EXECUTIVE SUMMARY
- CME Early Close for January 9 Day of Mourning to Honor Pres Carter Passing
- MNI US DATA: Stronger Dallas Fed Manufacturing Only Partly Offsets Wider Weakness
- MNI Chicago Business Barometer™ - Slipped to 36.9 in December
- MNI US DATA: Pending Home Sales Pick Up, Broader Activity Remains Muted
MNI US: CME Early Close for January 9 Day of Mourning to Honor Pres Carter Passing
- While the NYSE Group markets will close in observance of the National Day of Mourning for President Carter (New York Stock Exchange, NYSE American Equities, NYSE American Options, NYSE Arca Equities, NYSE Arca Options, NYSE Chicago and NYSE National), the CME Group has opted for early close, link HERE
- FI open outcry will close at 1300ET, GLOBEX shortly after at 1315ET.
- More to follow, but economic data expected that day is likely to proceed as normal (weekly jobless claims at 0930ET, Wholesale trade & inventories at 1000ET).
- Treasury auctions scheduled for January 9 remain uncertain (4- & 8W bills at 1130ET, 30Y bond re-open at 1300ET).
NEWS
MNI US-JAPAN: Ishiba To Meet Trump In Washington As Soon As February
Nikkei reporting that Japanese Prime Minister Shigeru Ishiba is "preparing to visit Washington for a meeting with Donald Trump as soon as February" following Trump's inauguration on January 20, adding that "Tokyo has conveyed its intention to meet with the incoming U.S. leader in February or later and is coordinating with Trump's camp."
MNI US: Federal Govt And Markets Expected To Close For Carter Funeral On Jan 9
The United States federal government and both the New York Stock Exchange and Nasdaq markets are likely to close on January 9 to observe the state funeral of former US President Jimmy Carter, who died on Sunday. Additional details of the funeral have not been made public.
- President Biden said in a statement yesterday: "I do further appoint January 9, 2025, as a National Day of Mourning throughout the United States. I call on the American people to assemble on that day in their respective places of worship, there to pay homage to the memory of President James Earl Carter, Jr. I invite the people of the world who share our grief to join us in this solemn observance."
MNI SECURITY: Croatian Election Signals Continued Erosion In EU Support For Ukraine
The Croatian presidential election is set to go to a runoff on January 12, with former Prime Minister Zoran Milanović poised to win re-election. Although the position is largely ceremonial, Milanović's likely re-election is another signal that voters in Europe are softening in their support for Ukraine.
MNI US TSYS: Tsys Hold Higher Range Heading Into Year End
- Treasuries look to finish near the top end of the range Monday after marking session highs following much weaker than expected Chicago PMI data. Chicago Business Barometer™, produced with MNI slipped 3.3 points to 36.9 in December. This is the third consecutive monthly decline, with the index at its lowest since May 2024, and below the 2024 average.
- Higher than expected pending new home sales (2.2% vs. 0.8% est) and a jump in Dallas Fed mfg index data (3.4 vs. -3.0 est) tempered Tsy support by midmorning with the Mar'25 10Y contract trading around 108-30 (+16) through the second half, 10Y yield -.0806 at 4.5447% after the bell.
- Despite the pull-back, Projected rate cuts into early 2025 gained momentum vs. this morning, levels (*) as follows: Jan'25 steady at -2.8bp, Mar'25 -14.6bp (-13.6bp), May'25 -20.6bp (-19.5bp), Jun'25 -30.3bp (-28.8bp).
- Tuesday data (prior, est) includes FHFA House Price Index MoM (0.7%, 0.4%) and S&P CoreLogic CS 20-City MoM SA (0.18%, 0.20%) at 0900ET, Dallas Fed Services Activity (9.8, --) at 1030ET.
- Reminder for Tuesday's session: Rate futures have full session (1600ET close) while cash Tsys close at 1400ET.
OVERNIGHT DATA
MNI US DATA: Pending Home Sales Pick Up, Broader Activity Remains Muted
Pending home sales picked up to a 21-month high in November, with the NAR's index printing 79.0. That is an NSA increase of 5.6%, and points to a continued pickup in existing home sales in the next couple of months.
- The 2.2% increase was driven almost entirely by a jump in pending sales in the South region (+5.2% M/M to 94.5), with sales in the northeast contracting (level = 67.8) and Midwest/West up only slightly.
- The worst may be over for pending sales. But as the overall index level suggests (the reading is indexed to the level in 2001=100), however, pending sales remain weak on a historical basis despite a recent uptick.
- 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. We see little reason to expect a trend change until and unless either unemployment picks up or rates fall substantially.
MNI US DATA: Stronger Dallas Fed Manufacturing Only Partly Offsets Wider Weakness
December's Dallas Fed Manufacturing Survey beat expectations with a headline reading of positive 3.4 vs -3.0 expected and -2.7 prior. That's the first positive reading in 32 months and the highest in 33, highlighted by a much stronger new orders reading (up 11 points to -0.9, pointing to unchanged demand from the prior month but still the best reading in 31 months).
- Other readings were mostly stronger vs November, including production, capacity utilization, shipments, expectations, though the employment sub-indices were a little softer.
- Notably though, there were much lower inflationary pressures evident in the survey, with raw materials prices falling 18 points to a 17-month low 10.5, with finished goods falling 12 points to -3.4, the first negative reading this year.
- Dallas is the 5th regional Fed to publish its December manufacturing report, and overall they were very mixed: Empire fell to 0.2 from 31.2 and Philly to -16.4 from -5.5, with Kansas City to -4 from -2, more than offsetting the improvements in Richmond (-10 from -14) and Dallas.
- That's not to mention the December MNI Chicago PMI which fell to 36.9 vs 40.2 prior, and the preliminary S&P Global PMI dipping to 48.3 from 49.7.
- As such despite an apparent improvement in some regional survey optimism immediately following the November elections (and again, this was quite mixed - the range of survey scores was the broadest since April 2020), the overall theme of the manufacturing sector remaining steady at a weak level generally remains intact.
MNI Chicago Business Barometer™ - Slipped to 36.9 in December
The Chicago Business Barometer™, produced with MNI slipped 3.3 points to 36.9 in December. This is the third consecutive monthly decline, with the index at its lowest since May 2024, and below the 2024 average.
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA down 316.66 points (-0.74%) at 42672.09
S&P E-Mini Future down 54 points (-0.9%) at 5972.25
Nasdaq down 178.5 points (-0.9%) at 19541.15
US 10-Yr yield is down 8.3 bps at 4.5427%
US Mar 10-Yr futures are up 17/32 at 108-31
EURUSD down 0.0023 (-0.22%) at 1.0403
USDJPY down 0.99 (-0.63%) at 156.87
WTI Crude Oil (front-month) up $0.61 (0.86%) at $71.20
Gold is down $12.44 (-0.47%) at $2608.94
European bourses closing levels:
EuroStoxx 50 down 29.6 points (-0.6%) at 4869.28
FTSE 100 down 28.77 points (-0.35%) at 8121.01
German DAX down 75.18 points (-0.38%) at 19909.14
US TREASURY FUTURES CLOSE
3M10Y -7.952, 25.414 (L: 24.696 / H: 32.793)
2Y10Y -0.434, 28.858 (L: 28.246 / H: 30.322)
2Y30Y +2.408, 50.878 (L: 48.4 / H: 51.69)
5Y30Y +3.734, 39.141 (L: 35.76 / H: 39.502)
Current futures levels:
Mar 2-Yr futures up 4.125/32 at 102-25.875 (L: 102-21.25 / H: 102-26.375)
Mar 5-Yr futures up 11.25/32 at 106-12.5 (L: 106-00.25 / H: 106-13.75)
Mar 10-Yr futures up 17/32 at 108-31 (L: 108-12 / H: 109-00.5)
Mar 30-Yr futures up 26/32 at 114-3 (L: 113-02 / H: 114-05)
Mar Ultra futures up 25/32 at 119-10 (L: 118-07 / H: 119-19)
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: 108-29 @ 16:16 GMT Dec 30
- SUP 1: 108-12 Low Dec 30
- SUP 2: 108-00 1.500 proj of the Oct 1 - 14 - 16 price swing
- SUP 3: 107-27+ 1.0% 10-dma envelope
- SUP 4: 107-19+ 1.618 proj of the Oct 1 - 14 - 16 price swing
The trend condition in Treasury futures remains bearish despite the intraday rally into the Monday close. These short-term gains are considered corrective below the 110-03+ 20-day EMA. 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.
SOFR FUTURES CLOSE
Mar 25 +0.015 at 95.830
Jun 25 +0.045 at 95.965
Sep 25 +0.060 at 96.030
Dec 25 +0.075 at 96.065
Red Pack (Mar 26-Dec 26) +0.080 to +0.095
Green Pack (Mar 27-Dec 27) +0.090 to +0.095
Blue Pack (Mar 28-Dec 28) +0.090 to +0.090
Gold Pack (Mar 29-Dec 29) +0.080 to +0.085
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.01997 to 4.33704 (+0.02047 total last wk)
- 3M -0.01834 to 4.31044 (+0.00136 total last wk)
- 6M -0.02263 to 4.26230 (+0.00872 total last wk)
- 12M -0.03247 to 4.20684 (+0.01534 total last wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.46% (-0.07), volume: $2.275T
- Broad General Collateral Rate (BGCR): 4.45% (-0.05), volume: $840B
- Tri-Party General Collateral Rate (TGCR): 4.45% (-0.05), volume: $803B
- (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: $271B
FED Reverse Repo Operation
RRP usage recedes to $260.743B this afternoon from $268.739B last Friday. Compares to $98.356B on Friday, December 20 - the lowest level since mid-April 2021. The number of counterparties recedes to 57 from 63 prior.
PIPELINE
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: Year Winds Down With Modest Gains
European curves leaned modestly bull flatter Monday.
- Bunds and Gilts gained fairly steadily throughout the session, regaining ground from Friday's sell-off.
- There was no clear upside driver in the morning session, though gains ramped up in the afternoon as equities fell and the USD gained in an apparent risk-off move, while US MNI Chicago PMI came in below-expected.
- Spanish flash December inflation came in above-expected (core 2.6% Y/Y vs 2.4% survey), but there was little market reaction with the main national readings not released until next week.
- ECB's Stournaras eyed gradual rate cuts but that bigger reductions "shouldn't be ruled out" if inflation cooperates.
- Periphery EGB spreads widened by a little under 1bp as equities fell. French OATs underperformed peers, with 10Y spreads widening 2bp.
- As per usual on New Year's Eve, Tuesday's schedule is light, with Irish flash inflation the main scheduled highlight, and widespread market closures in Europe until Thursday.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 1.8bps at 2.082%, 5-Yr is down 3.6bps at 2.154%, 10-Yr is down 2.9bps at 2.367%, and 30-Yr is down 3bps at 2.597%.
- UK: The 2-Yr yield is down 1.2bps at 4.453%, 5-Yr is down 1.3bps at 4.394%, 10-Yr is down 2.2bps at 4.611%, and 30-Yr is down 0.9bps at 5.173%.
- Italian BTP spread up 0.8bps at 115.5bps / French OAT up 2.1bps at 83.3bps
MNI FOREX: EURJPY Sells Off Sharply on Lower Equities and Yields
- Lower US yields initially contributed to a lower greenback on Monday, with the likes of EURUSD and GBPUSD trading with a strong bid across the European morning. However, sharp weakness for equities abruptly altered the sentiment in currency markets, with the dollar paring losses and the Japanese yen then notably outperforming.
- This was best evidenced by the significant weakness for EURJPY (-0.80%), which fell around 200 pips from session highs to print a low of 162.82. Initial firm support for the cross lies at 162.34, the 20-day EMA and for now, the pullback is considered technically corrective with potential month/year end flow dynamics potentially contributing.
- For EURUSD, a session low of 1.0372 keeps bearish conditions firmly in play. The trend condition continues to highlight scope for a test of key support at 1.0335, the Nov 22 low and a bear trigger.
- The Swiss Franc was less interested by today’s moves across equity/bond markets, and notably USDCHF rose to fresh post-election highs of 0.9074, also representing the highest level for the pair since May. Above here, the year’s best level at 0.9224 remains the most obvious target should the trend continue.
- In emerging markets, USDMXN stands out having risen 1.5% to trade at a one-month high. Resistance to watch remains at 20.8313, the Nov 26 high, and a breach of this hurdle would confirm a resumption of the uptrend. In contrast, the Brazilian real trades higher on the session, with the central bank stepping in once more, auctioning 1.8 billion in the spot market to curtail the BRL weakness.
TUESDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 31/12/2024 | 1355/0855 | ** |  US | Redbook Retail Sales Index |
| 31/12/2024 | 1400/0900 | ** | US | S&P Case-Shiller Home Price Index |
| 31/12/2024 | 1400/0900 | ** | US | FHFA Home Price Index |
| 31/12/2024 | 1400/0900 | ** | US | FHFA Home Price Index |
| 31/12/2024 | 1500/1000 | *** | US | Conference Board Consumer Confidence |
| 31/12/2024 | 1530/1030 | ** | US | Dallas Fed Services Survey |