Highlights:
- CAD, MXN knocked as Trump looks to Day One tariffs
- AUD/NZD on cusp of breakout as monpol diverges
- Crude oil put skew most bearish since October
- Treasuries have pared earlier losses seen after President-elect Trump proposed an additional 10% tariff on China plus 25% tariffs on all imports from Canada and Mexico.
- It leaves cash yields just 0.5-1.5bp higher on the day, with 10s leading increases, broadly consolidating yesterday’s strong rally following Bessent’s pick as Treasury Sec, WTI sliding on Israel-Hezbollah ceasefire prospects and the strongest 2Y auction since July.
- TYZ4 at 110-13 is at the higher end of the overnight range but is still 4 ticks lower on the day. Yesterday’s high of 110-18 cleared the 20-day EMA and opens 111-08 (50-day EMA) with gains considered corrective. Support is seen at 109-14+ (Nov 20/21 low).
- Today’s data pick is the Conference Board survey with its labor differential still of note, but with greater data focus on tomorrow’s GDP and monthly PCE releases.
- Attention later in the session will then turn to the 5Y auction after yesterday’s strong front-end demand before the FOMC minutes (MNI Preview here).
- Data: Philly Fed non-mfg (0830ET), FHFA and S&P CoreLogic house prices Sep (0900ET), Conf Board consumer survey Nov (1000ET), New home sales Oct (1000ET), Richmond Fed mfg Nov (1000ET), Dallas Fed service Nov (1030ET)
- Fedspeak: FOMC minutes (1400ET)
- Note/bond issuance: US to sell $70bn 5-Year notes – 91282CMA6, US to sell $28bn 2Y FRN reopen - 91282CLT6 (1300ET)
- Bill issuance: US to sell $48bn 52-week bills, $80bn 41-day CMB (1130ET)
STIR: Fed Rate Path Consolidates Monday’s Pullback Off Cycle Highs
- Fed Funds implied rates consolidate yesterday’s Bessent- and WTI slide-induced flattening.
- Cumulative cuts from 4.58% effective: 14bp Dec, 20bp Jan, 33bp Mar and 52bp June.
- Looking further out to Dec’25, the implied 73.5bp of cuts to an effective 3.84% is still elevated compared to prior FOMC forecasts from September at least, with technically only one dot higher for 2024. There was 1 at 4-4.25% and 1 at 3.75-4% (with the latter equivalent to an effective 3.83% at current spreads above the lower target range, i.e. very close to current pricing), whilst all others were at 3.5-3.75% and below.
- Minneapolis Fed’s Kashkari (non-voter) late yesterday on BBG TV in response to a question about whether policymakers should reduce borrowing costs by 25bps at their last meeting of the year: “Right now, knowing what I know today, still considering a 25-basis-point cut in December - it’s a reasonable debate for us to have.” He added that the policy rate may be higher with policy not as restrictive and that productivity is a big question mark for the neutral rate.
- The FOMC minutes headline Fed commentary today with no other scheduled speakers. See the MNI FOMC Minutes preview here.
STIR: OI Points To Long Setting In SOFR Whites Monday, Short Cover Further Out
OI data points to long setting dominating in the white SOFR futures pack on Monday, while short cover was more prominent further out the strip.
- The rally in SOFR futures came as markets deemed Trump’s nomination for Tsy Secretary to be less inflationary than some of the alternatives.
- Subsequent tariff threats from Trump (against China, Canada & Mexico) have limited the move from developing further, although contracts are merely little changed to -3.0 vs. settlement at typing, nowhere near paring Monday's rally further out the strip.
| 25-Nov-24 | 22-Nov-24 | Daily OI Change |
| Daily OI Change In Packs |
SFRU4 | 1,259,587 | 1,252,924 | +6,663 | Whites | +40,444 |
SFRZ4 | 1,299,125 | 1,261,553 | +37,572 | Reds | -26,230 |
SFRH5 | 1,077,679 | 1,084,564 | -6,885 | Greens | -30,899 |
SFRM5 | 994,897 | 991,803 | +3,094 | Blues | -2,963 |
SFRU5 | 781,238 | 778,088 | +3,150 |
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SFRZ5 | 921,633 | 920,585 | +1,048 |
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SFRH6 | 584,426 | 597,901 | -13,475 |
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SFRM6 | 600,731 | 617,684 | -16,953 |
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SFRU6 | 646,140 | 662,922 | -16,782 |
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SFRZ6 | 638,350 | 639,733 | -1,383 |
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SFRH7 | 411,104 | 426,567 | -15,463 |
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SFRM7 | 346,577 | 343,848 | +2,729 |
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SFRU7 | 272,845 | 269,886 | +2,959 |
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SFRZ7 | 276,933 | 277,133 | -200 |
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SFRH8 | 210,623 | 211,453 | -830 |
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SFRM8 | 162,647 | 167,539 | -4,892 |
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EUROPE ISSUANCE UPDATE
BTP Short Term / BTPei Results
- E2bln of the 3.10% Aug-26 BTP Short Term. Avg yield 2.47% (bid-to-cover 1.81x).
- E1bln of the 1.50% May-29 BTPei. Avg yield 1.16% (bid-to-cover 1.83x).
- E750mln of the 0.10% May-33 BTPei. Avg yield 1.51% (bid-to-cover 1.99x).
Bobl Results
- E4bln (E3.35bln allotted) of the 2.50% Oct-29 Bobl. Avg yield 2.04% (bid-to-offer 1.45x; bid-to-cover 1.73x).
GILT SYNDICATION: 1.25% Nov-54 I/L gilt: Allocations out
- Spread set: 1.25% Nov-55 (GB00B0CNHZ09) +4.00bps (guidance was +4.00/+4.25 bps). Tap Size: GBP4.25bln (currently GBP£8.5bln o/s). MNI expected GBP4.0-4.5bln transaction, so this is the middle of our expected range. Books closed in excess of GBP65bln (inc GBP4.25bln JLM interest) - similar level to July tap.
FOREX: AUDNZD Retesting Breakout, AU CPI and RBNZ Easing in Focus
- Price action in recent sessions has seen AUDNZD break to a fresh two year high, with topside momentum building on a break of the Oct/Nov highs at 1.1092 and trendline resistance drawn from the 2022 highs.
- The cross reached as high at 1.1180 on Friday, a level closely matched during early Monday trade before pulling roughly 60 pips lower into yesterday’s close and extending this pullback overnight to retest the breakout.
- Spot remains ~2.8% above the September lows and this move has been underpinned by divergent short-term central bank expectations. Significantly, ahead of the RBNZ rate decision tomorrow, Australian CPI will also be published which should keep AUDNZD volatility firmly in the spotlight.
- Full piece here: FX Market Analysis - AUDforeNZD 26-11.pdf
Figure 1: AUDNZD Attempts to Break Higher as AU/NZ 2yr Swap Rate Spread Approaches Highs
FOREX: CAD Sold in Size as Trump Targets Day One
- Markets hold a risk-off footing into the NY crossover, with Trump's tariff talk overnight unnerving sentiment and prompting outperformance in haven currencies. As a result, JPY outperforms, while trade sensitive FX (most notably CAD and AUD) are softer against all others.
- While the pursuit of tariffs is certainly not new news for the administration, the market reaction across both the MXN and CAD today suggests markets had been expecting a more gradual approach to trade restrictions following the nomination of Scott Bessent to the Treasury over the weekend.
- Trump's pledge to pass the tariffs via executive order could well be setting a precedent here, with high-level economic policy passed through directly from the Oval Office. With CAD the primary target in G10, USD/CAD made light work of the 1.4100 handle as well as YTD highs, printing 1.4178 in the process.
- Sustainability of the move lower in CAD will depend on the Canadian authorities' ability to cooperate with the Trump administration on drug and migration controls, with solid concessions likely needed to avoid any punitive measures on trade.
- US consumer confidence data marks the data highlight today, with markets expecting the number to tick higher to 111.4 from 108.7. With the data capturing the immediate aftermath of the Presidential election, markets will be on watch for any further reversal of pre-vote jitters - as evidenced in the gradual incline for the University of Michigan sentiment index over November.
OPTIONS: Expiries for Nov26 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0415(E1.1bln), $1.0475(E1.1bln), $1.0500(E1.5bln), $1.0545-50(E723mln)
EQUITIES: E-Mini S&P Holding Onto Bulk of Recent Gains, Theme Remains Bullish
- A bear threat in the Eurostoxx 50 futures contract remains present and short-term gains are considered corrective - for now. A fresh cycle low last week marked a resumption of the downtrend that started Sep 30. Price has breached 4746.94, 61.8% of the Aug 5 - Sep 30 bull cycle. This exposes 4662.12, the 76.4% retracement point. Initial firm resistance has been defined at 4961.00, the Nov 6 high, where a break would highlight a reversal.
- S&P E-Minis started the week on a bullish note with the contract extending the recovery from 5855.00, the Nov 19 low. Recent weakness appears to have been a correction. Medium-term trend signals such as moving average studies, continue to highlight a dominant uptrend. Sights are on the bull trigger at 6053.25, the Nov 11 high. A break would resume the uptrend. On the downside, key short-term support to watch is 5855.60, the 50-day EMA.
COMMODITIES: Monday's Move Lower Reinforces Bearish WTI Future Trend Conditions
- A bearish theme in WTI futures remains intact and Monday’s move lower reinforces this theme. Attention is on $65.74, the Oct 1 low, and $63.90, the Sep 10 low and key support. For bulls, a stronger reversal to the upside would instead refocus attention on the key short-term resistance at $77.04, the Oct 8 high. Clearance of this level would resume the recent uptrend. Initial firm resistance to watch is unchanged at $72.41, the Nov 7 high.
- The long-term trend condition in Gold is unchanged, it remains bullish and the Oct 31 - Nov 14 bear leg appears to have been a correction. Price has recovered from its recent lows and Monday’s move lower is - for now - considered corrective, despite it being a very sharp pullback. Resistance to watch is $2721.4, yesterday’s high. Clearance of this level would be a bullish development. Key support is $2536.9,Nov 14 low. A break would be bearish.
OIL OPTIONS: Crude Put Skew Most Bearish Since Early October
The crude options call-put skew has turned the most bearish since early October as the futures market fell yesterday in reaction to optimism for a possible Israel-Hezbollah ceasefire agreement.
- Uncertainty still surrounds the future OPEC+ plans to increase supply next year with many analysts expecting a further output hike delay to be decided at the Dec. 1 minister meeting.
- The Brent second month contract has seen a shift in bias towards the puts with the call-put spread falling to -1.3% today compared to a skew to the calls at +8.5% in early November. The WTI second month skew is down to -2.25% having shifted to a small put bias on Nov. 14.
- Crude implied volatility has stabilised after a drop in H1 November. Brent second month is at 29.2% and WTI to 32.0%.
- Aggregate Brent crude futures and options traded volumes have edged higher this week up to 1.2m and 260k respectively with the increase in options volumes driven by higher put volumes relatively to recent amounts.
Source: Bloomberg
MEXICO: MXN Stabilises Following Overnight Rout
- The initial impact of the Trump tariff headlines on the Mexican peso has moderated ahead of the NY crossover, with USDMXN pulling back towards 20.50, comfortably off the 20.75 highs overnight. Price action continues to be capped by the post-election peak of 20.8072, a multi-year high for the pair.
- As a reminder, Trump stated that one of his first actions in office would be the signing of the first "of my many executive orders" that will charge Mexico and Canada a 25% tariff on "all" products coming into the US.
- Markets will toy between the notion of less liquidity and potential position squaring amid the US Thanksgiving holiday, with month-end flows also potentially impacting price action. We highlight that 21.0233 marks the next topside level, the 50% retracement of the post-COVID range.
- Trade balance data and the quarterly inflation report are set to cross tomorrow, before the November central bank minutes are released on Thursday.
- Separately, Chinese electric-vehicle maker BYD is finalizing plans for a factory in Mexico, a push that will test Donald Trump’s trade policies and the Mexican government’s appetite for conflict with the president-elect. Full WSJ piece here: https://www.wsj.com/business/autos/mexico-gets-cold-feet-over-new-chinese-ev-plant-after-trump-win-3b92f1c3
| Date | GMT/Local | Impact | Country | Event |
| 26/11/2024 | 1305/0805 |  CA | BOC Deputy Mendes speech in PEI. | |
| 26/11/2024 | 1330/0830 | ** |  US | Philadelphia Fed Nonmanufacturing Index |
| 26/11/2024 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 26/11/2024 | 1400/0900 | ** | US | S&P Case-Shiller Home Price Index |
| 26/11/2024 | 1400/0900 | ** | US | FHFA Home Price Index |
| 26/11/2024 | 1400/0900 | ** | US | FHFA Home Price Index |
| 26/11/2024 | 1400/0900 | ** | US | FHFA Quarterly Price Index |
| 26/11/2024 | 1400/0900 | ** | US | FHFA Quarterly Price Index |
| 26/11/2024 | 1500/1000 | *** | US | New Home Sales |
| 26/11/2024 | 1500/1000 | *** | US | Conference Board Consumer Confidence |
| 26/11/2024 | 1500/1000 | ** | US | Richmond Fed Survey |
| 26/11/2024 | 1500/1500 |  GB | BOE's Pill at Economic Affairs Committee | |
| 26/11/2024 | 1530/1030 | ** | US | Dallas Fed Services Survey |
| 26/11/2024 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 26/11/2024 | 1630/1130 | ** | US | US Treasury Auction Result for 52 Week Bill |
| 26/11/2024 | 1800/1300 | * | US | US Treasury Auction Result for 5 Year Note |
| 26/11/2024 | 1800/1300 | ** | US | US Treasury Auction Result for 2 Year Floating Rate Note |
| 26/11/2024 | 1900/1400 | *** | US | FOMC Minutes |
| 27/11/2024 | - |  NZ | Reserve Bank of New Zealand Meeting | |
| 27/11/2024 | 0030/1130 | *** |  AU | Quarterly construction work done |
| 27/11/2024 | 0030/1130 | *** | AU | CPI Inflation Monthly |
| 27/11/2024 | 0100/1400 | *** | NZ | RBNZ official cash rate decision |
| 27/11/2024 | 0700/1500 | ** |  CN | MNI China Money Market Index (MMI) |
| 27/11/2024 | 0745/0845 | ** |  FR | Consumer Sentiment |
| 27/11/2024 | 0930/1030 | * |  DE | GFK Consumer Climate |
| 27/11/2024 | 1200/0700 | ** | US | MBA Weekly Applications Index |
| 27/11/2024 | 1330/0830 | *** | US | GDP |
| 27/11/2024 | 1330/0830 | *** | US | Jobless Claims |
| 27/11/2024 | 1330/0830 | ** | US | Durable Goods New Orders |
| 27/11/2024 | 1330/0830 | ** | US | Advance Trade, Advance Business Inventories |
| 27/11/2024 | 1445/0945 | *** | US | MNI Chicago PMI |
| 27/11/2024 | 1500/1000 | *** | US | Personal Income and Consumption |
| 27/11/2024 | 1500/1000 | ** | US | NAR Pending Home Sales |
| 27/11/2024 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 27/11/2024 | 1630/1130 | ** | US | US Treasury Auction Result for 7 Year Note |
| 27/11/2024 | 1700/1200 | ** | US | Natural Gas Stocks |
| 27/11/2024 | 1800/1900 |  EU | ECB's Lane dinner remarks at conference on "Macroeconomic modelling frontiers for research and policy" |
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