Highlights:
- Tariff talk does little to push G10 FX outside of recent ranges
- Treasuries look modestly lower ahead of holiday-thinned week
- Building Permits unlikely to move the needle, but prelim durable goods, consumer confidence worth a look
- Treasuries are looking modestly lower to start the new week, Christmas markets keeping volumes light (TYH5<175k). Early close Tuesday for Christmas Eve (1315ET), Wednesday full close for Christmas (Globex re-open at 1800ET), full sessions Thursday and Friday.
- Off last week's lows, the Mar'24 10Y contract currently trades -2.5 at 108-28.5, initial technical support at 108-16+ Low Dec 19 followed by 108-12+ (1.382 proj of the Oct 1 - 14 - 16 price swing).
- The trend condition in Treasury futures remains bearish and short-term gains are considered corrective. Last week’s sell-off reinforces the current bear cycle. Current 10Y yield +.0141 at 4.5363%, curves mildly steeper with 2s10s +.766 at 21.538, 5s30s +.024 at 34.387.
- Busy data and auction schedule ahead: Building Permits, Durable/Cap Goods and Chicago Fed Nat Activity Index at 0830ET; New Home Sales and Conf. Board Consumer Confidence at 1000ET.
- Shoe-horning in the Treasury supply with five auctions today: $81B 13W & $72B 26W bills at 1000ET; $48B 52W & $65B 42D CMB auctions at 1130ET; $69B 2Y notes (91282CME8) at 1300ET.
BOE: MNI BOE Review - December 2024
- The Bank of England’s MPC voted to keep Bank Rate on hold at 4.75% on Thursday with the guidance largely unchanged.
- However, there was a surprise in the vote split with both Ramsden and Taylor joining Dhingra in voting for an immediate 25bp cut.
- The MPC were largely dismissive of higher wage growth and continue to look for "gradual" cuts.
- We don't think the extra dissenters now change the course for the BOE; we expect they would have looked for sequential cuts early in 2025 anyway.
See the full MNI BOE Review here.
EGB FUNDING UPDATE: Greece 2025 Funding Plan
- The PDMA notes that Greece's cash reserves amount to E33bln (3 years of financing needs).
- Financing needs for 2025 total E15.283bln (E5.54bln from MT/LT redemptions, E4.75bln interest on debt, E5.29bln of early repayments (including T-bill stock reduction), E5.496bln from other cash requirements (RRF loans, capital increases etc). This is partially offset by a projected primary surplus of E5.793bln.
- Financing sources:
- GGB issuance: E8.000bln (down from E10.0bln in 2024 plan, E9.55bln executed).
- Other financing sources (NGEU, EIB, CEB, etc.): E3.027bln
- Proceeds from equity and investment fund shares E564mln
- Decrease in cash reserves: E3.692bln
US TSY FUTURES: CFTC Shows Hedge Funds & A Managers Trimming Exposure Into FOMC
The latest CFTC CoT report pointed to both hedge funds and asset managers reducing net exposure ahead of last week’s FOMC decision (survey cut off 17 December).
- Hedge funds trimmed net shorts in most contracts (TU, FV, TY & WN), comfortably outweighing additions to existing net shorts in UXY & US. The cohort remains net short across all contracts.
- Asset managers added to longs in TU, TY & US, but cut net longs across the remainder of the curve, with the latter dominating from a net DV01 equivalent perspective. The cohort remains net long across all contracts.
- Non-commercial net positioning saw a mix of net shorts being added to (TU, UXY, US & WN) and trimmed (FV & TY). The cohort remains net short across all contracts.
- CFTC CoT positioning metrics will be skewed by the presence of basis trades.
Source: MNI - Market News/CFTC/Bloomberg
US TSY FUTURES: Short Cover Seen In Most Contracts On Friday
OI data suggests net short cover was seen in most contracts during Friday’s rally, with only modest long setting in FV futures breaking the wider trend.
- WN futures saw the only DV01 equivalent positioning swing of note (~$1.8mn).
| 20-Dec-24 | 19-Dec-24 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 4,201,990 | 4,222,691 | -20,701 | -797,916 |
FV | 6,121,899 | 6,112,805 | +9,094 | +385,049 |
TY | 4,445,805 | 4,453,126 | -7,321 | -474,730 |
UXY | 2,148,211 | 2,153,444 | -5,233 | -461,798 |
US | 1,873,119 | 1,875,319 | -2,200 | -277,491 |
WN | 1,761,972 | 1,771,554 | -9,582 | -1,832,677 |
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| Total | -35,943 | -3,459,563 |
STIR: OI Signals Short Cover In SOFR, Possible SFRZ4/Z5 Steepener Unwinds
OI data points to net short cover in most SOFR futures on Friday, as PCE data helped pull contracts away from the multi-month lows registered around last week’s FOMC decision.
- This is an approximation given that SFRZ4 was unchanged at settlement time.
- Also note that the fairly sizeable reduction in both SFRZ4 & Z5 OI means that spread activity in SFRZ4/Z5 may have factored into positioning swings, via unwinds of existing steepener positions.
| 20-Dec-24 | 19-Dec-24 | Daily OI Change |
| Daily OI Change In Packs |
SFRZ4 | 1,197,455 | 1,254,109 | -56,654 | Whites | -70,274 |
SFRH5 | 1,091,763 | 1,095,452 | -3,689 | Reds | -68,417 |
SFRM5 | 1,011,913 | 1,019,262 | -7,349 | Greens | -12,254 |
SFRU5 | 835,919 | 838,501 | -2,582 | Blues | +46 |
SFRZ5 | 905,142 | 952,856 | -47,714 |
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SFRH6 | 553,603 | 563,191 | -9,588 |
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SFRM6 | 617,734 | 624,065 | -6,331 |
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SFRU6 | 609,956 | 614,740 | -4,784 |
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SFRZ6 | 681,871 | 694,941 | -13,070 |
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SFRH7 | 445,931 | 449,450 | -3,519 |
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SFRM7 | 365,450 | 359,095 | +6,355 |
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SFRU7 | 287,796 | 289,816 | -2,020 |
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SFRZ7 | 292,271 | 289,592 | +2,679 |
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SFRH8 | 225,368 | 227,761 | -2,393 |
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SFRM8 | 158,392 | 157,894 | +498 |
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SFRU8 | 118,009 | 118,747 | -738 |
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FOREX: EUR Trades Heavy, But Quiet Market Looks Through Tariff Talk
- Newsflow and price action is understandably muted, with market volumes well below average for this time of day given the proximity to the Christmas market closures that kick in in earnest tomorrow. That said, EUR is softer on the session, with continued focus on French politics. The French PM is set to unveil a new cabinet later today - a slightly later timeline than initially expected - which may be weighing on French bonds and, in turn, the single currency.
- Having traded 0.8315 overnight, EUR/GBP is back to negative on the day - having reversed ahead of any test on the 50-dma at 0.8319 - a level markets have failed to break on three occasions in the past week or so.
- EUR/NOK is lower for a second session, extending the reversal off the post-Norges Bank high to just over 1%. Rate is now meeting support at the confluence of the 50-, 100-dmas of 11.7666/65. The greenback is more mixed. The USD Index is very mildly higher, but is holding the majority of Friday's slippage - leaving 108.541 the key level ahead.
- As a gauge of lighter volumes and limited liquidity today: EUR futures have traded volumes ~20% below average for this time of day, GBP ~50% lower and JPY ~40% lower. Tariff headlines failed to ignite significant market moves, despite reports that the US have triggered investigations into the legacy semiconductors industry that could result in steeper tariffs on Chinese goods once Trump is in office.
- Building permits data is unlikely to move the needle, however prelim durable goods data is also set for release, as well as the December consumer confidence report. There are no central bank speakers of note.
COMMODITIES: Recent Gains in WTI Futures Still Considered Corrective
A bearish threat in WTI futures remains present and recent gains are - for now - considered corrective. A resumption of the bear cycle would open $65.57, the Oct 1 low, and $63.73, 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 $76.41, the Oct 8 high. Initial firm resistance to watch is unchanged at $71.97, the Nov 7 high. Gold traded sharply lower on Dec 18. The move down undermines a recent bullish theme. A resumption of weakness would signal scope for an extension towards the key support at $2536.9, the Nov 14 low. Moving average studies are in a bull mode position highlighting a medium-term uptrend and this suggests that the latest sell-off is likely a correction. Initial pivot resistance is $2642.9, the 20-day EMA. A breach of this EMA would be positive for bulls.
- WTI Crude up $0.36 or +0.52% at $69.83
- Natural Gas up $0.16 or +4.14% at $3.896
- Gold spot up $4.25 or +0.16% at $2627.82
- Copper up $2.25 or +0.55% at $412.3
- Silver up $0.22 or +0.75% at $29.7515
- Platinum up $11.14 or +1.2% at $939.11
EQUITIES: Bull Cycle in Eurostoxx 50 Futures Remains Intact
A bull cycle in the Eurostoxx 50 futures contract remains intact, however, the recent move down highlights a corrective cycle and a short-term bear threat remains present - for now. Price has traded through the 50-day EMA, at 4922.49. The Dec 20 sell-off resulted in a print below 4846.57, 61.8% of the Nov 21 - Dec 9 bull cycle. Key short-term resistance has been defined at 5040.00, the Dec 9 high. Initial resistance is at 4935.29, the 20-day EMA. A sell-off in the S&P E-Minis contract on Dec 18 highlights a short-term top and a corrective cycle. The move down resulted in a breach of the 20- and 50-day EMAs. A resumption of weakness would open 5811.65, 38.2% of the Aug 5 - Dec 6 bull leg. Support at 5921.00, Nov 19 low, has been pierced. A clear break of it would strengthen a bearish threat. Initial resistance is 6067.90, the 20-day EMA. A clear break of it would be a bullish development.
- Japan's NIKKEI closed higher by 459.44 pts or +1.19% at 39161.34 and the TOPIX ended 24.75 pts higher or +0.92% at 2726.74.
- Elsewhere, in China the SHANGHAI closed lower by 16.812 pts or -0.5% at 3351.257 and the HANG SENG ended 162.43 pts higher or +0.82% at 19883.13.
- Across Europe, Germany's DAX trades lower by 6.33 pts or -0.03% at 19878.2, FTSE 100 higher by 5.25 pts or +0.06% at 8089.62, CAC 40 down 3.83 pts or -0.05% at 7270.15 and Euro Stoxx 50 down 6.91 pts or -0.14% at 4855.08.
- Dow Jones mini up 61 pts or +0.14% at 43374, S&P 500 mini up 20 pts or +0.33% at 6021.5, NASDAQ mini up 117.5 pts or +0.54% at 21683.
| Date | GMT/Local | Impact | Country | Event |
| 23/12/2024 | 1330/0830 | * |  CA | Industrial Product and Raw Material Price Index |
| 23/12/2024 | 1330/0830 | *** | CA | Gross Domestic Product by Industry |
| 23/12/2024 | 1330/0830 | ** |  US | Durable Goods New Orders |
| 23/12/2024 | 1500/1000 | * | US | US Treasury Auction Result for 26 Week Bill |
| 23/12/2024 | 1500/1000 | * | US | US Treasury Auction Result for 13 Week Bill |
| 23/12/2024 | 1500/1000 | *** | US | New Home Sales |
| 23/12/2024 | 1630/1130 | ** | US | US Treasury Auction Result for 52 Week Bill |
| 23/12/2024 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 23/12/2024 | 1800/1300 | * | US | US Treasury Auction Result for 2 Year Note |
| 23/12/2024 | 1830/1330 | CA | Bank of Canada meeting minutes | |
| 24/12/2024 | 0030/1130 |  AU | RBA Minutes | |
| 24/12/2024 | 1330/0830 | ** | US | Philadelphia Fed Nonmanufacturing Index |
| 24/12/2024 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 24/12/2024 | 1500/1000 | ** | US | Richmond Fed Survey |
| 24/12/2024 | 1630/1130 | * | US | US Treasury Auction Result for 5 Year Note |
| 24/12/2024 | 1630/1130 | ** | US | US Treasury Auction Result for 2 Year Floating Rate Note |