Macron expressed confidence that the government can survive the vote.
- Apart from the French vote Wednesday, attention will be on final Nov Services PMIs (first and final for Italy and Spain), Eurozone PPI, and appearances by ECB's Lagarde and BOE's Bailey.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 4.2bps at 1.941%, 5-Yr is up 3.5bps at 1.903%, 10-Yr is up 2bps at 2.054%, and 30-Yr is up 0.6bps at 2.277%.
- UK: The 2-Yr yield is up 1.7bps at 4.225%, 5-Yr is up 2.6bps at 4.095%, 10-Yr is up 3.1bps at 4.243%, and 30-Yr is up 3.5bps at 4.768%.
- Italian BTP spread down 4.2bps at 119bps / French OAT down 2.9bps at 85.1bps
MNI FOREX: USDKRW Soars on Martial Law Headlines, USDJPY Briefly Slides Below 149.00
- The main talking point for global currency markets on Tuesday was centred around the declaration of Martial Law in South Korea by the President, and the resulting KRW weakness. USD/KRW spot and NDF outrights are off the highest levels, but remain around 1.75% higher on the session following the news.
- USD/KRW spot's intraday high at 1,444.65 intersects well with the mid'22 high, suggesting strong resistance at this level - a rally through here could accelerate today's price action.
- The government statement provided reassurances that "unlimited" liquidity is to be provided to markets if needed and further meetings between the finance ministry and the central bank are scheduled in the coming hours.
- In G10, the USD index traded moderately lower on Tuesday, declining around 0.20% ahead of the APAC crossover. Most major pairs have had limited daily adjustments, although USDJPY volatility has remained in focus, with the pair briefly sliding to a new 7-week low of 148.65.
- Stronger than expected US Jolts job openings halted the USDJPY decline and assisted the recovery to current spot levels around 149.25. The quits rate data were notable in the release, lifting from 1.95% to 2.09% for the highest since May and its first monthly increase on a rounded basis since May 2023.
- With divergent monetary policy paths clearly weighing on USDJPY in recent weeks, Friday’s US employment report remains the next focus, as well as wage data from Japan. On the downside, 148.17 support is next, the 50% retracement of the Sep 16/Nov 15 rally.
- Australian GDP headlines the overnight calendar on Wednesday, before the focus turns to US ADP and ISM Services PMI data.
WEDNESDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 04/12/2024 | 0815/0915 | ** |  ES | S&P Global Services PMI (f) |
| 04/12/2024 | 0815/0915 | ** | ES | S&P Global Composite PMI (final) |
| 04/12/2024 | 0845/0945 | ** |  IT | S&P Global Services PMI (f) |
| 04/12/2024 | 0845/0945 | ** | IT | S&P Global Composite PMI (final) |
| 04/12/2024 | 0850/0950 | ** |  FR | S&P Global Services PMI (f) |
| 04/12/2024 | 0850/0950 | ** | FR | S&P Global Composite PMI (final) |
| 04/12/2024 | 0855/0955 | ** |  DE | S&P Global Services PMI (f) |
| 04/12/2024 | 0855/0955 | ** | DE | S&P Global Composite PMI (final) |
| 04/12/2024 | 0900/1000 | ** |  EU | S&P Global Services PMI (f) |
| 04/12/2024 | 0900/1000 | ** | EU | S&P Global Composite PMI (final) |
| 04/12/2024 | 0900/1000 | EU | ECB's Cipollone speech on behavioural financial regulations | |
| 04/12/2024 | 0900/0900 |  GB | BOE's Bailey keynote interview at the FT Boardroom | |
| 04/12/2024 | 0930/0930 | ** | GB | S&P Global Services PMI (Final) |
| 04/12/2024 | 0930/0930 | *** | GB | S&P Global/ CIPS UK Final Composite PMI |
| 04/12/2024 | 1000/1100 | ** | EU | PPI |
| 04/12/2024 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 04/12/2024 | 1200/0700 | ** |  US | MBA Weekly Applications Index |
| 04/12/2024 | 1315/0815 | *** | US | ADP Employment Report |
| 04/12/2024 | 1330/1430 | EU | ECB's Lagarde statement at ECON hearing | |
| 04/12/2024 | 1345/0845 | US | St. Louis Fed's Alberto Musalem | |
| 04/12/2024 | 1400/0900 | US | Richmond Fed's Tom Barkin | |
| 04/12/2024 | 1445/0945 | *** | US | S&P Global Services Index (final) |
| 04/12/2024 | 1445/0945 | *** | US | S&P Global US Final Composite PMI |
| 04/12/2024 | 1500/1000 | *** | US | ISM Non-Manufacturing Index |
| 04/12/2024 | 1500/1000 | ** | US | Factory New Orders |
| 04/12/2024 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 04/12/2024 | 1845/1345 | US | Fed Chair Jerome Powell | |
| 04/12/2024 | 1900/1400 | US | Fed Beige Book | |
| 05/12/2024 | 0030/1130 | ** |  AU | Trade Balance |