EUROZONE ISSUANCE: EGB Supply – W/C 5 January

• RES 4: 0.6660 High Sep 18 
• RES 3: 0.6640 76.4% retracement of the Sep 17 - Nov 21 bear leg
• RES 2: 0.6618 High Oct 29 and a key near-term resistance  
• RES 1: 0.6600/6598 High Dec 03 / 61.8% retracement of the Sep 17 - Nov 21 bear leg
• PRICE: 0.6596 @ 16:44 GMT Dec 3 
• SUP 1: 0.6517 20-day EMA 
• SUP 2: 0.6466/21 Low Nov 26 / 21
• SUP 3: 0.6415 Low Aug 21 / 22 and a bear trigger 
• SUP 4: 0.6404 38.2% retracement of the Apr 9 - Sep 17 bull cycle  

AUDUSD continues to appreciate and price action remains above the 20- and 50-day EMAs. This week’s gains have resulted in a breach of a short-term trendline resistance at 0.6544, drawn from the Sep 17 high. The break strengthens a bull theme and highlights a stronger reversal, testing 0.6598 next, a Fibonacci retracement. First support is at 0.6512, the 20-day EMA. A move below this average would signal a possible reversal.            

• Treasuries look to finish moderately firmer Wednesday - off early morning highs following a flurry of economic data.
• TYH6 currently +7.5 at 113-04 vs. 113-07 high, initial technical resistance at 113-11/22+ High Dec 1 / High Nov 25.
• The ISM services index was stronger than expected in November as it inched higher to 52.6 (cons 52.0) after 52.4 in October, marking its highest since February. The S&P Global US services PMI continues to offer a more optimistic assessment of current activity despite being revised down in its final November release to 54.1.
• ADP employment growth “surprised” lower at -32k (Bloomberg cons 10k) in November whilst the October increase was revised up from 42k to 47k.
• The S&P Global US services PMI was revised lower in the final November release 54.1 (flash & cons 55.0) in Nov final after 54.8 in Oct, dipping to its lowest since June rather than confirming what had been its highest since July.
• Stocks continue to plow higher Wednesday, recovering from early session lows after Microsoft denied a write-up from "The Information" they had lowered "AI software sales quotas". Pretty specific, nevertheless, while market concerns over stretched AI-tied valuations are on full display.
• Charles Gasparino at Fox Business reports on X that there is a 'last-ditch' effort by Wall Street and corporate America insiders to caution President Donald Trump against nominating National Economic Council Director Kevin Hassett as Federal Reserve Chair. 
• Look Ahead Thursday Data Calendar: Challenger Job Cuts, Weekly Claims, Revelio & Regional Fed Data.

SOFR & Treasury options remained mixed after better downside put interest early overnight. Underlying futures well off midmorning lows - still off early morning highs. Projected rate cut pricing mixed vs. early morning levels (*): Dec'25 at -23.6bp (-24.6bp), Jan'26 at -31.4bp (-31.8bp), Mar'26 at -40.4bp (-39.8bp), Apr'26 at -47.9bp (-46.3bp).

• SOFR Options:
• +6,000 SFRZ5 96.12 puts, .25 vs. 96.2825
• +15,000 SFRF6 96.50/96.75 call spds 2.0-2.75 over 96.37 puts ref 96.465
• +4,000 SFRH6 96.75 calls, 4.0 vs. 96.475/0.20%
• 2,089 SFRZ5 96.12/96.18/96.25 call flys
• 2,000 0QZ5 96.81/96.87/97.00/97.06 call condors ref 96.95
• 3,500 SFRZ5 96.31/96.37 call spds ref 96.275
• 5,000 SFRZ5 96.25/96.31 call spds ref 96.2725
• over 9,600 SFRZ5 96.31 calls ref 96.2725
• 3,000 SFRH6 96.00 puts ref 96.445
• +6,000 SFRZ5 96.25/96.37 put spds, 9.0
• +5,000 SFRZ5 96.18/96.25 put spds, 0.75
• +7,500 SFRH6 96.18/96.25/96.31 put trees, 0.0 vs. 96.405/0.02%
• +6,000 SFRH6 96.18/96.31/96.37 broken put flys, 2.0
• over -4,100 SFRM6 98.00 calls, 2.0 ref 96.715/0.04%
• +1,850 SFRF6 96.56/96.75 call spds, 2.75 vs 96.46/0.18%
• Treasury Options:
• -5,000 TYF6 112.5/113.5 strangles, 39
• +84,361 wk2 Fri 30Y 106 puts, cab-7**
• 3,000 Wed wkly 113.5 calls ref 113-03.5 (exp today)
• 2,000 USG6 108 puts ref 116-21
• -2,500 TYF6 114/114.75 call spds, 9 vs. 113-08/0.12%
• +2,000 USG6 108/112 3x1 put spds, 6 ref 116-14
• 2,000 USF6 125.5 calls ref 116-16
• +1,750 FVF6 111 calls, 3 vs. 109-20.5/0.08%
• +7,600 Wed wkly 113 calls ref 112-28 to 30 (exp today)
• tyf6 114/114.75 cs vs 113-08 12% seller 9s 2500x 648am
• **File under patently absurd low-delta 30Y put trade:
  84,361 wk2 30Y 106 puts trade on screen at cab-7
  The 10 handle out-of-the-money option expires next week Friday - after the final FOMC of 2025. while markets are widely anticipating a 25bp rate cut on December 10.
  Most likely a hedge vs some short term balance sheet risk that corresponds to a rise in 30Y yield to (rough) appr 5.48% from current yield of 4.73%. (Two caveats: bond cheapest to deliver will change to a higher duration bond most likely; the duration on US 30y cash and USH prob ably won't shift in parallel.)
  There has been a rise in low delta option trades - Treasury & SOFR - on both sides of the curve over the last few sessions. SOFR has seen rise of par (100 strike) and above call options in midcurves targeting early 2026.