Highlights:
- Trump's Treasury Secretary pick could still be decisive market signal
- JPY fades as Ueda declines to provide concrete BoJ plans
- ECB speak next up, Lagarde set to appear
- Treasuries trade bear steeper from Friday’s close as US desks filter in, with the front end little changed on balance but the longer end selling off in London hours.
- Politics remains in the spotlight, with President-elect Trump reportedly eyeing a new candidate for Treasury Secretary amid internal debate, whilst separately, President Biden has approved Ukraine’s use of long-range missiles inside Russia.
- Cash yields are 0-3.5bp higher, with 2s10s at 16bps (+2bp) but still within recent ranges. Most benchmark yields are firmly within Friday's range although 30s have probed higher at 4.655%, albeit still below last week's high of 4.6644% (with FOMC officials increasingly sensitive to long-term yield increases).
- TYZ4 trades on and off session lows of 109-09+ (-07+) on modestly below recent average volumes of 300k. It has remained within yesterday’s range throughout.
- Resistance is seen at 109-30+ (Nov 13 high) but a bearish trend is seen in place with support at 108-18+ (Fibo projection of Oct 1-10-16 price swing) after which lies 108-03 (Fibo projection of the same moves).
- Data: NY Fed services Nov (0830ET), NAHB housing index Nov (1000ET), TIC flows Sep (1600ET)
- Fedspeak: Goolsbee welcome remarks (1000ET)
- Bill auction: US Tsy $81B 13W, $72B 26W (1130ET)
STIR: Fed Funds Little Changed With Dec Pause Still Considered
- Fed Funds implied rates are near unchanged from Friday’s close.
- It sees rates for the next two meetings close to last week’s highs primarily on growing pause talk but combined core PCE implications, whilst meetings further into 2025 hold more modest net retracement of Wednesday’s CPI-induced decline.
- Cumulative cuts from 4.58% effective: 15bp Dec, 23bp Jan, 38bp Mar and 56bp June.
- See our summary of the notable shift in Fedspeak from Friday’s US Macro Weekly (here).
- Ahead, Chicago Fed’s Goolsbee (’25 voter) gives welcome remarks at 1000ET with no prepared text. Market impact should be limited owing to the format and the fact he spoke on Friday saying current policy is still restrictive, he sees rates coming down along the lines of the dot plot (itself a relatively hawkish shift for recently the most dovish member of the FOMC) and that dispute on the neutral rate could support slower cuts.
US TSY FUTURES: OI Points To Modest Long Cover In Most contracts On Friday
OI data points to relatively modest net long cover in most contracts on Friday, with the only exception to that theme coming via apparent net short setting in FV futures.
| 15-Nov-24 | 14-Nov-24 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 4,519,294 | 4,539,792 | -20,498 | -729,986 |
FV | 6,409,189 | 6,363,895 | +45,294 | +1,868,955 |
TY | 4,538,842 | 4,541,660 | -2,818 | -181,860 |
UXY | 2,202,677 | 2,204,762 | -2,085 | -179,723 |
US | 1,852,397 | 1,857,838 | -5,441 | -684,356 |
WN | 1,744,151 | 1,752,702 | -8,551 | -1,670,229 |
|
| Total | +5,901 | -1,577,199 |
STIR: Mix Of Long Cover & Setting Most Prominent In SOFR Futures On Friday
OI data suggests that a mix of net long cover (most contracts out to SFRM6) and net long setting (further out) as the SOFR futures strip twist flattened on Friday.
| 15-Nov-24 | 14-Nov-24 | Daily OI Change |
| Daily OI Change In Packs |
SFRU4 | 1,272,909 | 1,277,641 | -4,732 | Whites | -37,913 |
SFRZ4 | 1,323,727 | 1,347,322 | -23,595 | Reds | -21,053 |
SFRH5 | 1,071,673 | 1,068,824 | +2,849 | Greens | +21,179 |
SFRM5 | 966,737 | 979,172 | -12,435 | Blues | +2,135 |
SFRU5 | 731,354 | 734,680 | -3,326 |
|
|
SFRZ5 | 955,350 | 965,790 | -10,440 |
|
|
SFRH6 | 642,352 | 647,921 | -5,569 |
|
|
SFRM6 | 605,905 | 607,623 | -1,718 |
|
|
SFRU6 | 612,497 | 591,142 | +21,355 |
|
|
SFRZ6 | 649,895 | 648,276 | +1,619 |
|
|
SFRH7 | 419,700 | 422,698 | -2,998 |
|
|
SFRM7 | 337,808 | 336,605 | +1,203 |
|
|
SFRU7 | 275,537 | 270,920 | +4,617 |
|
|
SFRZ7 | 263,597 | 264,168 | -571 |
|
|
SFRH8 | 208,637 | 209,751 | -1,114 |
|
|
SFRM8 | 154,983 | 155,780 | -797 |
|
|
US TSY FUTURES: CFTC Shows Asset Mgers & Hedge Funds Had Cover Bias After Elex
The latest CFTC CoT report pointed to cover dominating amongst hedge fund and asset manager positioning during the initial rounds of post-election trade (in DV01 adjusted terms).
- Asset managers covered longs in FV, TY & WN futures, while they added to existing longs in TU, UXY & US futures. The cohort remains net long across all futures.
- Levered funds covered shorts in TY & WN futures, while adding to shorts in TU, FV, UXY & US futures. The cohort remains net short across all futures.
- Meanwhile, net non-commercial positioning saw a mix of net short trimming and setting, remaining net short in all contracts (full details in table below).
Source: MNI - Market News/Bloomberg
CFTC: Markets Built USD Exposure, Trim MXN Long in Wake of Election
- Markets aggressively trimmed MXN exposure in the wake of the election results, with the week-ending 12 Nov showing the net long MXN position dropping by 11k contracts to put the net position at 13.7% of open interest, and not too far off 5.9%, the 52w low. This puts the positioning Z-score at -1.69, the lowest among all currencies surveyed.
- Elsewhere, markets built the GBP net long, while building the net short JPY, NZD, CAD and CHF position, meaning markets built their exposure to the USD alongside the broad greenback rally that accompanied the election results.
Full dataset here:
ECB: Weekly ECB Speak Wrap (Nov 11 – Nov 18)
The potential impact of US tariffs and the weak Eurozone growth outlook have once again been prevalent in the past week’s ECB-speak. Concerns around the negative growth impact of US trade policy prompted further dovish repricing in ECB-dated OIS, though short-end pressure this morning (Nov 18) has reversed a good portion of those moves. ECB-dated OIS currently price 139bps of easing through December 2025, down from ~145bps at Friday’s close but still above the 135bps seen on November 8.
Overall, the conclusions from the MNI Policy Team’s latest sources piece on November 7 continue to hold: A 25bps cut is almost assured at the December meeting (consistent with market pricing), while the ECB is set to retain its meeting-by-meeting and data-dependent approach (consistent with Schnabel’s remarks on forward guidance).
In the following PDF, we provide a summary of ECB-speak from November 11 to November 18 and summarise commentary since the October meeting by speaker and topic: 241118 - Weekly ECB Speak Wrap.pdf
EUROPE ISSUANCE UPDATE:
EU mandate: 2.5% Dec 2031 tap / 1.25% Feb 2043 green tap
- "The EU (EUROPEAN UNION), rated AAA (Fitch) / Aaa (Moody's) / AA+ (S&P) / AAA (Scope) has mandated BofA Securities, Credit Agricole CIB, Deutsche Bank, HSBC and Nomura as Joint Lead Managers for its upcoming EUR Fixed Rate RegS Bearer dual tranche transaction comprising an increase of the EU 2.500% benchmark due 4 December 2031 (EU000A3L1DJ0) and an increase of the green EU 1.25% benchmark due 4 February 2043 (EU000A3K4DG1)".
- From market source.
Slovakia auction results:
- E73mln of the 3.00% Feb-28 SlovGB. Avg yield 2.5678% (bid-to-cover 2.49x).
- E130mln of the 3.625% Jun-33 SlovGB. Avg yield 3.2583% (bid-to-cover 3.49x).
- E139mln of the 3.75% Mar-34 SlovGB. Avg yield 3.3605% (bid-to-cover 2.97x).
- E150mln of the 0.375% Apr-36 SlovGB. Avg yield 3.5109% (bid-to-cover 2.95x).
Belgium auction results:
- E1.305bln of the 2.85% Oct-34 OLO. Avg yield 2.944% (bid-to-cover 1.64x).
- E700mln of the 3.45% Jun-43 OLO. Avg yield 3.321% (bid-to-cover 1.80x).
RATINGS: S&P Move Ireland & South Africa To Positive Outlooks
Sovereign rating reviews of note from after hours on Friday include:
- Fitch affirmed Ireland at AA; Outlook Stable
- Fitch affirmed Latvia at A-; Outlook revised to Stable from Positive
- S&P affirmed Ireland at AA; Outlook revised to Positive
- S&P affirmed South Africa at BB-; Outlook revised to Positive
- Morningstar DBRS confirmed the United Kingdom at AA, Stable Trend
FOREX: EUR Favoured in Early Europe Trade, But Conviction Lacking
- The EUR trades well, rising against most others in G10 on relatively shallow price action. A pick up in volumes coincided with the European open, and aided the recovery in EUR. Over 2k contracts traded inside two minutes at 0922GMT across EUR futures, for a cash equivalent of ~$300mln and the best activity of the session so far.
- The resultant EUR/GBP highs puts the cross at the best level since Nov06, which narrows the gap with 0.8448, a break above which would resume the upleg posted off multi-year range-defining support at the ~0.83 handle.
- The JPY is the weakest, helping USD/JPY gravitate back toward the Y155.00 handle, with the currency receiving little support from an appearance from BoJ's Ueda, who declined to provide a clear indication or time-linked path for the next BoJ rate hike.
- Market focus remains on Trump's cabinet picks, with the Treasury Secretary position still up for grabs. Latest reports suggest that Trump's shortlist is growing, and he is to hold interviews this week with the leading candidates, including (but not limited to) Scott Bessent, Howard Lutnick, Kevin Warsh and Marc Rowan. Their perceived support for Trump's tariff regime will prove key to any market reaction on the formal appointment.
- The speaker schedule is the focus ahead, with appearances from ECB's Lane, Stournaras, Vujcic and Lagarde, as well as BoE's Greene on the docket. Fedspeak just sees Fed's Goolsbee providing welcome remarks.
OPTIONS: Expiries for Nov18 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0500-20(E1.3bln), $1.0600(E1.3bln)
- NZD/USD: $0.5835(N$853mln)
- USD/CAD: C$1.3950($689mln)
- USD/CNY: Cny7.2300($741mln)
EQUITIES: Move Lower in E-Mini S&P Last Week Appears Corrective
- Despite recent gains, a bearish condition in Eurostoxx 50 futures remains intact. The move lower last 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, Nov 6 high, where a break would highlight a reversal.
- The move lower last week in S&P E-Minis appears corrective. Medium-trend signals such as moving average studies, continue to highlight a dominant uptrend. The contract has traded through the 20-day EMA. The next key support to monitor is 5826.69, the 50-day EMA. A clear break of this level would signal scope for a deeper retracement. A resumption of gains would refocus attention on the bull trigger at 6053.25, the Nov 11 high.
COMMODITIES: Bearish Theme in WTI Futures Remains Intact, Attention on $65.99
- A bearish theme in WTI futures remains intact and the move lower from the Nov 7 high has reinforced current conditions. Attention is on $65.99, the Oct 1 low, and $64.16, 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 $77.70, the Oct 8 high. Clearance of this level would resume the recent uptrend. Initial firm resistance is $72.88, the Nov 7 high.
- The long-term trend condition in Gold is unchanged, it remains bullish and the latest pullback is considered corrective. The recent move down has resulted in a breach of the 20- and 50-day EMAs, and the metal is trading at its recent lows. The breach of the EMAs signals scope for a deeper retracement and sights are on $2511.1 next, the Sep 18 low. Firm resistance is seen at $2657.6, the 20-day EMA.
| Date | GMT/Local | Impact | Country | Event |
| 18/11/2024 | 1300/1400 |  EU | ECB's Lane lecture on Inflation Expectations | |
| 18/11/2024 | 1315/0815 | ** |  CA | CMHC Housing Starts |
| 18/11/2024 | 1330/0830 | * | CA | International Canadian Transaction in Securities |
| 18/11/2024 | 1500/1000 | ** |  US | NAHB Home Builder Index |
| 18/11/2024 | 1500/1000 | US | Chicago Fed's Austan Goolsbee | |
| 18/11/2024 | 1630/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 18/11/2024 | 1630/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 18/11/2024 | 1830/1930 | EU | ECB's Lagarde on economic and human challenges | |
| 18/11/2024 | 1830/1830 |  GB | BOE's Greene Fireside Chat On The Future of Inflation | |
| 18/11/2024 | 2100/1600 | ** | US | TICS |
| 19/11/2024 | 0030/1130 |  AU | RBA Minutes | |
| 19/11/2024 | 0845/0945 | EU | ECB's Elderson at 10th Green Finance Forum | |
| 19/11/2024 | 0900/1000 | ** | EU | EZ Current Account |
| 19/11/2024 | 1000/1100 | *** | EU | HICP (f) |
| 19/11/2024 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 19/11/2024 | 1000/1000 | GB | BOE's Bailey, Lombardelli, Mann and Taylor at TSC | |
| 19/11/2024 | 1330/0830 | *** | CA | CPI |
| 19/11/2024 | 1330/0830 | *** | US | Housing Starts |
| 19/11/2024 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 19/11/2024 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 19/11/2024 | 1810/1310 | US | Kansas City Fed's Jeff Schmid | |
| 20/11/2024 | 2350/0850 | ** |  JP | Trade |