Highlights:
- Trump secures Presidency, re-igniting USD positive theme
- Curve trades acutely steeper as inflation, deficits in focus
- Fed still seen going 25bps at Thursday rate decision
US TSYS: Trump Steepening Trade In Full Flight, 30Y Supply Adds Pressure
- Treasuries have pushed to fresh lows in the long end of the curve as US desks join in the aftermath of the former President Trump set to return to the White House.
- Cash yields are 10-24bps higher, with 30s leading the increases as the extension of the steepening theme plays out along with today's supply.
- 30Y yields at 4.674% are +24bp for the largest daily increase since 2020.
- 10Y yields at 4.473% (+20.5bp) are on track for a close above medium-term downtrend resistance drawn off the October ’23 high and have pushed through resistance at the June closing high (4.4670%). A clean break here would expose the May 29 closing high (4.6117%).
- TYZ4 trades at 109-08+ (- 1-04+), close to overnight lows of 109-07 on substantial volumes of 1.8m. +5,000 TYZ4 109-10.5 bought through 109-09.5 post time offer at 0619:23ET helped with a short-lived lift off latest lows.
- Support is seen at 109-05 (Fibo retrace of Apr-Sep bull cycle, cont) after which lies the round 109-00.
- Data: MBA mortgage applications (0700ET)
- Note/bond issuance: US Tsy $25B 30Y Bond auction (1300ET)
- Bill issuance: US Tsy $64B 17W Bill auction (1130ET)
STIR: Fed Rates Unchanged For Tomorrow But Firmly Steeper Thereafter
- Former President Trump being projected to win the election hasn’t altered expectations for tomorrow’s FOMC decision (24.5bp cut priced) but the steepening bias is clearly seen beyond further out.
- Cumulative cuts from 4.83% effective: 24.5bp Nov, 42bp Dec (vs 44bp yday close), 54bp Jan (59bp) and 91bp June (99bp).
- See the earlier STIR post for the clear underperformance of US rates compared to their European counterparts where trade policy implications weighs on growth prospects, along with the continued climb in US terminal rate expectations.
- A reminder of the MNI Fed Preview for tomorrow’s decision, found here: https://media.marketnews.com/Fed_Prev_Nov2024_With_Analysts_d4a81c3019.pdf
STIR: Significant SOFR Underperformance Remains Despite Shift Off Lows
- SOFR futures hold an overnight shift off lows but still see implied yields up to 10bps higher on the day through the greens and larger increases beyond following further networks calling the election in Trump’s favor.
- The day’s sell-off is exaggerated by yesterday’s second half rally, which at the time reversed much of the hawkish implications from a strong ISM services report.
- However, even taking that into account and looking at changes since around the European close, SOFR futures still heavily underperform with yields some 4bps higher – see chart.
- Euribor sees the largest rally, with 2H25 implied yields 16bps lower on the aforementioned tariffs threat.
- The rally in UK rates is more restrained, with yields as much as 7bps lower through late 2025/early2026 contracts. There’s a clear reluctance to move too far away from yesterday’s fresh cycle highs for terminal rate expectations at just under 4% for almost 20bps above pre-Budget levels (in firm contrast to Euribor implied terminal rates back below 2%).
There could be some stickiness here before the BoE decision on Thursday (MNI Preview here).
US ELECTIONS: AP Calls Presidency For Trump
The Associated Press has called the presidential election for former President Donald Trump. The call on the presidency comes after AP called Wisconsin for Trump, putting him on 277 electoral college votes, over the 270 threshold. The AP call is viewed as the 'gold standard' of election declarations in the US.
- A second term in the Oval Office for Trump comes alongside the Republicans retaking control of the Senate with at least 51 seats with seven seats still to be called. Focus now turns to the House and whether a the GOP can achieve a clean sweep.
- After pre-election expectations of one of the closest contests in history, the relatively swift calling of the election (notably in comparison to 2020) has come as something of a surprise to many observers. Rather than Trump and Democratic nominee Kamala Harris splitting the sun belt and rust belt states between them, Trump looks on course to win all seven states highlighted as battleground states before the vote.
- Concerns of civil unrest around the election do not look set to be borne out, with the efficient and transparent count in many states limiting the prospect of accusations of malign interference.
- DDHQ gives a 57.9% probability that the Republicans win a majority in the House, but with the caveat that the advantage could be the most slender 218-217 member margin. If this scenario comes to fruition it could make policy enactment difficult despite the GOP holding the presidency and both chambers of Congress. This is given the experience over the past two years of recalcitrant GOP Reps. voting against Republican speakers on key legislation.
Chart 1. Electoral College Hexagram
Source: AP, MNI, mapchart.net
US ELECTIONS: Immediate Analyst Views
With Donald Trump set to return to the White House in January 2025, there will be a flurry of research and analysis in the coming days and weeks on what a second Trump presidency could look like in terms of political, economic, security, and market impacts across the globe. With that in mind, below we highlight some initial analyst views in the immediate aftermath of the election.
Full article PDF attached below:
MNIPOLITICALRISK-USElectionImmediateAnalystViews.pdf
US TSYS: 10-Year Yield Breaches Downtrend Line
10-Year Tsy yields on track for a close above medium-term downtrend resistance drawn off the October ’23 high following the election result.
- Next resistance June closing high (4.4670%) being tested at typing.
- A clean break there would expose the May 29 closing high (4.6117%).
Fig. 1: U.S. 10-Year Tsy Yield (%)
Source: MNI - Market News/Bloomberg
US TSY FUTURES: Cover Dominated Ahead Of Election
OI data points to cover dominating during yesterday's twist flattening of the curve, as participants generally lightened up on exposure ahead of the election.
- Short cover in TY presented the only notable move in DV01 equivalent terms.
- Modest net short setting in FV futures the only contract to buck the broader trend.
| 05-Nov-24 | 04-Nov-24 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 4,397,535 | 4,440,827 | -43,292 | -1,570,743 |
FV | 6,248,163 | 6,236,241 | +11,922 | +496,677 |
TY | 4,548,256 | 4,589,153 | -40,897 | -2,656,074 |
UXY | 2,180,999 | 2,186,858 | -5,859 | -508,064 |
US | 1,832,667 | 1,834,711 | -2,044 | -258,632 |
WN | 1,743,340 | 1,747,135 | -3,795 | -748,662 |
|
| Total | -83,965 | -5,245,499 |
STIR: Mix Of Long Cover And Short Setting Dominated In SOFR Futures Tuesday
Cover also dominated across much of the SOFR strip on Tuesday, with net long cover prominent through the greens.
- Net long setting then seemed to provide the most meaningful move in the blues.
| 05-Nov-24 | 04-Nov-24 | Daily OI Change |
| Daily OI Change In Packs |
SFRU4 | 1,262,931 | 1,269,581 | -6,650 | Whites | -22,772 |
SFRZ4 | 1,148,880 | 1,156,108 | -7,228 | Reds | -9,740 |
SFRH5 | 1,008,674 | 1,021,147 | -12,473 | Greens | -19,006 |
SFRM5 | 886,611 | 883,032 | +3,579 | Blues | +3,967 |
SFRU5 | 704,680 | 702,899 | +1,781 |
|
|
SFRZ5 | 840,502 | 849,028 | -8,526 |
|
|
SFRH6 | 596,783 | 601,417 | -4,634 |
|
|
SFRM6 | 579,690 | 578,051 | +1,639 |
|
|
SFRU6 | 526,370 | 530,359 | -3,989 |
|
|
SFRZ6 | 610,333 | 625,105 | -14,772 |
|
|
SFRH7 | 396,107 | 392,579 | +3,528 |
|
|
SFRM7 | 331,237 | 335,010 | -3,773 |
|
|
SFRU7 | 273,321 | 273,672 | -351 |
|
|
SFRZ7 | 259,578 | 257,536 | +2,042 |
|
|
SFRH8 | 201,926 | 198,611 | +3,315 |
|
|
SFRM8 | 157,293 | 158,332 | -1,039 |
|
|
FOREX: Greenback Leads on Rates-Driven Trump Rally
- The USD is holding a large part of the overnight gains as the election comes close to a conclusion. Trump looks to have secured the Presidency and the Senate, but the votes are still being counted for the House - the last hurdle toward the Republican Party securing a full red sweep for next year.
- GBP/USD's intraday run lower has stabilised - with the pair recouping close to 80 pips off the lows to trade either side of 1.2900 at typing. With election results all but confirmed, and UK PM Starmer congratulating Trump on his victory, short-term focus will likely remain on rates differentials. The hawkish shift across '25 US rates contrasts with stronger rate-cut pricing for the BoE next year, prompting a tightening of ~10bps in the Jun'25 UK-US rate spread. The move's been closely tracked by GBP/USD, and will likely remain a focus as markets head through both the Fed and BoE decisions this week.
- Volumes have been impressive: GBP futures 4x average for this time of day, EUR 6x average, JPY 3x average.
- Outside of the USD, unsurprisingly the MXN is the poorest performer globally - off near 3% and leading the weakness across EM currencies, as those with keen exposure to tariff risk and international trade conditions also trade offered (HUF, ZAR similarly weak).
- Among G10, EUR weakness pervades and while the single currency is just off lows, EUR/CHF has made a notable break lower - narrowing the gap with support of 0.9333. The break lower in EUR/USD and the low print of 1.0720 saw a solid uptick in volumes - suggesting some decent support ahead of the 1.07 handle. Weakness through here opens 1.0666 as the next major level.
- The data schedule is light ahead, keeping focus on central bank speakers including BoC's Rogers and ECB's Lagarde, de Guindos and Villeroy. FOMC members remain inside their pre-rate decision media blackout, with the rate decision tomorrow still fully priced for a 25bps rate reduction. The Brazilian central bank are seen hiking rates by 50bps later today.
EQUITIES: US Banks, Oil & Gas Rally, Chipmakers and Global Supply Chains Lag
With pre-market US trade formally opening ~50 minutes ago - the Trump trade effect is being most keenly felt on US banks, the O&G sector and single name stocks that have been closely tied to the Presidential campaign:
- US Banks (JP Morgan up 6%, Citi up 6.5%, Bank of America up 7.5%)
- Oil explorers (ExxonMobil up 3%, Chevron up 2.7%)
- Specific Trump-tied names (Tesla up 13%, Trump Media up 43%)
Interestingly, chipmakers are firmer generally, but not replicating the sharp gains seen elsewhere (NVIDIA up 1.3%, AMD up 1.1%) - the same case for stocks closely tied to global supply chains (Apple up 0.8%, Amazon up 0.7%).
OPTIONS: Copy - Expiries for Nov06 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0750($550mln), $1.0800(E1.3bln), $1.0950-70(E1.0bln), $1.1040-50(E567mln)
- USD/JPY: Y151.00($1.3bln), Y153.50($729mln)
- AUD/USD: $0.6675(A$555mln) $0.6855(A$1.1bln)
- USD/CAD: C$1.3750($524mln)
EQUITIES: E-Mini S&P Rallies to Fresh High, Back Above 20-Day EMA
- Eurostoxx 50 futures are volatile but remain closer to their recent lows. Last week’s move down, resulted in a breach of 4914.00, the Oct 16 low. Note that 4884.06, 38.2% of the Aug 5 - Sep 30 bull cycle, has also been cleared. This exposes 4815.50 next, the 50.0% retracement. Initial firm resistance has been defined at 5015.00, the Oct 29 high, where a break would highlight a reversal. First resistance is 4940.00, today’s intraday high.
- S&P E-Minis have recovered from their recent lows. A key short-term support has been defined at 5724.25, the Nov 4 low. Price is trading above both the 20- and 50-day EMAs and the continuation higher has resulted in a print above the bull trigger at 5927.25, the Oct 17 high. Clearance of this level would confirm a resumption of the primary uptrend. On the downside, a breach of 5724.25 is required to reinstate a bearish threat.
COMMODITIES: WTI Futures Reverse This Week's Earlier Gains, Bearish Theme Intact
- A bearish theme in WTI futures remains intact and the latest recovery, including this week’s gains, appears to be a correction. 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 S/T resistance at $77.70, the Oct 8 high. Clearance of this level would resume the recent uptrend. Initial resistance is $72.67, the Nov 5 high.
- The trend condition in Gold is unchanged, it remains bullish and the latest pullback is considered corrective. Recent gains resulted in a breach of $2685.6, the Sep 26 high, confirming a resumption of the primary uptrend. Sights are on the $2800.0 handle next. Price has breached support around the 20-day EMA. An extension lower would signal scope for a deeper correction, towards 2642.7, the 50-day EMA.
| Date | GMT/Local | Impact | Country | Event |
| 06/11/2024 | 1200/0700 | ** |  US | MBA Weekly Applications Index |
| 06/11/2024 | 1400/1500 |  EU | ECB's Lagarde address at 10th anniversary of Single Supervisory Mechanism | |
| 06/11/2024 | 1430/1530 | EU | ECB's De Guindos speech and Q&A at Distinguished Speaker Seminar | |
| 06/11/2024 | 1500/1000 | * |  CA | Ivey PMI |
| 06/11/2024 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 06/11/2024 | 1725/1225 | CA | BOC Sr Deputy Rogers speech in Toronto. | |
| 06/11/2024 | 1800/1300 | *** | US | US Treasury Auction Result for 30 Year Bond |
| 07/11/2024 | 2330/0830 | ** |  JP | average wages (p) |
| 07/11/2024 | - |  NO | NorgesBank Meeting | |
| 07/11/2024 | 0030/1130 | ** |  AU | Trade Balance |
| 07/11/2024 | 0700/0800 | ** |  DE | Trade Balance |
| 07/11/2024 | 0700/0800 | ** | DE | Industrial Production |
| 07/11/2024 | 0700/0800 |  SE | Flash CPI | |
| 07/11/2024 | 0800/0900 | ** |  ES | Industrial Production |
| 07/11/2024 | 0810/0910 | EU | ECB's Schnabel remarks at Money Market conference | |
| 07/11/2024 | 0830/0930 | *** | SE | Riksbank Interest Rate Decison |
| 07/11/2024 | 0830/0930 | ** | EU | S&P Global Final Eurozone Construction PMI |
| 07/11/2024 | 0900/1000 | *** | NO | Norges Bank Rate Decision |
| 07/11/2024 | 1000/1100 | ** | EU | Retail Sales |
| 07/11/2024 | 1045/1145 | EU | ECB's Elderson in panel on climate leadership | |
| 07/11/2024 | 1200/1200 | *** |  GB | Bank Of England Interest Rate |
| 07/11/2024 | 1200/1200 | *** | GB | Bank Of England Interest Rate |
| 07/11/2024 | 1230/1230 | GB | BoE Press Conference | |
| 07/11/2024 | - | *** |  CN | Trade |
| 07/11/2024 | 1330/0830 | *** | US | Jobless Claims |
| 07/11/2024 | 1330/0830 | ** | US | Preliminary Non-Farm Productivity |
| 07/11/2024 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 07/11/2024 | 1330/1430 | EU | ECB's Lane speech on Public Debt | |
| 07/11/2024 | 1400/1400 | GB | Monthly Decision Maker Panel Data | |
| 07/11/2024 | 1400/0900 | CA | BOC Deputy Mendes gives opening remarks before a lecture. | |
| 07/11/2024 | 1430/1530 | EU | ECB's Lane in panel on Lesson Learnt in Past Crises | |
| 07/11/2024 | 1500/1000 | ** | US | Wholesale Trade |
| 07/11/2024 | 1530/1030 | ** | US | Natural Gas Stocks |
| 07/11/2024 | 1630/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 07/11/2024 | 1630/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 07/11/2024 | 1900/1400 | *** | US | FOMC Statement |
| 07/11/2024 | 2000/1500 | * | US | Consumer Credit |
| 08/11/2024 | 2330/0830 | ** | JP | Household spending |