US TSYS: Hot PCE Green Light For More Fed Hikes
Tsys near lows after the bell. Hot PCE read points to "more to do" by the Fed to reel in inflation, yield curves flatter but off lows as 30s races 2s to new contract lows: TUH3 new contract low of 101-17.88, 2YY hits 4.8364% - highest level since July 2007; USH3 133-20 low, 30YY tapped 3.9597% high.
- Tsys gapped lower as nominal personal spending was stronger than expected in Jan (1.8% vs 1.4) and incomes weaker (0.6% vs 1.0), with the savings rate rising further to 4.7% in Jan from 4% in Q4 and a low of 2.7% in June (albeit prone to sizeable revs). Stronger inflation meant that real spending came in as expected, bouncing strongly after yesterday's surprise downward revision with the 1.1% M/M the strongest since Mar'21.
- Jump in new home sales added to the FI sell-off, 7.2% M/M in Jan (cons 0.7) after an upward revised 7.2% M/M (initial 2.3), leaving sales at 670k (cons 620k) for the highest since March.
- Fed funds implied hike for Mar'23 at 31.0bp, May'23 cumulative 58.1bp (+1.9) to 5.164%, Jun'23 75.5bp (+3.0) to 5.338%, terminal at 5.40% in Aug'23/Sep'23, off first half high of 5.445%.
- Early Fed speak from Cleveland Fed Mester in line with previous, favoring getting rates somewhat above 5%, won't pre-judge next meeting size.
- Boston Fed President Susan Collins said Friday she sees the need for more rate increases amid high inflation and then likely holding there for an extended period of time.
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AUDUSD TECHS: Resumes Its Uptrend
- RES 4: 0.7202 High Jun 9
- RES 3: 0.7175 1.764 proj of the NOv 21 - Dec 13 - Dec 20 price swing
- RES 2: 0.7137 High Aug 11 and key resistance
- RES 1: 0.7123 High Jan 25
- PRICE: 0.7078 @ 16:22 GMT Jan 25
- SUP 1: 0.6994/6906 Low Nov 23 / 20-day EMA
- SUP 2: 0.6872 Low Jan 19 and a key support
- SUP 3: 0.6802 50-day EMA
- SUP 4: 0.6688 Low Jan 3 and key support
AUDUSD traded higher Wednesday and in the process cleared resistance at 0.7063, the Jan 18 high. The breach confirms a resumption of the uptrend and maintains the bullish price sequence of higher highs and higher lows. Attention is on the next key resistance at 0.7137, the Aug 11 high where a break would strengthen underlying bullish conditions. On the downside, short-term support is seen at the 20-day EMA - it intersects at 0.6906.
US STOCKS: Late Earnings
Reminder, late earnings after the close from: IBM, AMP, CCI, TSLA, CSX, RJF, STX, TER
- Rounding out the week:
- Thu: DOW, LUV, BX, VLO, ADM, WY, INTC, OLN, V
- Fri: AXP, CVX, and CL
US TSYS: Late SOFR/Treasury Option Roundup
While the Asia Lunar New Year holiday has kept overall volumes muted this week - SOFR option volume remains robust with focused on low-delta puts/spds (hedging extended rate but smaller hikes). Wed the first time since last week where a shift in low delta call and call spds after more consistent put trade has been noted. Salient trades in the list below include +60,000 SFRZ3 97.00/97.50/98.00 call flys, 1.5 and 19,500 SFRZ3 96.25/97.00/97.50 broken call flys, 6.5 vs. 95.59/0.10%. Puts include 20,000 SFRU3 95.37/95.62 put spds, 17.5 ref 95.30.
- SOFR Options:
- Block, 8,000 SFRJ3 95.37/95.50 call spds, 1.25 ref 95.13
- Block, +8,000 SFRJ3 95.31/95.56 call spds, 2.5 vs. 95.135/0.15%
- BLOCK, 20,000 SFRU3 95.37/95.62 put spds, 17.5 ref 95.30
- Block/screen, +60,000 SFRZ3 97.00/97.50/98.00 call flys, 1.5
- Block, 5,000 SFRU3 96.25/96.75 call spds, 2.5 ref 95.295
- 3,250 SFRJ3 95.25/95.37/95.31/95.37 call condors
- 3,000 SFRZ3 94.75/95.00/95.25 put flys, 3.0
- -10,000 SFRU3 95.62 calls, 12.0 vs. 95.275/0.28%
- Block, 5,000 OQM3 97.25/3QM3 97.75 call spd, 1.5 short Jun over
- Block, 5,000 SFRZ3 97.00/97.50 call spds, 3.0 vs. 95.665/0.05%
- Block, 5,000 SFRJ3 95.25/95.37 call spds, 1.75 vs. 95.09/0.11%
- 2,500 SFRK3 95.18/95.31/95.50 call trees
- 2,000 SFRH3 96.75/97.50/98.00 broken call flys ref 96.15
- Block/screen, 19,500 SFRZ3 96.25/97.00/97.50 broken call flys, 6.5 vs. 95.59/0.10%
- 1,250 SFRK3 95.25/95.31 call spds vs. SFRN3 95.06/95.18/95.25/95.37 call condors
- 1,250 SFRN3 95.06/95.18/95.31/95.50 call condors ref 95.265
- 3,000 SFRM3 95.12/OQM3 96.12 call spds
- Treasury Options:
- 8,500 TYG3 114/114.5 put spds vs. TYH3 111/112 put spds
- 1,800 TYH 112.5/113.5/115.5/116 broken put condors ref 115-06
- 12,000 TYG 114.75/115 put spds, 5
- 2,500 TYG3 115.75/116.25 call spds
- 2,500 FVH3 111 calls, 11 ref 109-20.75
- 7,500 TYG3 116 calls, 4 ref 115-06
- 8,500 TYG3 114/114.5 put spds, 4 ref 115-03.5 -04
- 2,000 TYG3 115.75 calls, 4 ref 115-02.5
