EMISSIONS: EU Mid-Day Carbon Summary: EUAs/UKAs Track Weekly Gains

• SFRX5 96.37/96.43cs 2x3, traded 1.5 in 3k.
• SFRZ5 96.43/96.50/96.56c fly, traded 0.25 in 8k.
• SFRZ5 96.37/96.25ps, traded 1.5 in 2.5k.
• SFRM6 96.87/96.68ps 1x2, traded -3.25 and -3 in 2k.
• 0QZ5 97.18c, traded 6 in 4k.
• 0QF6 96.75/96.62ps, traded 2.5 in 2k.

SOFR prints 4.31% Tuesday, up 4bp from prior for the biggest spread above IORB (16bp) since 2020. Similarly TGCR (4.28%) rose to 13bp above IORB, an indicator that has been eyed by ex-SOMA manager and now Dallas Fed Pres Logan as a sign reserves have shifted into "ample" from "abundant".

• Yes some of this is due to heavy bill settlements Tuesday but the structural move seems clear - overall it's another signal for the FOMC to consider in deciding whether to announce an immediate end to QT today- we (and consensus) think it's increasingly likely.

• In the FI space, Bund futures are unchanged and continue to trade closer to their recent lows. The move down that started on Oct 17 is considered corrective and this has allowed an overbought trend condition to unwind. Initial key support at 129.46, the 20-day EMA, has been breached. This exposes the 50-day EMA, currently at 129.10. For bulls, a reversal would refocus attention on the key resistance at 130.59, the Oct 17 high. First resistance is 130.07, Oct 24 high.
• A bull cycle in Gilt futures remains intact and yesterday’s fresh cycle high reinforces current conditions. Note too that MA studies are in a bull-mode position, highlighting a dominant uptrend. Sights are the 94.00 handle next. A break of this level would pave the way for an extension towards 94.24, a 1.618 projection of the Sep 3 - 11 - 26 price swing. The contract is overbought, a pullback would allow this condition to unwind. Firm support to watch 92.41, the 20-day EMA.