US TSYS: Lat eSOFR/Treasury Option Roundup: Heavy SOFR Puts

• RES 4: 164.76 High Nov 20 and a key short-term resistance  
• RES 3: 162.49 High Nov 22  
• RES 2: 161.73 50-day EMA 
• RES 1: 160.07/160.43 High Dec 10 / 20-day EMA  
• PRICE: 159.96 @ 15:58 GMT Dec 11
• SUP 1: 157.56 Low Dec 05
• SUP 2: 156.18 Low Dec 03 and the bear trigger 
• SUP 3: 155.15 Low Sep 16 and a key support 
• SUP 4: 153.87 Low Dec 8 / 14 2023 

A bear cycle in EURJPY remains in play and recent short-term gains are considered corrective. Moving average studies are in a bear mode position, highlighting a downtrend. 157.87, the 76.4% retracement of the Sep 16 - Oct 31 bull cycle, has been breached. The clear break of this level strengthens a bearish theme and opens 155.15, the Sep 16 low. Initial firm resistance to monitor is 160.43, the 20-day EMA.

Secured rates have been sticky to the upside over the past few sessions. At 4.64% (up 1bp), the SOFR fix printed 6bp above Fed Funds on Tuesday, widening the SOFR-EFFR spread for a 3rd consecutive session (EFFR has remained steady at 4.58%), with SOFR-ON RRP at 9bp and SOFR-IORB at -1bp.

• The 75th minus 25th SOFR percentiles rose 2bp to 11bp (highest since Dec 2) with 99th minus 1st up 2bp to 20bp.
• These are figures not often seen over the past few years outside of some quarter-/year-end dates when funding markets typically come under pressure, and that's before next week's mid-month Treasury settlements and corporate tax payment date.
• These are not necessarily alarming developments, and SOFR is still expected to fade by later in the month - but they underscore some underlying tensions in funding markets that have been bubbling up in the past couple of months.
• Fed officials have expressed that they are unconcerned that reserves are becoming scarce, but an end to QT is likely to be a topic of discussion at meetings in early 2025.

REPO REFERENCE RATES (rate, change from prev. day, volume):

• Secured Overnight Financing Rate (SOFR): 4.64%, 0.01%, $2308B
• Broad General Collateral Rate (BGCR): 4.61%, 0.01%, $864B
• Tri-Party General Collateral Rate (TGCR): 4.61%, 0.01%, $832B

New York Fed EFFR for prior session (rate, chg from prev day):

• Daily Effective Fed Funds Rate: 4.58%, no change, volume:  $102B
• Daily Overnight Bank Funding Rate: 4.58%, no change, volume:  $230B

• Crude markets are on track for their highest close since Nov 22. Support comes from the possibility of tighter sanctions on Russian crude, with Bloomberg also noting that algorithmic buying activity has supported gains.
• WTI Jan 25 is up by 2.6% at $70.4/bbl.
• For WTI futures, initial firm resistance to watch is unchanged at $72.41, the Nov 7 high. Above here, key short-term resistance is at $77.04, the Oct 8 high.
• Meanwhile, Henry Hub front month is headed for its highest close since Nov 25, supported by the current above normal demand and despite milder weather forecasts for next week.
• US Natgas Jan 25 is up 7.5% at $3.4/mmbtu.
• Elsewhere, spot gold has risen for a fourth session in a row, with the yellow metal gaining by 0.8% to $2,716/oz, as US CPI inflation data reaffirmed expectations of a Fed rate cut next week.
• Gold briefly tested resistance at $2,721.4, the Nov 25 high, before paring gains.
• Clearance of this resistance level would highlight a bullish short-term development, opening $2,730.4, the 76.4% retracement of the Oct 31 - Nov 14 bear leg.