Highlights:
- Treasuries slightly underwater, with a focus on geopolitics, 20y bond sale
- USD claws back lost ground, EUR/USD within range of Tuesday low
- Higher UK inflation does little to support BoE pricing, GBP
US TSYS: Geopol Risk Haven Play Fades, Fedspeak And Earnings Ahead
- Treasuries trade moderately lower today on a variety of factors including a Reuters source suggesting Russia President Putin is open to discussing a Ukraine ceasefire deal with President-elect Trump and firmer-than-expected UK CPI inflation (following CAD CPI yesterday).
- We write more on today’s potentially impactful Fedspeak in the previous STIR bullet but broader risk sentiment can also be impacted by today’s Nvidia earnings after the close.
- Cash yields are 2-3bp higher on the day, led by 20s and 30s, although yields remain comfortably within the week’s range across the curve.
- TYZ4 trades within a few ticks of session lows of 109-17 (-10) on modest cumulative volumes of 335k. That includes a boost from the quarterly roll although it remains light at less than 10% complete (today’s spread activity has mostly been concentrated in 5s).
- The further pullback from yesterday’s high of 110-04+ helps reaffirm the bearish trend condition, with support seen at 108-30 (Nov 15 low) before 108-18+ (1.236 proj of Oct 1-10-16 swing).
- Data: MBA mortgage applications, Nov 15 (0700ET)
- Fedspeak: Barr (1000ET), Cook (1100ET), Bowman (1215ET), Collins (1600ET) – see STIR bullet.
- Note/bond issuance: US Tsy $16B 20Y Bond auction - 912810UF3 (1300ET)
- Bill issuance: US Tsy $64B 17W & $50B 40D CMB auctions (1130ET)
STIR: Little Change In Near-Term Fed Rates, Fedspeak Eyed
- Fed Funds implied rates are little changed out to mid-2025, with likely focus on today’s Fedspeak amidst a very little data docket.
- Cumulative cuts from 4.58% effective: 15bp Dec, 21bp Jan, 36bp Mar and 55bp June.
- From a monetary policy angle, permanent voters Cook and Bowman are of particular interest before ’25 voter Collins. Following last week’s hawkish Fedspeak, including from a previously dovish Gov. Kugler (recap here), we watch for both openness to a pause in December and any views on neutral rate estimates.
- Leading hawk Bowman refrained from dissenting to the 25bp cut at the Nov 6-7 FOMC meeting having objected to the 50bp cut in September, but these will be her first comments since both the US election and the Nov FOMC. Recall that Dallas Fed's Logan mused last week that the Fed had
perhaps already reached neutral rates. Gov. Cook meanwhile last spoke early Oct/late Sept. - 1000ET – VC Supervision testifies on prudential regulator oversight (text + Q&A).
- 1100ET – Gov Cook on economic outlook and mon pol (text + Q&A)
- 1215ET – Gov Bowman on the approach to agency policymaking (text + Q&A)
- 1600ET – Collins (’25 voter) speaks on mon pol (text + Q&A)
STIR: OI Data Points To Fresh Position Setting In Most SOFR Futures On Tuesday
OI points to a mix of net long and short setting across most SOFR futures on Tuesday.
- The most notable net OI swing came via apparent net short setting in SFRM5, although we would attribute most of this to flattener flow in SFRM5/Z5.
| 19-Nov-24 | 18-Nov-24 | Daily OI Change | Daily OI Change In Packs | ||
| SFRU4 | 1,270,169 | 1,273,110 | -2,941 | Whites | +42,371 |
| SFRZ4 | 1,315,630 | 1,306,570 | +9,060 | Reds | +1,035 |
| SFRH5 | 1,071,174 | 1,072,523 | -1,349 | Greens | +19,446 |
| SFRM5 | 1,010,917 | 973,316 | +37,601 | Blues | +7,981 |
| SFRU5 | 741,396 | 738,848 | +2,548 | ||
| SFRZ5 | 945,061 | 939,627 | +5,434 | ||
| SFRH6 | 627,006 | 640,500 | -13,494 | ||
| SFRM6 | 614,867 | 608,320 | +6,547 | ||
| SFRU6 | 638,649 | 622,208 | +16,441 | ||
| SFRZ6 | 656,695 | 651,769 | +4,926 | ||
| SFRH7 | 420,261 | 423,470 | -3,209 | ||
| SFRM7 | 341,983 | 340,695 | +1,288 | ||
| SFRU7 | 278,084 | 277,480 | +604 | ||
| SFRZ7 | 269,318 | 266,548 | +2,770 | ||
| SFRH8 | 211,086 | 209,537 | +1,549 | ||
| SFRM8 | 158,501 | 155,443 | +3,058 |
REPEAT INVITATION:MNI Webcast with ECB's Philip Lane On Dec 18
You are invited to listen to an MNI Webcast with Philip R. Lane, Chief Economist and Member of the Executive Board of the European Central Bank.
Details below:
- Topic of discussion: 'Eurozone economy and the ECB's monetary policy'
- Date: Wednesday 18 December
- Time: 9am - 1030am London; 10am - 1130am Frankfurt
- This event is on the record and will run as a Zoom Webinar
To register please go to: MNI Webcast Registration
EUROPE ISSUANCE UPDATE:
Greece auction results
- E250mln of the 3.375% Jun-34 GGB. Avg yield 3.16% (bid-to-cover 3.83x).
Germany auction results
- E1bln (E818mln allotted) of the 0% Aug-52 Bund. Avg yield 2.51% (bid-to-offer 1.97x; bid-to-cover 2.41x).
- E1bln (E804mln allotted) of the 1.80% Aug-53 Bund. Avg yield 2.55% (bid-to-offer 2.93x; bid-to-cover 3.65x).
CHINA: Market Views Diverge on Direction for Chinese Assets
Amid the ongoing Financial Leaders' Summit in Hong Kong, the relative investability of Chinese assets has been a firm focus among both the sell- and buy-side following the unrolling of stimulus and US election. Regulators and the central bank have been out in full force with a view to opening up China further to foreign investment - which is meeting differing views on the street.
- Goldman Sachs' Chief Econ stated that investors remain "predominantly on the sidelines" over deploying capital in the country, with weak local consumer confidence and difficulty in moving money out of the country hindering investment. Morgan Stanley's CEO, meanwhile, sees some green shoots, but stressed the need for greater transparency in regulations and policy-making.
- Both GS and MS downgraded their views for Chinese equities in the past week or so, with MS reducing stocks to underweight, while GS cut their MSCI China Index target to 75 from 84 and cut HK equities to underweight.
- Oaktree Capital Management's co-founder, however, claimed some assets in China are available at "bargain" prices, deeming comments that China is uninvestable as "music to my ears". Separately, Fidelity International's Efstathopoulos is targeting onshore, mid-cap Chinese stocks to build on the gains generated from the recent stock rally. Robeco similarly see bottom-up opportunities for attractively priced equities in China.
- Notably, Citi last week upgraded their '24 China growth view to 5.0%, citing the recent policy push.
FOREX: USD Recovers Well Off O/N Lows, UK CPI Provides Scant Support for GBP
- The greenback trades firmer against most others in G10 Wednesday, as markets walk back against the late spell of USD weakness that dominated the second half of US trade yesterday. While EUR/USD is well off highs, it remains comfortably clear of the weekly lows at 1.0524 for now.
- JPY has slipped, with the currency weaker on the back of the more stable equity market backdrop and the overriding market perception that while Ukraine-Russia tensions are ratcheting higher, the endgame remains the same, typified by Putin comments this morning that reiterated that Moscow would prepared to negotiate a ceasefire should demands be met.
- USD/JPY's overnight rally puts prices back above Y155.50 and within range of Y156.75, the cycle high. Clearance above here would resume the primary uptrend that's proved dominant off the September low.
- GBP saw only limited support on the back of a firmer CPI print (Core Y/Y at 3.3% vs. Exp. 3.1%, Services CPI at 5.0% vs. Exp. 4.9%), with the release seen doing little to divert policy expectations across '25, which remain focused on the employers NIC hike, and the implications of the last UK Budget.
- Key datapoints are few and far between Wednesday, keeping focus on the central bank speaker slate. ECB's de Guindos, Stournaras and Makhlouf are set to appear, as well as Fed's Cook - who comments on the economic outlook and policy. BoE's Ramsden is also to address monetary policy at a speech at the University of Leeds.
OPTIONS: Expiries for Nov20 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0500-10(E1.1bln), $1.0530-50(E1.5bln), $1.0585(E685mln), $1.0620-25(E1.4bln)
- USD/JPY: Y154.80-00($1.6bln)
- USD/CAD: C$1.4000($616mln)
COMMODITIES: WTI Futures Trading Above Monday's Lows, But Trend Remains Bearish
- A bearish theme in WTI futures 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 is considered corrective. Price has recovered from its recent lows. The 20-day EMA is at $2651.3. A clear break above it would highlight a possible reversal and signal the end of the recent bearish corrective cycle. This would open $2710.4, the Nov 11 high. Key short-term support lies at $2536.9, Nov 14 high. A break would resume the bear cycle.
EQUITIES: Medium-Term Trend Signals in E-Mini S&P Highlight Dominant Uptrend
- A bearish condition in Eurostoxx 50 futures 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 4848.22, the 20-day EMA.
- The latest move lower 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 the 20-day EMA. The next key support to monitor is 5834.60, 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, Nov 11 high.
| Date | GMT/Local | Impact | Country | Event |
| 20/11/2024 | 1200/0700 | ** |  US | MBA Weekly Applications Index |
| 20/11/2024 | 1300/1400 |  EU | ECB's Lagarde address on financial stability | |
| 20/11/2024 | 1500/1000 | US | Fed Vice Chair Michael Barr | |
| 20/11/2024 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 20/11/2024 | 1600/1600 |  GB | BOE's Ramsden speech on monetary policy | |
| 20/11/2024 | 1600/1100 | US | Fed Governor Lisa Cook | |
| 20/11/2024 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 20/11/2024 | 1715/1215 | US | Fed Governor Michelle Bowman | |
| 20/11/2024 | 1800/1900 | EU | ECB's De Guindos speech on financial stability | |
| 20/11/2024 | 1800/1300 | ** | US | US Treasury Auction Result for 20 Year Bond |
| 20/11/2024 | 2100/1600 | US | Boston Fed's Susan Collins | |
| 21/11/2024 | 0700/0700 | *** | GB | Public Sector Finances |
| 21/11/2024 | 0745/0845 | ** |  FR | Manufacturing Sentiment |
| 21/11/2024 | 0830/0930 | EU | ECB's Cipollone at ECRB meeting | |
| 21/11/2024 | 1100/0600 | *** |  TR | Turkey Benchmark Rate |
| 21/11/2024 | 1100/1100 | ** | GB | CBI Industrial Trends |
| 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 | 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 |
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