Highlights:
- USD/JPY erases election rally, with tariffs & BoJ decision looming
- Heavy data day as US calendar front-loads ahead of Thanksgiving
- Treasuries build on rally, with 7-yr issuance in focus
US TSYS: Higher Ahead Of Heavy Data Docket And Early Issuance
- Treasuries have extended yesterday’s late rally, broadly consolidating the steepening seen after the FOMC minutes, although the longer end have pared some of these gains over the past two hours.
- Latest headlines have been limited with the move coming ahead of a heavy pre-Thanksgiving data docket plus 7Y supply at the earlier than usual 1130ET after solid offerings from 2Y and 5Y already this week.
- Cash yields are 2.4-4.2bp lower today, with 7s leading declines and 30s lagging.
- 2s10s is little changed at 5.4bps, pulling away from Monday’s post-Bessent brief inversion.
- The Mar 2025 is now the most active for Treasury futures with the roll broadly complete. TYH5 trades at 110-24 off earlier highs of 110-27 that pushed above Monday’s post-Bessent high of 110-24.
- Note that the next downside target in the 10yr Yield is seen at 4.2205%, which would equate to 111-06.
- Data: Headlined by the second Q3 GDP release, jobless claims and durable goods all at 0830ET before the monthly PCE report at 1000ET. See our thoughts on core PCE here.
- Fedspeak: None scheduled but scope for pre-holiday unscheduled appearances.
- Note/bond issuance: US to sell $44bn 7-Year notes - 91282CLZ2 (earlier time of 1130ET)
- Bill issuance: US to sell $95bn 4-Week bills, $90bn 8-Week bills (10030ET), $64bn 17-Week bills (1130ET)
STIR: Fed Seen More Likely To Cut 25bp Than Pause In Dec
- Fed Funds implied rates have pushed lower overnight (Dec -0.5bp, Jan -1bp and June -3bp) with focus on today’s heavy data docket including second revisions to Q3 GDP and jobless claims before the monthly PCE report for October.
- Cumulative cuts from 4.58% effective: 16bp Dec, 22bp Jan, 34bp Mar and 52bp June.
- December pricing saw a further hit after the FOMC minutes yesterday didn’t see an overt push for a pause at the meeting (even if somewhat stale by more hawkish Fedspeak since then), with Fed Funds seeing the meeting as more in favor of a 25bp cut.
- Further out, today’s decline in mid-2025 rates only comes after it got close to last week’s fresh cycle highs.
STIR: Fresh Positions Set In Most SOFR Futures On Tuesday
OI points to a mix of net long setting and short cover in most SOFR futures on Tuesday, with a clear bias to the former.
- The only meaningful exception came via apparent short setting in SFRZ4.
| 26-Nov-24 | 25-Nov-24 | Daily OI Change |
| Daily OI Change In Packs |
SFRU4 | 1,260,737 | 1,259,584 | +1,153 | Whites | +32,555 |
SFRZ4 | 1,347,329 | 1,300,573 | +46,756 | Reds | +60,096 |
SFRH5 | 1,045,743 | 1,072,391 | -26,648 | Greens | +23,465 |
SFRM5 | 1,006,191 | 994,897 | +11,294 | Blues | +4,668 |
SFRU5 | 794,273 | 780,076 | +14,197 |
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SFRZ5 | 958,028 | 921,633 | +36,395 |
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SFRH6 | 585,773 | 584,218 | +1,555 |
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SFRM6 | 608,580 | 600,631 | +7,949 |
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SFRU6 | 653,477 | 646,140 | +7,337 |
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SFRZ6 | 651,697 | 638,309 | +13,388 |
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SFRH7 | 414,116 | 411,104 | +3,012 |
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SFRM7 | 346,225 | 346,497 | -272 |
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SFRU7 | 274,086 | 272,845 | +1,241 |
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SFRZ7 | 281,136 | 275,394 | +5,742 |
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SFRH8 | 211,551 | 209,080 | +2,471 |
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SFRM8 | 157,861 | 162,647 | -4,786 |
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ECB: Schnabel Plays Down PMI Impact, Warns Against Accommodative Stance
ECB Executive Board member Schnabel sought to play down the impact of the weak November flash PMIs in her hawkish-leaning interview with Bloomberg. She noted that the data wasn’t too surprising, echoing sentiment from her hawkish counterpart Nagel last Friday.
- While not explicitly signalling a preference for the upcoming December decision, Schnabel said she had a “strong preference for a gradual approach”. This seemingly supports the case for a 25bp (rather than a 50bp) cut next month.
- Schnabel assesses the neutral interest rate to lie between 2 and 3%, and warned against bringing policy to an accommodative level (i.e. 2%). She seems to favour the ECB keeping “valuable policy space” free to respond to future shocks, where monetary policy would be more effective (i.e. caused by cyclical rather than structural weakness).
- She joined Executive Board counterparts de Guindos and Lane in pushing back against the use of forward guidance, seemingly cementing the case for the “data-dependent and meeting-by-meeting” approach to remain in the December policy statement – as reported by the MNI Policy Team at the start of this month.
- Finally on the prospect of US tariffs, Schnabel noted there was not enough information to make an assessment yet. Still, she said that tariffs would bring downside risks to economic growth, but that the inflation impact is “more complicated”.
Table 1: ECB-dated OIS Implied Cuts
| Meeting Date | ESTR ECB-Dated OIS (%) | Difference Vs. Current Effective ESTR Rate (bp) |
| Dec-24 | 2.873 | -29.2 |
| Jan-25 | 2.544 | -62.1 |
| Mar-25 | 2.237 | -92.8 |
| Apr-25 | 2.029 | -113.6 |
| Jun-25 | 1.882 | -128.3 |
| Jul-25 | 1.804 | -136.2 |
| Sep-25 | 1.743 | -142.2 |
| Oct-25 | 1.715 | -145.0 |
| Dec-25 | 1.689 | -147.6 |
| Source: MNI/Bloomberg. | ||
EGBS: SPGB/OAT/PGB 10-Year Fly Moves Towards -50bp
We have been monitoring the SPGB/OAT/PGB 10-Year fly for some and the structure sits at the lowest level seen since ’06, nearing -50bp.
- Last -48bp vs. ’06 lows of -66.3bp
- With French fiscal and political risk remaining present, it is hard to envisage a scenario whereby the trend is reversed, at least in the immediate term.
- A brief recovery was seen in late October/early November, as passive index inclusion flows into PGBs faded and the fiscal impact of the Valencia floods was considered.
- That was before the French risks mentioned above re-emerged, which helped relative fiscal trajectories of the 3 countries reassert themselves in the structure.
- Indeed, Commerzbank warn that “OATs remain vulnerable, above all vs. Iberia.”
Fig. 1: SPGB/OAT/PGB 10-Year Butterfly (%)
Source: MNI - Market News/Bloomberg
FOREX: USD/JPY Sell-off Extends, EUR Bid on Schnabel
- USD/JPY's sell-off has extended into a second session with today's pullback low at 151.43 marking a break below the 200-dma of Y152.00 and, more significantly, the 50-day EMA of 151.56. A close at current or lower levels confirms a reversal of the election-triggered rally, with Trump's tariff threats a key driver on top of the building expectation for a BoJ rate hike at the December meeting (OIS-markets see a 25bps hike near 65% priced).
- This week's price action also shows well that USD/JPY can shrug off US equity strength, should risk-off be pervasive elsewhere (particularly via European stock markets).
- The greenback is the poorest performer in G10 FX, with the USD Index showing well through yesterday's lows thanks to both the strengthening JPY as well as a better-bid EUR, which gained on the back of a somewhat hawkish appearance from ECB's Schnabel. She firmed her language on the ECB rate path, stating that the room for further rate cuts is "limited". EUR/USD neared first resistance at the Tuesday high of 1.0545 before fading.
- The MNI Chicago PMI data due later today is the schedule highlight - markets expect the figure to improve to 45.0 from 41.6, but still signalling contraction. The secondary read for US GDP is unlikely to press prices in either direction, with the weekly jobless claims data to take precedent, brought forward by one day due to the Thanksgiving holidays from tomorrow.
JPY: Close at Current Levels Would Erase Election Rally
USD/JPY's sell-off extends into a second session with today's pullback low at 151.43 marking a break below the 200-dma of Y152.00 and, more significantly, the 50-day EMA of 151.56. A close at current or lower levels confirms a reversal of the election-triggered rally, with Trump's tariff threats a key driver on top of the building expectation for a BoJ rate hike at the December meeting (OIS-markets see a 25bps hike near 65% priced). This week's price action also shows well that USD/JPY can shrug off US equity strength, should risk-off be pervasive elsewhere (particularly via European stock markets).
- Tomorrow's Tokyo CPI for Nov (published three weeks before the national print) is seen rising further, but it's the Dec 12 Tankan survey that will likely be a greater determinant for the Dec 19 decision. USD/JPY vols are bid to accompany spot weakness, with 1m (capturing the Dec BoJ, as well as Fed decision) topping 12 points for the first time in two weeks today.
- Recall month-end flows (likely front-loaded this week due to the Thanksgiving market holidays across Thursday & Friday) pointed to USD sales to rebalance against a surging US equity market, which will be adding to the downside pressure.
- Worth noting the heavy supply weighing on JPY over the past two sessions, with both yesterday's session and today's trade so far well ahead of average volumes for currency futures. Today's cumulative activity sits over 30% ahead of average for this time of day.
OPTIONS: Expiries for Nov27 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0410(E2.6bln), $1.0450-65(E1.5bln), $1.0475-90(E2.3bln), $1.0500(E3.1bln), $1.0550(E732mln), $1.0570(E1.1bln), $1.0600-10(E4.0bln)
- USD/JPY: Y153.00($2.7bln), Y153.50-60($690mln) Y155.95-00($1.2bln)
- EUR/JPY: Y167.30(E1.1bln)
- AUD/USD: $0.6482-90(A$591mln)
- NZD/USD: $0.5750(N$1.0bln), $0.5865(N$630mln)
- USD/CNY: Cny7.2000($1.5bln), Cny7.2480-00($1.1bln), Cny7.3000($1.1bln)
EQUITIES: E-Mini S&P Sets Sights on Key Resistance at $6053.25
- A downtrend in Eurostoxx 50 futures remains intact and short-term gains are considered corrective - for now. A fresh cycle low last week marked a resumption of the downtrend that started Sep 30. Price has traded through 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.
- S&P E-Minis are trading at this week’s highs and sights are on the key resistance and bull trigger at 6053.25, the Nov 11 high. A break of this hurdle would resume the uptrend and open 6070.16, a Fibonacci projection. Moving average studies remain in a bull-mode set-up and this highlights a dominant uptrend and positive market sentiment. Initial support to watch lies at 5944.60, the 20-day EMA.
COMMODITIES: Long-Term Trend Condition in Gold Unchanged and Bullish
- A bearish theme in WTI futures remains intact and Monday’s move lower reinforces this theme. Attention is on $65.74, the Oct 1 low, and $63.90, 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 $77.04, the Oct 8 high. Clearance of this level would resume the recent uptrend. Initial firm resistance to watch is unchanged at $72.41, the Nov 7 high.
- The long-term trend condition in Gold is unchanged, it remains bullish and the Oct 31 - Nov 14 bear leg appears to have been a correction. Moving average studies are in a bull-mode position, highlighting a dominant uptrend. Monday’s move lower is - for now - considered corrective, despite it being a very sharp pullback. Resistance to watch is $2721.4, Monday’s high. Key support to monitor is $2536.9, the Nov 14 low. A break would be bearish.
| Date | GMT/Local | Impact | Country | Event |
| 27/11/2024 | 1200/0700 | ** |  US | MBA Weekly Applications Index |
| 27/11/2024 | 1330/0830 | *** | US | GDP |
| 27/11/2024 | 1330/0830 | *** | US | Jobless Claims |
| 27/11/2024 | 1330/0830 | ** | US | Durable Goods New Orders |
| 27/11/2024 | 1330/0830 | ** | US | Advance Trade, Advance Business Inventories |
| 27/11/2024 | 1445/0945 | *** | US | MNI Chicago PMI |
| 27/11/2024 | 1500/1000 | *** | US | Personal Income and Consumption |
| 27/11/2024 | 1500/1000 | ** | US | NAR Pending Home Sales |
| 27/11/2024 | 1500/1000 | ** | US | US Bill 04 Week Treasury Auction Result |
| 27/11/2024 | 1500/1000 | * | US | US Bill 08 Week Treasury Auction Result |
| 27/11/2024 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 27/11/2024 | 1630/1130 | ** | US | US Treasury Auction Result for 7 Year Note |
| 27/11/2024 | 1700/1200 | ** | US | Natural Gas Stocks |
| 27/11/2024 | 1800/1900 |  EU | ECB's Lane dinner remarks at conference on "Macroeconomic modelling frontiers for research and policy" | |
| 28/11/2024 | - | EU | European Central Bank Meeting | |
| 28/11/2024 | 0030/1130 | * |  AU | Private New Capex and Expected Expenditure |
| 28/11/2024 | 0800/0900 | *** |  ES | HICP (p) |
| 28/11/2024 | 0800/0900 | ** |  SE | Economic Tendency Indicator |
| 28/11/2024 | 0900/1000 | ** | EU | M3 |
| 28/11/2024 | 0900/1000 | ** |  IT | ISTAT Business Confidence |
| 28/11/2024 | 0900/1000 | ** | IT | ISTAT Consumer Confidence |
| 28/11/2024 | 0900/1000 | ** | IT | PPI |
| 28/11/2024 | 0900/1000 | *** |  DE | North Rhine Westphalia CPI |
| 28/11/2024 | 0900/1000 | *** | DE | Bavaria CPI |
| 28/11/2024 | 1000/1100 | ** | EU | EZ Economic Sentiment Indicator |
| 28/11/2024 | 1000/1100 | * | EU | Consumer Confidence, Industrial Sentiment |
| 28/11/2024 | 1300/1400 | *** | DE | HICP (p) |
| 28/11/2024 | 1330/0830 | * |  CA | Current account |
| 28/11/2024 | 1330/0830 | * | CA | Payroll employment |
| 28/11/2024 | 1700/1800 | EU | ECB's Lane speech at the 25th anniversary of Euro 50 Group at Banque de France | |
| 29/11/2024 | 2330/0830 | ** |  JP | Tokyo CPI |
| 29/11/2024 | 2330/0830 | * | JP | Labor Force Survey |
| 29/11/2024 | 2350/0850 | * | JP | Retail Sales (p) |
| 29/11/2024 | 2350/0850 | ** | JP | Industrial Production |
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