Highlights:
- Reported ICBM use by Russia triggers contained bout of risk-off
- JPY gains, alongside gold, as haven assets in demand
- Plethora of Fed, ECB speak follows weekly jobless claims
US TSYS: Geopol Gains Pared, Jobless Claims Offer Macro Focus
- Treasuries have mostly retraced their earlier gains seen as geopolitical risk concerns flared after a Russia missile attack on Ukraine with potentially the first use of an ICBM.
- The curve twist steepens, with cash yields between 1.5bp lower (3s) to 2bps higher (20s).
- 20s see clear underperformance after yesterday’s weak auction with a large tail and surge in primary dealer take-up.
- 2s10s meanwhile is little changed at 10bps, consolidating yesterday’s flattening.
- TYZ4 has reverted to unchanged on the day at 109-22 from an earlier high of 109-28. Volumes are elevated at 680k but boosted by the quarterly roll, earlier than usual ahead of next week’s Thanksgiving holiday.
- Resistance is seen at 110-08+ (20-day EMA) but bears remain in the driving seat with yesterday’s low at 109-14+ before support at 108-30 (Nov 15 low).
- Data: Jobless claims (0830ET), Philly Fed mfg Nov (0830ET), Existing home sales Oct (1000ET), Conf. Board leading index Oct (1000ET), KC Fed mfg Nov (1100ET)
- Fedspeak: Hammack welcome remarks (0845ET), Goolsbee in Q&A (1225ET), Hammack moderates Q&A (1230ET), Schmid speech on longer-term policy (1240ET), Barr discusses banks and AI (1640ET)
- Note/bond issuance: US Tsy $17B 10Y TIPS reopen auction - 91282CLE9 (1300ET)
- Bill issuance: US Tsy $95B 4W, $90B 8W bill auctions (1130ET)
STIR: Fed Rates 1-2bps Lower On Further Geopol Risk
- Fed Funds implied rates have pared around half of their earlier decline after a Russia missile attack on Ukraine with potentially the first use of an ICBM.
- Cumulative cuts from 4.58% effective: 14bp Dec, 21bp Jan, 35bp Mar and 55bp June.
- The FT earlier published comments from Richmond Fed’s Barkin (’24 voter) which somewhat echoed an increasing collection of Fed officials hinting at a decision between cutting another 25bp in Dec or pausing.
- Separately, in comments to Barron’s, NY Fed’s Williams (voter) said PCE inflation is “not quite there yet” with respect to the inflation target but he sees inflation cooling further. “Will be appropriate over time to bring the Fed funds rate down closer to more normal or neutral levels”. He sees "normal" probability of a US recession and expects the unemployment rate to sit between 4-4.25%.
- For today’s Fedspeak, we pick Cleveland Fed’s Hammack (’24) to watch as she hasn’t spoken since the US election/FOMC, although the style of remarks could limit her own mon pol views.
- Note that KC Fed’s Schmid (’25) is set to speak on longer-term policy at 1240ET but the title is identical to last week’s speech which noted "While now is the time to begin dialing back the restrictiveness of monetary policy, it remains to be seen how much further interest rates will decline or where they might eventually settle." We nevertheless watch to see whether he gives a clue that his neutral rate estimate is closer to 4% than 3%.
STIR: OI Points To Short Setting & Long Cover In SOFR Futures On Wednesday
OI data points to a mix of net short setting and long cover in SOFR futures on Wednesday, as most contracts ticked lower on the day.
- Not that net short setting in SFRH5 and SFRM6 provided two of the larger net OI swings, although long cover seemed to dominate in both the whites and reds (in net pack OI terms).
| 20-Nov-24 | 19-Nov-24 | Daily OI Change |
| Daily OI Change In Packs |
SFRU4 | 1,265,949 | 1,270,169 | -4,220 | Whites | -4,621 |
SFRZ4 | 1,307,905 | 1,317,711 | -9,806 | Reds | -12,206 |
SFRH5 | 1,082,496 | 1,071,174 | +11,322 | Greens | +1,132 |
SFRM5 | 1,008,919 | 1,010,836 | -1,917 | Blues | +358 |
SFRU5 | 734,954 | 741,396 | -6,442 |
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SFRZ5 | 934,620 | 944,989 | -10,369 |
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SFRH6 | 621,480 | 627,009 | -5,529 |
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SFRM6 | 625,001 | 614,867 | +10,134 |
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SFRU6 | 638,383 | 638,649 | -266 |
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SFRZ6 | 652,012 | 656,675 | -4,663 |
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SFRH7 | 426,362 | 420,261 | +6,101 |
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SFRM7 | 341,943 | 341,983 | -40 |
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SFRU7 | 279,046 | 278,084 | +962 |
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SFRZ7 | 268,902 | 269,318 | -416 |
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SFRH8 | 211,219 | 211,086 | +133 |
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SFRM8 | 158,180 | 158,501 | -321 |
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EUROPE ISSUANCE UPDATE:
Spain auction results
- E1.375bln of the 3.10% Jul-31 Obli. Avg yield 2.768% (bid-to-cover 2.56x).
- E1.161bln of the 4.20% Jan-37 Obli. Avg yield 3.187% (bid-to-cover 2.04x).
- E1.545bln of the 1.00% Jul-42 Green Obli. Avg yield 3.442% (bid-to-cover 1.35x).
France MT auction results
- E3.811bln of the 2.50% Sep-27 OAT. Avg yield 2.45% (bid-to-cover 2.47x).
- E2.255bln of the 0.75% Nov-28 OAT. Avg yield 2.6% (bid-to-cover 2.93x).
- E3.708bln of the 2.75% Feb-30 OAT. Avg yield 2.74% (bid-to-cover 2.71x).
- E1.223bln of the 0% Nov-30 OAT. Avg yield 2.76% (bid-to-cover 3.02x).
UK tender results
- GBP2bln of the 0.125% Jan-26 Gilt. Avg yield 3.996% (bid-to-cover 4.31x, tail 0.6bp).
France I/L auction results
- E821mln of the 3.15% Jul-32 OATei. Avg yield 0.88% (bid-to-cover 2.83x).
- E705mln of the 0.60% Jul-34 OATei. Avg yield 1.03% (bid-to-cover 2.76x).
- E324mln of the 1.80% Jul-40 OATei. Avg yield 1.19% (bid-to-cover 2.95x).
- E398mln of the 0.10% Mar-36 OATi. Avg yield 1.18% (bid-to-cover 2.80x).
FOREX: JPY's Resurgent Status as Haven FX Keeps Cross-JPY Under Pressure
- JPY's resurgent safe haven status is again underpinning the currency, with JPY running firmer alongside another ratchet higher in geopolitical tensions. In response to the use of US and Franco-British long-range missiles in Ukrainian territory, Russia have launched an ICBM strike on Ukraine - the first recorded use of such a weapon in warfare.
- USD/JPY is well through yesterday's lows, narrowing the gap with the Tuesday low at Y153.29, which marks next support in the pair. GBP/JPY is again testing a confluence of support at the 50-, 100- and 200-dmas, which all sit layered between 194.34-71. The currency also gained a tailwind on Ueda's appearance overnight, at which he retained a non-committal message on the December BoJ meeting - keeping market pricing either side of 50/50 for a 25bps hike.
- EUR trades poorly on exposure to the Ukraine crisis, keeping EUR/CAD under pressure and touching a new pullback low. Today's show below 1.47 is the first since early July. GBP trades similarly poorly, with public sector net borrowing figures coming in much wider-than-expected for October.
- Focus for the duration of the Thursday session turns to weekly jobless claims data and and October existing home sales. Central bank speak is thick and fast, with four Fed members speaking across 5 events, 12 ECB members across 9 events, and Catherine Mann representing the BoE.
OPTIONS: Expiries for Nov21 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0500-15(E1.2bln), $1.0535-50(E1.8bln), $1.0600-10(E2.1bln), $1.0650(E1.3bln)
- AUD/USD: $0.6450(A$2.0bln), $0.6490-00(A$592mln)
- USD/CAD: C$1.4000($1.1bln), C$1.4025-40($1.2bln), C$1.4175($1.0bln)
- USD/CNY: Cny7.2500($781mln)
EQUITIES: Recent Weakness in E-Mini S&P Appears Corrective
- A bearish theme in the Eurostoxx 50 futures contract remains intact. A fresh cycle low this week marks 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. First resistance is at 4838.11, the 20-day EMA.
- Recent weakness in the S&P E-Minis contract appears corrective. Medium-term trend signals such as moving average studies, continue to highlight a dominant uptrend. The contract has traded through support at the 20-day EMA and the next key support to monitor is 5838.64, the 50-day EMA. A clear break of this level would signal scope for a deeper retracement. The bull trigger is at 6053.25, Nov 11 high. A break would resume the uptrend.
COMMODITIES: Gold Breaks Through 20- and 50-Day EMAs
- WTI futures are unchanged. A bearish theme remains intact and the move lower from the Nov 7 high has reinforced a bear theme. Attention is on $65.74, the Oct 1 low, and $63.90, the Sep 10 low and key support. For bulls, a clear 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 is $72.41, the Nov 7 high.
- The long-term trend condition in Gold is unchanged, it remains bullish and the latest move down appears to have been a correction. Price has recovered from its recent lows and the metal is again trading higher, today. The 20-day EMA at $2651.2, has been breached. This highlights a stronger reversal and signals the end of the recent bearish corrective cycle, opening $2710.4, the Nov 11 high. Key short-term support lies at $2536.9, Nov 14 high.
| Date | GMT/Local | Impact | Country | Event |
| 21/11/2024 | 1330/0830 | *** |  US | Jobless Claims |
| 21/11/2024 | 1330/0830 | * |  CA | Industrial Product and Raw Material Price Index |
| 21/11/2024 | 1330/0830 | ** | US | Philadelphia Fed Manufacturing Index |
| 21/11/2024 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 21/11/2024 | 1345/0845 | US | Cleveland Fed's Beth Hammack | |
| 21/11/2024 | 1400/1400 |  GB | BOE Mann fireside chat with Brown Brothers Harriman | |
| 21/11/2024 | 1500/1600 | ** |  EU | Consumer Confidence Indicator (p) |
| 21/11/2024 | 1500/1000 | *** | US | NAR existing home sales |
| 21/11/2024 | 1500/1000 | * | US | Services Revenues |
| 21/11/2024 | 1530/1030 | ** | US | Natural Gas Stocks |
| 21/11/2024 | 1530/1630 | EU | ECB's Lane in panel on macroeconomic effects of geopolitical uncertainty | |
| 21/11/2024 | 1530/1630 | EU | ECB's Elderson at the University of Cyprus | |
| 21/11/2024 | 1600/1100 | ** | US | Kansas City Fed Manufacturing Index |
| 21/11/2024 | 1630/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 21/11/2024 | 1630/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 21/11/2024 | 1730/1230 | US | Chicago Fed's Austan Goolsbee | |
| 21/11/2024 | 1730/1230 | US | Kansas City Fed's Jeff Schmid | |
| 21/11/2024 | 1800/1300 | ** | US | US Treasury Auction Result for TIPS 10 Year Note |
| 21/11/2024 | 2140/1640 | US | Fed Vice Chair Michael Barr | |
| 22/11/2024 | 2200/0900 | *** |  AU | Judo Bank Flash Australia PMI |
| 22/11/2024 | 2330/0830 | *** |  JP | CPI |
| 22/11/2024 | 0001/0001 | ** | GB | Gfk Monthly Consumer Confidence |
| 22/11/2024 | 0030/0930 | ** | JP | Jibun Bank Flash Japan PMI |
| 22/11/2024 | 0700/0800 | *** |  DE | GDP (f) |
| 22/11/2024 | 0700/0700 | *** | GB | Retail Sales |
| 22/11/2024 | 0815/0915 | ** |  FR | S&P Global Services PMI (p) |
| 22/11/2024 | 0815/0915 | ** | FR | S&P Global Manufacturing PMI (p) |
| 22/11/2024 | 0830/0930 | ** | DE | S&P Global Services PMI (p) |
| 22/11/2024 | 0830/0930 | ** | DE | S&P Global Manufacturing PMI (p) |
| 22/11/2024 | 0830/0930 | EU | ECB's Lagarde on Europe and New World Order | |
| 22/11/2024 | 0840/0940 | EU | ECB's De Guindos at Foro Observatorio Económico | |
| 22/11/2024 | 0900/1000 | ** | EU | S&P Global Services PMI (p) |
| 22/11/2024 | 0900/1000 | ** | EU | S&P Global Manufacturing PMI (p) |
| 22/11/2024 | 0900/1000 | ** | EU | S&P Global Composite PMI (p) |
| 22/11/2024 | 0930/0930 | *** | GB | S&P Global Manufacturing PMI flash |
| 22/11/2024 | 0930/0930 | *** | GB | S&P Global Services PMI flash |
| 22/11/2024 | 0930/0930 | *** | GB | S&P Global Composite PMI flash |
| 22/11/2024 | 1330/0830 | ** | CA | Retail Trade |
| 22/11/2024 | 1330/0830 | ** | CA | Retail Trade |
| 22/11/2024 | 1445/0945 | *** | US | S&P Global Manufacturing Index (Flash) |
| 22/11/2024 | 1445/0945 | *** | US | S&P Global Services Index (flash) |
| 22/11/2024 | 1500/1000 | ** | US | U. Mich. Survey of Consumers |
| 22/11/2024 | 1545/1645 | EU | ECB's Schnabel in panel on MonPol | |
| 22/11/2024 | 2315/1815 | US | Fed Governor Michelle Bowman |
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