STIR: Holding Swing Off Dovish Extremes, ISM Services and Beige Book Ahead
- Fed Funds implied rates consolidate yesterday’s lift off recent dovish extremes, aided by spillover from German fiscal plans plus Lutnick hinting at tariff relief for Canada and Mexico (growth negative tariff impacts had outweighed the inflationary angle in recent sessions).
- Cumulative cuts from 4.33% effective: 1.5bp Mar, 11.5bp May, 27.5bp Jun, 37.5bp Jul and 73bp Dec.
- The 73bp of cuts for 2025 has swung from as many as 85bp yesterday.
- Data headlines today’s docket with no scheduled Fedspeak after NY Fed’s Williams yesterday reiterated that he sees mon pol as “modestly restrictive” and didn’t see a current need to change policy. He also noted inflation expectations are to be watched closely, adding to similar comments from St Louis Fed’s Musalem on Friday.
- The main focus is on the ISM Services February report whilst the Beige Book will be watched for anecdotal updates, especially concerning tariff impacts, ahead of the Mar 19 FOMC. It’ll be the first Beige Book since Trump’s inauguration.
- Beige Book “tariff” count: Zero mentions in the Oct 23 report, 11 in Dec 4 and 23 in Jan 15. From January’s update: “More contacts were optimistic about the outlook for 2025 than were pessimistic about it, though contacts in several Districts expressed concerns that changes in immigration and tariff policy could negatively affect the economy.”
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STIR: Mix Of Net Short Setting & Long Cover In SOFR Futures On Friday
OI data points to a mix of net short setting and long cover in SOFR futures on Friday, with the only outright net positioning swing of any note coming via net short setting in SFRM5 (~15K, which accounted for less than 1.5% of outstanding OI).
| 31-Jan-25 | 30-Jan-25 | Daily OI Change |
| Daily OI Change In Packs |
SFRZ4 | 1,089,556 | 1,085,831 | +3,725 | Whites | +19,349 |
SFRH5 | 1,213,684 | 1,217,522 | -3,838 | Reds | -10,004 |
SFRM5 | 1,073,919 | 1,058,543 | +15,376 | Greens | +4,355 |
SFRU5 | 774,414 | 770,328 | +4,086 | Blues | -6,741 |
SFRZ5 | 958,695 | 955,673 | +3,022 |
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SFRH6 | 682,080 | 690,312 | -8,232 |
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SFRM6 | 636,078 | 637,997 | -1,919 |
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SFRU6 | 594,408 | 597,283 | -2,875 |
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SFRZ6 | 692,856 | 701,591 | -8,735 |
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SFRH7 | 485,031 | 481,031 | +4,000 |
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SFRM7 | 412,863 | 406,599 | +6,264 |
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SFRU7 | 290,400 | 287,574 | +2,826 |
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SFRZ7 | 275,864 | 278,791 | -2,927 |
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SFRH8 | 218,970 | 219,929 | -959 |
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SFRM8 | 180,985 | 183,297 | -2,312 |
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SFRU8 | 120,100 | 120,643 | -543 |
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US 10YR FUTURE TECHS: (H5) Holding On To The Bulk Of Its Recent Gains
- RES 4: 110-25 High Dec 12
- RES 3: 110-19 76.4% retracement of the Dec 6 - Jan 13 bear leg.
- RES 2: 109-31 High Dec 18
- RES 1: 109-10+/13 50-day EMA / High Jan 30
- PRICE: 108-28+ @ 11:07 GMT Feb 3
- SUP 1: 108-23+ 20-day EMA
- SUP 2: 108-06/107-06 Low Jan 23 / 13 and the bear trigger
- SUP 3: 107-04 Low Apr 25 ‘24 and a key support
- SUP 4: 106-11 2.00 proj of the Oct 1 - 14 - 16 price swing
Treasury futures are trading in a tight range. A bullish corrective cycle is intact and the contract is holding on to its recent gains. 109-10+, the 50-day EMA, remains exposed. It has been pierced, a clear break of it would strengthen a bullish theme and open 109-31, the Dec 18 high. The medium-term trend condition is bearish. The bear trigger is 107-06, the Jan 13 low. Initial firm support has been defined at 108-06, the Jan 23 low.
US TSY FUTURES: Long Cover In TY Futures Dominated On Friday
OI data points to a mix of net short setting (FV, UXY, US & WN futures) and net long cover (TU & TY futures) ahead of the weekend, with late Friday trade being dominated by tariff headlines that weighed on Tsy futures.
- The size of the DV01 equivalent swing in TY futures (~$5.6mln) mean that net long cover dominated in curve-wide terms.
| 31-Jan-25 | 30-Jan-25 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 4,185,319 | 4,201,993 | -16,674 | -621,291 |
FV | 6,380,403 | 6,358,074 | +22,329 | +924,327 |
TY | 4,882,499 | 4,969,360 | -86,861 | -5,557,174 |
UXY | 2,319,904 | 2,294,916 | +24,988 | +2,184,165 |
US | 1,959,119 | 1,954,714 | +4,405 | +552,724 |
WN | 1,792,085 | 1,788,424 | +3,661 | +693,717 |
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| Total | -48,152 | -1,823,534 |
