US TSYS: Early Volatility on Noisy CPI Inflation Data, New Methodologies
- Treasuries look to finish higher - but well off this morning's post-data knee-jerk highs after softer than expected CPI inflation data as markets dug deeper into the BLS release. Headline inflation came in softer than expected across monthly average and Y/Y measures in the November (and partial October) report, but caveats abound.
- Currently, TYH6 trades +8 at 112-24 vs. 112-31 high, the move higher has exposed 113-00+, a Fibonacci retracement. Clearance of this level would open 113-07, the Dec 3 high. It is possible that recent gains are corrective.
- It appears that the November aggregate indices were downwardly biased by distortionary housing CPI readings for November (even if, as we note, it will never be known whether the bias was to the upside or the downside given October's data will never be collected).
- The Cleveland and Atlanta Feds have published their usual measures of underlying inflation following the delayed/abbreviated Oct/Nov CPI report. As with the latter, the measures of October and November inflation were soft but carried significant methodological issues, and should be interpreted with caution.
- No substantive reaction in Tsys to the BoE cutting 25bp with a five-to-four vote in the Monetary Policy Committee, the ECB left its three key interest rates unchanged and confirmed in an updated economic assessment that inflation should stabilise at the 2% target in the medium term.
- Friday data calendar: Home Sales, Michigan Sentiment, and NY Fed Williams will be interviewed on CNBC at 0830ET.
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US TSYS: Late SOFR/Treasury Option Roundup
Treasury & SOFR options saw better call volume on net Tuesday, underlying futures firmer but well off early highs. Meanwhile, projected rate cut pricing gained vs late Monday levels (*): Dec'25 at -12bp (-10.2bp), Jan'26 at -22.1bp (-20.1bp), Mar'26 at -33.1bp (-30.9bp), Apr'26 at -40.1bp (-37.6bp).
- SOFR Options:
- +30,000 SFRZ5 96.25/96.37/96.50 call flys, 3.25
- Blocks, over -30,000 SFRZ5 96.18/96.25/96.31/96.37 call condors, 1.5-1.75 ref 96.19 (Massive open interest in the four strikes between 340k to 604k. Potential roll-up of options that expire two days after the final FOMC meeting of 2025 on December 10. Projected rate cut pricing gaining vs late Monday levels (*): Dec'25 at -12.3bp (-10.2bp), Jan'26 at -23.1bp (-20.1bp), Mar'26 at -34.1bp (-30.9bp), Apr'26 at -41.4bp (-37.6bp).)
- 6,000 SFRZ5 96.37/96.50 call spds ref 96.1925
- 1,000 SFRZ5 96.25/96.31/96.37/96.43 call condors
- 10,000 SFRZ5 96.12/96.25 put spds ref 96.1875
- Block/screen, 4,500 0QZ5 96.68/96.93/96.06 broken put trees ref 96.915
- 3,800 SFRZ5 96.50/96.62 call spds ref96.19
- 2,000 SFRZ5 96.12/96.18/96.25 put flys ref 96.19
- 7,500 SFRZ5 96.18/96.25/96.31/96.37 call condors ref 96.19
- 5,000 SFRZ5 96.12/96.18/96.25/96.31 call condors ref 96.19 to -.1925
- 1,000 SFRZ5 96.25/96.37 1x2 call spds ref 96.1925
- Treasury Options:
- 3,000 USF6 112/117 2x1 put spds
- 8,000 TYZ5 114/114.5/115.5 call flys
- 1,750 FVZ5 110.25/110.5 call spds ref 109-10.5
- 2,500 TYZ5 112.75/113.25 1x2 call spds ref 112-27.5
- 4,500 TYF6 114 calls, 24 ref 112-26
- 2,000 TYZ5 113.5/TYF6 114 call spds, 19
- 3,500 TYZ5 113.5 calls ref 112-26.5
- 2,000 FVG6 110.25/110.5 call spds ref 109-13.25
- 1,400 TUZ5 104.12/104.5 put sds ref 104-05.12
- 2,000 TYZ5 113 puts 30 ref 112-24
- 2,300 TYF6 114 calls, ref 112-20.5
AUDUSD TECHS: Bear Threat Remains Present
- RES 4: 0.6660 High Sep 18
- RES 3: 0.6644 76.4% retracement of the Sep-Oct bear leg
- RES 2: 0.6618 High Oct 29 and a key near-term resistance
- RES 1: 0.6525/6580 20-day EMA / High Nov 13
- PRICE: 0.6503 @ 16:44 GMT Nov 18
- SUP 1: 0.6459 Low Nov 5
- SUP 2: 0.6440 Low Oct 14 and key support
- SUP 3: 0.6415 Low Aug 21 / 22 and a bear trigger
- SUP 4: 0.6373 Low Jun 23
A sharp move down this week so far, in AUDUSD, highlights a clear bear threat. This also reinforces a short-term bearish signal on Nov 13 - a shooting star (inverted hammer) candle formation. Note too that moving average studies are in a bear-mode position, highlighting a dominant downtrend. Key short-term pivot resistance has been defined at 0.6580, the Nov 13 high. A continued sell-off would expose 0.6440, the Oct 14 low.
US DATA: BLS To Publish PPI On Nov 25, Import/Export Prices On Dec 3
BLS reports the PPI report for September (originally due out Oct 16) will be published Tues Nov 25 at 0830ET. This is in line with MNI's expectation that this data would be published by late November.
And the September Import/Export price indices (originally due out Oct 17) will be published on Wed Dec 3 at 0830ET.
