EXECUTIVE SUMMARY
- MNI: Fed Rates Well-Positioned To Respond To Risks - Barkin
- MNI FED: Kashkari Suggests High CPI Required For December Rate Hold
- MNI US: Trump Advisors May Push For "Calibrated Approach To Tariffs" WSJ
- MNI SECURITY: Biden Administration Still Confident Of Ceasefire Agreement In Lebanon
- MNI US INFLATION: Core CPI Seen Steady On Offsetting Volatile Factors, Flat Rents
- MNI US ECONOMIC SURVEY: Bank Lending Standards Mixed But Still Looser Than Last Year
US
MNI: Fed Rates Well-Positioned To Respond To Risks - Barkin
The Federal Reserve is well positioned to respond to either a U.S. labor market that continues to weaken or a scenario in which demand stays strong and upside inflation risks are revived, Richmond Fed President Tom Barkin said Tuesday. The Fed has cut its benchmark interest rate by 75 bps this fall from its post-Covid peak as inflation fell and the labor market normalized. "With the economy now in a good place and interest rates off their recent peak but also off their historic lows, the Fed is in position to respond appropriately regardless of how the economy evolves. After the challenges of the last several years, that’s a good place to be."
MNI FED: Kashkari Suggests High CPI Required For December Rate Hold
On the eve of the CPI release for October - one of two such reports before the December FOMC - 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.”
NEWS
MNI US: Trump Advisors May Push For "Calibrated Approach To Tariffs" WSJ
The Wall Street Journal has published a piece arguing that Trump’s tariff agenda is unlikely to be as politically damaging as the price shock during the first half of Biden’s term. WSJ notes: “Early on [in Biden's term], wages lagged behind inflation, eating away at purchasing power. But even once wages caught up, the psychological damage remained.
MNI SECURITY: US State Dept: No Change To Israel Policy After 30 Day Gaza Deadline
US State Department Spokesperson Vedant Patel has confirmed that the US will not change its policy on providing weapons to Israel after sufficient steps were taken to address concerns over a humanitarian crisis in Gaza, laid out by US Secretary of State Antony Blinken and Defense Secretary Lloyd Austin in October.
MNI SECURITY: Biden Administration Still Confident Of Ceasefire Agreement In Lebanon
US President Joe Biden's Middle East envoy, Amos Hochstein, told reporters that the US continues to believe that a ceasefire agreement in Lebanon is possible, stating, "I am full of hope that we will succeed... there is a shot". However, the political influence of the Biden Administration is increasingly constrained as Israel opens up new lines of communication with US President-elect Donald Trump - including a meeting between Trump and Israeli Strategic Affairs Minister Ron Dermer at Mar-a-Lago on Sunday.
MNI US: Probability Of Senator Rick Scott Winning Senate Leadership Recedes
Senate Republicans will hold an internal, closed ballot, election for their leadership tomorrow. The race to replace the outgoing Minority Leader Mitch McConnell (R-KY) has transformed into a proxy struggle between Senate orthodoxy represented by Senate Majority Whip John Thune (R-SD) and Senator John Cornyn (R-TX) and the Trump-aligned media ecosystem, represented by Senator Rick Scott (R-FL).
MNI GERMANY: 16 Dec Date For Confidence Vote In Bundestag
Following earlier reports that 23 February 2025 is the most likely date for a snap federal election, it now appears that the confidence vote required to set in motion the removal of the gov't and the calling of snap elections will take place on Monday 16 December. Under Germany's 'Basic Law', it is the gov't that must call a confidence vote in itself to trigger the dissolution of the Bundestag and snap elections. The opposition can only call a 'constructive confidence vote', which requires their own chancellor candidate to be able to command a majority in the chamber in order to oust the incumbent.
MNI EU: Final Day Of Commissioner Hearings Underway, Exec VPs Face MEPs Questions
The Commissioners-designate to serve as High Representative for Foreign Affairs and Security Policy and Executive VP for Cohesion and Reforms, Estonia's Kaja Kallas and Italy's Raffaele Fitto respectively, are coming towards the end of their hearings before the relevant European Parliament committees.
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.
OVERNIGHT DATA
MNI US INFLATION: Core CPI Seen Steady On Offsetting Volatile Factors, Flat Rents
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). The table below shows consensus expectations across key categories of core CPI. To sum up expectations: the largest core categories are seen basically unchanged, but the volatile categories are seen reversing prior moves and essentially offsetting each other.
MNI US ECONOMIC SURVEY: Bank Lending Standards Mixed But Still Looser Than Last Year
The Fed's quarterly Senior Loan Officer Survey ("SLOOS") for October was mixed, but continued to point to a much more constructive environment for bank lending than seen at the peak of the monetary tightening cycle in 2023.While there is no sign of a nascent lending boom, conditions have normalized from last year's tightest levels, even if consumer credit demand remains relatively subdued.
- Lending Standards: The survey showed a general continuation of the trend of looser standards for business and consumer loans, with mortgage standards becoming slightly more stringent. Overall, each of these categories enjoyed much looser standards than seen at their tightest point of the post-pandemic cycle in 2023.
- Loan Demand: Demand for loans was much more mixed: demand from businesses retraced vs July, but continued to improve for commercial real estate and for most categories of residential mortgages. Consumer loan demand was relatively flat vs the previous quarter.
MNI: US Consumers See Lower Inflation, Better Jobs - NY Fed
U.S. consumers expect inflation will fall over the one-, three-, and five-year-horizons, according to the latest survey of consumer expectations from the Federal Reserve Bank of New York. Americans anticipate inflation over the next year will fall to 2.87%, the lowest level since October 2020. Their expectations about inflation in three years declined 0.2pp to 2.54% and at the five year horizon declined a tenth to 2.77%, the lowest since March.
- More Americans' expectations about the labor market improved, with households reporting a lower likelihood of higher unemployment and job loss. Mean unemployment expectations, or the mean probability that the unemployment rate will be higher in a year, decreased by 1.7pp to 34.5%, the lowest reading since February 2022.
- Households also reported a lower likelihood of missing a minimum debt payment over the next three months, according to the survey, with the average decreasing 0.3pp to 13.9%. This was the first decrease since May.
US REDBOOK: STORE SALES +4.8% WK ENDED NOV 09 V YR AGO WK
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA down 382.15 points (-0.86%) at 43910.98
S&P E-Mini Future down 17.5 points (-0.29%) at 6014
Nasdaq down 17.4 points (-0.1%) at 19281.4
US 10-Yr yield is up 12.1 bps at 4.4256%
US Dec 10-Yr futures are down 14.5/32 at 109-14.5
EURUSD down 0.0029 (-0.27%) at 1.0626
USDJPY up 0.83 (0.54%) at 154.55
WTI Crude Oil (front-month) down $0.01 (-0.01%) at $68.03
Gold is down $18.17 (-0.69%) at $2600.77
European bourses closing levels:
EuroStoxx 50 down 109.34 points (-2.25%) at 4744.69
FTSE 100 down 99.42 points (-1.22%) at 8025.77
German DAX down 414.96 points (-2.13%) at 19033.64
French CAC 40 down 199.9 points (-2.69%) at 7226.98
US TREASURY FUTURES CLOSE
3M10Y +12.441, -11.345 (L: -23.716 / H: -10.226)
2Y10Y +3.717, 8.543 (L: 2.145 / H: 9.513)
2Y30Y +1.464, 22.817 (L: 15.514 / H: 24.079)
5Y30Y -1.798, 25.83 (L: 22.082 / H: 26.784)
Current futures levels:
Dec 2-Yr futures down 2.25/32 at 102-19.125 (L: 102-17.625 / H: 102-23)
Dec 5-Yr futures down 7.25/32 at 106-16.5 (L: 106-13.5 / H: 106-28.5)
Dec 10-Yr futures down 14.5/32 at 109-14.5 (L: 109-10 / H: 110-04.5)
Dec 30-Yr futures down 38/32 at 116-15 (L: 116-04 / H: 118-05)
Dec Ultra futures down 50/32 at 123-13 (L: 123-02 / H: 125-22)
MNI US 10YR FUTURE TECHS: (Z4) Southbound
- RES 4: 112-22 High Oct 16 and a key short-term resistance
- RES 3: 112-00 50-day EMA
- RES 2: 111-14+ High Oct 25
- RES 1: 110-29+ 20-day EMA
- PRICE: 109-13.5 @ 1515 ET Nov 12
- SUP 1: 109-07 Low Nov 6 and the bear trigger
- 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
The trend structure in Treasuries is unchanged and conditions remain bearish. Last week’s move lower reinforces the downtrend and the contract is trading closer to its recent lows. A resumption of the bear leg would open 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 11129+, the 20-day EMA.
SOFR FUTURES CLOSE
Dec 24 -0.010 at 95.555
Mar 25 -0.025 at 95.755
Jun 25 -0.035 at 95.910
Sep 25 -0.035 at 96.010
Red Pack (Dec 25-Sep 26) -0.04 to -0.025
Green Pack (Dec 26-Sep 27) -0.035 to -0.03
Blue Pack (Dec 27-Sep 28) -0.04 to -0.035
Gold Pack (Dec 28-Sep 29) -0.05 to -0.04
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.
MNI PIPELINE: $32.85B Corporate Bond Roundup
Backlog of $32.85B corporate debt to price Tuesday - the largest one-day of issuance since September 4 when $35.45B priced.
- Date $MM Issuer (Priced *, Launch #)
- 11/12 $4.75B #HSBC $1.5B 4NC3 +83, $500M 4NC3 SOFR+104, $2.25B 6NC5 +98, $500M 6NC5 SOFR+129
- 11/12 $1.75B #HSBC 11NC10 Tier 2 +145
- 11/12 $4.25B #Citigroup $2.2B 3NC2 +53, $800M 2NC2 SOFR, $1.25B 10NC5 +128
- 11/12 $3.5B #Republic of South Africa $2B 12Y 7.1%, $1.5B 30Y 7.95%
- 11/12 $3.5B #BNP Paribas $1.75B 6NC5 +98, $1.75B 11NC10 +148
- 11/12 $3B #Goldman Sachs 21NC20 +85
- 11/12 $3B #Westpac $750M -2Y +28, $750M -2Y SOFR+46, $1.5B 11NC10 +120
- 11/12 $2.45B #Mercedes-Benz $600M 2Y +50, $700M 3Y +63, $550M 3Y SOFR+85, $600M 5Y +80
- 11/12 $2.3B #Caterpillar $450M 3Y +32, $950M 3Y SOFR+56, $900M 5Y +42
- 11/12 $1.75B #Huntington Bancshares $1.15B 6NC5 +95, $600M 15NC10 +170
- 11/12 $1.5B #Societe Generale $1.1B 2.25Y +92, $400M 2.25Y SOFR+110
- 11/12 $600M *Otis Worldwide 7Y +75
- 11/12 $500M #Equitable Financial Life Global 3Y +58
- 11/12 $Benchmark Republic of South Africa 12Y 7.4%a, 30Y 8.25%a
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 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.
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 |