EXECUTIVE SUMMARY
- MNI US: Johnson Remains Favourite To Retain Speakership On January 3
- MNI US-RUSSIA: Biden Weighing New Sanctions Against Russian Energy Sector
- MNI US DATA: Philly Nonmanufacturing Consistent With Moderating Services Activity
- MNI US DATA: Richmond Fed Index Pickup Still Consistent With Soft ISM Manufacturing
MNI US TSYS: Late Session Rebound, Post-Auction Short Sets Unwound
- Treasury futures look to finish Tuesday's shortened Christmas-eve session near session highs, TYH5 +2.5 at 107-17 vs. 108-19 high, after trading much of the session weaker. The 10Y contract had breached a couple levels of technical support on it's way down to 108-09.5 low, 10Y yield climbing to 4.8160% high last seen in late May.
- Rates recovered soon after the $70B 5Y note auction (91282CMD0) stopped 0.2bp through (second consecutive stop since June): drawing 4.478% high yield vs. 4.480% WI; 2.40x bid-to-cover vs. 2.43x for the prior auction.
- The bounce helped projected rate cuts into early 2025 look steady to slightly higher vs. this morning (*) as follows: Jan'25 steady at -2.1bp, Mar'25 at -12.6bp (-11.7bp), May'25 -17.2bp (-16.7bp), Jun'25 -24.6bp (-23.1bp).
- No substantive reaction to regional Fed data:
- -6.0 reading for December's Philadelphia Fed's Nonmanufacturing current regional activity index (-2.4 expected) represented a steady outturn from -5.9 prior, and suggested a regional services sector that remained "weak", per the report.
- Richmond Fed's regional manufacturing survey index came in in at -10 as expected in December, the best reading since June (-14 prior). The shipments and employment subindices were flat, but new orders saw a solid improvement to -11 from -19 prior.
- Markets closed for Christmas holiday Wednesday, Globex pre-open Wednesday evening at 1700ET/re-open at 1800ET. Full sessions Thursday & Friday.
NEWS
MNI US: Johnson Remains Favourite To Retain Speakership On January 3
House Speaker Mike Johnson (R-LA) appears likely to win re-election to speaker on January 3, despite criticism from President-elect Donald Trump for his handling of a short-term government funding package. According to Polymarket, Johnson is assigned a 73% implied probability of retaining his gavel, down from roughly 95% ahead of the funding crisis.
- On January 3, Johnson will require near-unanimous support from House Republicans. Consistent with previous speaker votes when the minority party votes for their own candidate, Democrats are expected to whip against Johnson’s re-election. House Minority Leader Hakeem Jeffries (D-NY) told MSNBC on Sunday that there is a "real risk" of Johnson failing to become speaker, adding “there will be no Democrats available to save him or the extreme MAGA Republicans from themselves…”
- One Republican Rep, Thomas Massie (K-KY), who backed an effort to oust Johnson earlier this year, is again likely to oppose Johnson’s bid, with a handful of other hardline conservatives reportedly undecided.
- The baseline expectation is that Johnson is likely to be insulated from a major challenge to his speakership as there is no replacement candidate with a clear path to the gavel. Trump’s decision to endorse or oppose could smooth the path for Johnson’s re-election. Trump is likely to balance his dissatisfaction with Johnson’s failure to legislate a debt ceiling suspension with the necessity of stability in the House.
Source: Polymarket
MNI US-RUSSIA: Biden Weighing New Sanctions Against Russian Energy Sector
OVERNIGHT DATA
MNI US DATA: Richmond Fed Index Pickup Still Consistent With Soft ISM Manufacturing
The Richmond Fed's regional manufacturing survey index came in in at -10 as expected in December, the best reading since June (-14 prior). The shipments and employment subindices were flat, but new orders saw a solid improvement to -11 from -19 prior.
- At the same time, the regional service sector local business conditions index likewise showed improvement, to 14 from 10 prior, with both demand and revenues improving.
- The broad themes of the underlying survey data across both Services and Manufacturing are a continued slowing in price, activity, wage, and employment trends since 2021/2022, albeit now stabilizing a bit higher than recent lows, and with optimism picking up among respondents. The big exception is services sector revenues which rose sharply to 25 from 14, bringing it to levels not seen since early 2021.
- While the report doesn't mention it, the Richmond Fed noted in the October Beige Book that "parts of our District were heavily affected by Hurricane Helene", while recent weak manufacturing readings may have potentially been influenced by previously striking workers at Boeing which is headquartered in Virginia.
- As such these readings represent an improvement from soft conditions but shouldn't be read through directly to broader national conditions.
- Note for manufacturing, the Richmond Fed's improvement bucked the trend of the Philadelphia and Empire surveys deteriorating in December. Overall, those surveys are consistent with a national ISM Manufacturing reading in the high 40s, where it has been for the last 8 months.
MNI US DATA: Philly Nonmanufacturing Consistent With Moderating Services Activity
The -6.0 reading for December's Philadelphia Fed's Nonmanufacturing current regional activity index (-2.4 expected) represented a steady outturn from -5.9 prior, and suggested a regional services sector that remained "weak", per the report.
- Accordingly, weakness in the report was fairly broad-based on a regional basis, though expectations for activity 6-months ahead rose to a 37-month high of 48.8. Per the report: "The indexes for general activity, sales/revenues, and new orders were little changed from last month and remained low. On balance, the firms continued to report increases in employment; however, the indexes for full- and part-time employment declined. Both price indexes rose and indicate overall increases in prices. The respondents remained optimistic about growth over the next six months both for their firms and in the region."
- The recent spike in expectations (from negative as recently as August) can largely be attributed to optimism following November's elections. But the expectations index has been, at best, a coincident rather than a leading indicator - and even so, the it has consistently misled as to ongoing and future activity performance.
- The Philly Fed survey tends to mirror the national ISM Services survey more closely than the PMI Services. ISM has pulled back from elevated levels while the PMI equivalent has continued to rise (see chart). Like the ISM, the Philly reading is consistent with a softening rather than resurgent services sector, something that we have begun to see reflected from the demand side in national PCE reports.
MNI: US REDBOOK: DEC STORE SALES +5.0% V YR AGO MO
- US REDBOOK: STORE SALES +5.9% WK ENDED DEC 21 V YR AGO WK
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA up 390.08 points (0.91%) at 43297.03
S&P E-Mini Future up 62 points (1.03%) at 6098
Nasdaq up 266.3 points (1.3%) at 20031.13
US 10-Yr yield is up 0 bps at 4.5867%
US Mar 10-Yr futures are up 3/32 at 108-18
EURUSD down 0.0017 (-0.16%) at 1.0388
USDJPY up 0.09 (0.06%) at 157.25
WTI Crude Oil (front-month) up $0.79 (1.14%) at $70.04
Gold is up $4.31 (0.17%) at $2616.87
European bourses closing levels:
EuroStoxx 50 up 4.93 points (0.1%) at 4857.86
FTSE 100 up 34.27 points (0.42%) at 8136.99
French CAC 40 up 10.37 points (0.14%) at 7282.69
US TREASURY FUTURES CLOSE
3M10Y -0.503, 25.414 (L: 22.208 / H: 28.732)
2Y10Y +0.793, 25.013 (L: 23.991 / H: 27.615)
2Y30Y -0.237, 42.735 (L: 41.72 / H: 46.817)
5Y30Y -1.223, 32.583 (L: 31.872 / H: 35.337)
Current futures levels:
Mar 2-Yr futures up 0.75/32 at 102-21.125 (L: 102-19.375 / H: 102-21.5)
Mar 5-Yr futures up 0.75/32 at 106-2.75 (L: 105-29.5 / H: 106-04.5)
Mar 10-Yr futures up 3/32 at 108-18 (L: 108-09.5 / H: 108-19.5)
Mar 30-Yr futures up 10/32 at 113-28 (L: 113-06 / H: 113-30)
Mar Ultra futures up 16/32 at 119-14 (L: 118-08 / H: 119-16)
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: 108-16 @ 1235 ET Dec 24
- SUP 1: 108-12+ 1.382 proj of the Oct 1 - 14 - 16 price swing
- SUP 2: 108-09+ Low Dec 24
- 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, confirmed by the return lower on December 24th. For now, 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 +0.015 at 95.805
Jun 25 +0.025 at 95.895
Sep 25 +0.030 at 95.955
Dec 25 +0.025 at 95.985
Red Pack (Mar 26-Dec 26) +0.010 to +0.020
Green Pack (Mar 27-Dec 27) +0.010 to +0.015
Blue Pack (Mar 28-Dec 28) +0.015 to +0.020
Gold Pack (Mar 29-Dec 29) +0.020 to +0.025
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.00096 to 4.33778 (+0.00124/wk)
- 3M +0.00072 to 4.32666 (-0.00076/wk)
- 6M +0.01308 to 4.28467 (+0.00846/wk)
- 12M +0.03016 to 4.24104 (+0.01707/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.31% (+0.01), volume: $2.337T
- Broad General Collateral Rate (BGCR): 4.29% (+0.01), volume: $846B
- Tri-Party General Collateral Rate (TGCR): 4.29% (+0.01), volume: $815B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $119B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $282B
FED Reverse Repo Operation
RRP usage climbs to $180.989B this afternoon from $116.004B yesterday. Compares to $98.356B last Friday - the lowest level since mid-April 2021. The number of counterparties climbs to 52 from 47 prior.
WEDNESDAY/THURSDAY DATA CALENDAR
| Date | ET | Impact | Period | Release | Prior | Consensus | |
| 26/12/2024 | 0830 | *** | 21-Dec | Continuing Claims | 1874 | -- | (k) |
| 26/12/2024 | 0830 | *** | 21-Dec | Initial Jobless Claims | 220 | 223 | (k) |
| 26/12/2024 | 0830 | *** | 21-Dec | Prev Continuing Claims, Rev | -- | -- | (k) |
| 26/12/2024 | 0830 | *** | 21-Dec | Prev Initial Jobless Claims, Rev | -- | -- | (k) |
| 26/12/2024 | 1100 | ** | 20-Dec | Crude Oil Stocks ex. SPR w/w | -- | -- | bbl (m) |
| 26/12/2024 | 1100 | ** | 20-Dec | Distillate Stocks w/w change | -- | -- | bbl (m) |
| 26/12/2024 | 1100 | ** | 20-Dec | Gasoline Stocks w/w change | -- | -- | bbl (m) |
| 26/12/2024 | 1300 | ** | Dec | Bid to Cover Ratio | -- | -- |