Highlights:
- Veterans Day holiday keeps activity light as markets still ponder Trump Presidency impacts
- Equities progress further still, with e-mini S&P at a new high
- JPY slips as BoJ show no signs of progress toward December rate hike
US TSYS: Veterans Day Holiday, FI Futures Drifting Lower, Focus on CPI/PPI
- No data Monday in observance of Veterans Day holiday. Cash FI markets closed but futures are open on Globex; NYSE and Nasdaq are open. Focus is on CPI and PPI inflation data this Wednesday and Thursday respectively.
- Treasury futures are currently trading weaker, lower half of narrow overnight ranges on modest volumes: Dec'24 10Y futures trade 110-00 last (-9) vs. 110-00 low on volume of just over 245,000.
- Initial technical support below at 109-07 (Low Nov 6 and the bear trigger) followed by 109-05 (76.4% retracement of the Apr - Sep bull cycle (cont)) and 109-00 round number support.
- Curves twisted fatter as short end rates underperformed Friday, Dec24 not fully pricing another 25bp cut: Projected rate cuts into early 2025 compared to late Friday levels (*): Dec'24 cumulative -17.1bp (-18.7bp), Jan'25 -25.7bp (-25.8bp), Mar'25 -38.9bp (-40.1bp), May'25 -46.9bp (-48.0bp).
- Cross market roundup: crude trades weaker (WTI -1.23 at 69.15, Gold -18.50 at 2,666.27, USD gaining - extending highs vs. EUR, GBP, ZAR, CHF, CNH, CAD, NOK and SEK.
STIR: Net Short Setting Most Prominent In SOFR Futures On Friday
OI points to net short setting dominating in SFRZ4 through SFRM5 futures on Friday,
- Long cover was then slightly more prominent in SFRU5 through SFRH6, before net short setting reasserted itself in SFRM6 through SFRZ6.
- A modest rally was seen in contracts beyond that point, with the mix of net short cover and long setting more balanced.
- Net short setting provided the most meaningful positioning input in strip-wide terms.
| 08-Nov-24 | 07-Nov-24 | Daily OI Change |
| Daily OI Change In Packs |
SFRU4 | 1,268,816 | 1,270,129 | -1,313 | Whites | +48,324 |
SFRZ4 | 1,191,442 | 1,179,452 | +11,990 | Reds | +954 |
SFRH5 | 1,062,610 | 1,038,071 | +24,539 | Greens | +20,426 |
SFRM5 | 947,510 | 934,402 | +13,108 | Blues | +1,327 |
SFRU5 | 713,883 | 715,843 | -1,960 |
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SFRZ5 | 959,538 | 961,984 | -2,446 |
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SFRH6 | 631,341 | 633,263 | -1,922 |
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SFRM6 | 604,457 | 597,175 | +7,282 |
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SFRU6 | 540,153 | 528,648 | +11,505 |
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SFRZ6 | 620,203 | 612,396 | +7,807 |
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SFRH7 | 392,997 | 391,728 | +1,269 |
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SFRM7 | 327,964 | 328,119 | -155 |
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SFRU7 | 268,674 | 267,907 | +767 |
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SFRZ7 | 264,182 | 262,208 | +1,974 |
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SFRH8 | 204,298 | 204,113 | +185 |
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SFRM8 | 153,492 | 155,091 | -1,599 |
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US TSY FUTURES: OI Shows Exposure Building In Most Contracts On Friday
OI points to a mix of net short setting (TU & FV), long setting (TY, UXY & WN) and short cover (US) during Friday’s twist flattening of the curve.
- The establishment of fresh positions in the wings (TU & WN) dominated from a net DV01 equivalent perspective.
| 08-Nov-24 | 07-Nov-24 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 4,521,836 | 4,460,360 | +61,476 | +2,214,360 |
FV | 6,336,419 | 6,315,224 | +21,195 | +882,850 |
TY | 4,580,073 | 4,565,508 | +14,565 | +920,256 |
UXY | 2,205,897 | 2,195,213 | +10,684 | +935,730 |
US | 1,833,572 | 1,842,472 | -8,900 | -1,147,252 |
WN | 1,753,373 | 1,740,207 | +13,166 | +2,640,623 |
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| Total | +112,186 | +6,446,567 |
US TSY FUTURES: CFTC CoT Shows Hedge Fund ShortTrimming Ahead Of Elections
The latest CFTC CoT report showed some slightly more pronounced rounds of cover than we have generally seen in recent times, as participants reduced some exposure ahead of the election results (survey cut off was Tuesday November 5).
- Hedge funds covered shorts across TY, US & WN futures, while they added to shorts in TU, FV & UXY futures. Their overall net positioning remains short across all contracts but net DV01 exposure moderated from the week prior.
- Asset managers covered net longs in both TY & WN futures, although long setting across the remainder of the curve meant that their overall net long position was still added to in DV01 terms. The cohort remains net long across all contracts.
- Net non-commercial positioning swings are outlined in the table below.
- A reminder that the presence of basis trades skews the positioning metrics observed in the CFTC CoT.
Source: MNI - Market News/CFTC/Bloomberg
ECB: Weekly ECB Speak Wrap (Nov 5 – Nov 11)
ECB officials provided their initial reactions to the US Presidential Election result last week. While there was a general acknowledgement that a second Trump administration would bring new risks to the outlook, speakers steered clear of any meaningful policy signals.
The week ahead is highlighted by Schnabel’s panel appearance on Thursday at 1830GMT/1930CET. Schnabel will speak on "Reassessing Policy Tools for Current and Future Challenges", with the text and slides set to be released on the ECB’s website.
In the following PDF, we provide a summary of ECB-speak from October 29 to November 4 and summarise commentary since the October meeting by speaker and topic: 241111 - Weekly ECB Speak Wrap.pdf
FOREX: USD/JPY Narrows Gap With Resistance on Ishiba Election, BoJ Minutes
- The greenback is regaining a small part of the recent lost ground, while JPY, NOK and EUR remain the key underperformers to begin the week.
- Bearish technical conditions dominate in EUR/USD and spot has narrowed in on 1.0666, a key support. Below here, 1.0611 represents the next downside target, the 38.2% retracement of the Sep '22 - Jul '23 bull cycle, just ahead of the year's lows at 1.0601, printed back in April.
- JPY remains weaker across the board, helping AUD/JPY remain just above the 200-dma and within reach of last week's post-election highs at 102.41 (the corresponding high in USD/JPY is just 85 pips above current spot at 154.71). The formal re-election of Ishiba may have bolstered JPY downside overnight, while the BoJ minutes showed very few pressing signals for a rate hike at the December BoJ meeting.
- The Monday session sees no meaningful data releases or notable central bank speakers - keeping focus on recent Presidential election results and the gradual assembly of Trump's cabinet for 2025 as well as policy priorities. Geopolitical risk remains a focus, with Trump's election seen as a possible turning point for global conflicts including the Russia-Ukraine war and Middle-east instability.
OPTIONS: Expiries for Nov11 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0700(E530mln), $1.0780-00(E1.1bln), $1.0850-70(E1.2bln), $1.1050-70(E1.7bln), $1.1100(E1.6bln)
- AUD/USD: $0.6650(A$608mln)
- USD/CAD: C$1.3740($1.3bln), C$1.4065($1.4bln)
EQUITIES: Last Week's Gains Reinforce Bullish Conditions in E-Mini S&P
- A bearish condition in Eurostoxx 50 futures remains intact and last week’s fresh cycle lows reinforce current conditions, having confirmed a resumption of the bear cycle. The contract has pierced 4815.50, the 50.0% retracement of the Aug 5 - Sep 30 bull cycle. This exposes 4757.00, the Sep 6 / 10 low and a key support. Initial firm resistance has been defined at 5015.00, the Oct 29 high, where a break would highlight a reversal.
- Bullish conditions in S&P E-Minis remain intact and last week’s gains reinforce current conditions. A key short-term support has been defined at 5724.25, Nov 4 low. The move higher last week resulted in a breach of the bull trigger at 5927.25, Oct 17 high, confirming a resumption of the primary uptrend. The 6000.0 psychological handle has been pierced. Sights are on 6070.16, a Fibonacci projection. Initial support is at 5927.25, the Oct 17 high.
COMMODITIES: Pullback in Gold Considered Corrective, Bullish Trend Unchanged
- A bearish theme in WTI futures remains intact and the latest recovery, including last week’s gains, appear corrective. A resumption of weakness would expose $65.99, the Oct 1 low, and $64.16, the Sep 10 low and key support. For bulls, a clear reversal would instead refocus attention on the key short-term resistance at $77.70, the Oct 8 high. Clearance of this level would resume the recent uptrend. Initial resistance is $74.35, the Oct 14 high.
- The trend condition in Gold is unchanged, it remains bullish and the latest pullback appears corrective. The yellow metal has cleared the 20-day EMA and this highlights potential for an extension of the corrective cycle. Attention is on a key support at $2647.4, the 50-day EMA. A clear break of this average would expose $2604.9, the Oct 8 low. For bulls a reversal higher would refocus attention on the bull trigger at $2790.1, the Oct 31 high.
| Date | GMT/Local | Impact | Country | Event |
| 11/11/2024 | - |  GB | DMO quarterly investors/GEMM consultation | |
| 12/11/2024 | 0700/0800 | *** |  DE | HICP (f) |
| 12/11/2024 | 0700/0700 | *** | GB | Labour Market Survey |
| 12/11/2024 | 0900/0900 | GB | BOE's Pill panellist at UBS conference on Reversing tightening | |
| 12/11/2024 | 1000/1100 | *** | DE | ZEW Current Conditions Index |
| 12/11/2024 | 1000/1100 | *** | DE | ZEW Current Expectations Index |
| 12/11/2024 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 12/11/2024 | 1100/0600 | ** |  US | NFIB Small Business Optimism Index |
| 12/11/2024 | 1200/1200 | GB | Asset Purchase Facility Quarterly Report | |
| 12/11/2024 | 1330/0830 | * |  CA | Building Permits |
| 12/11/2024 | 1400/1500 |  EU | ECB's Cipollone chairing policy panel on financial sanctions | |
| 12/11/2024 | 1500/1000 | US | Fed Governor Christopher Waller | |
| 12/11/2024 | 1515/1015 | US | Richmond Fed's Tom Barkin | |
| 12/11/2024 | 1600/1100 | ** | US | NY Fed Survey of Consumer Expectations |
| 12/11/2024 | 1630/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 12/11/2024 | 1630/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 12/11/2024 | 1800/1300 | * | US | US Treasury Auction Result for Cash Management Bill |
| 12/11/2024 | 1900/1400 | US | Minneapolis Fed's Neel Kashkari | |
| 12/11/2024 | 2130/1630 | US | New York Fed's Roberto Perli | |
| 12/11/2024 | 2200/1700 | US | Philly Fed's Pat Harker |