STIR: Midday SOFR Option Update
Call volume picked up heading into midday, implied vol softer on moderate straddle & strangle selling. Projected rate cuts through mid-2025 gain slightly vs. this morning's levels (*) as follows: Mar'25 at -4.2bp (-4.1bp), May'25 at -11.9bp (-11.2bp), Jun'25 at -22.7bp (-22.1bp), Jul'25 at -29.1bp (-28.6bp).
- +5,000 0QJ5 95.62/95.87/96.00 put trees, 0.5 ref 96.185
- -4,000 0QH5 96.31 calls, 8.0 ref 96.155/0.36%
- +4,000 0QH5 96.06/96.31 1x2 call spds, 3.0 ref 96.16
- +10,000 0QH5 97.00/3QH5 96.87 call spds, cab net steepener
- +20,000 0QU5 97.12/98.12 call spds, 6.5 ref 96.15
- +10,000 SFRU5 96.62/97.62 call spds, 5.75 ref 96.015
- -5,000 SFRM5 95.87/96.12 call spds, 6.75 vs. 95.915/0.54%
- +10,000 SFRZ5 95.75/96.00 put spds vs. 5,000 96.50 calls, 1.75 net
- -4,000 SFRN5 95.62/96.37 strangles, 13.0 ref 96.035
- +5,000 SFRZ5 94.87/95.12/95.37/95.62 put condors, 2.25 ref 96.125
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EUROPEAN INFLATION: Bundesbank Estimates Firmer Sequential German Services CPI
The Bundesbank’s estimate of seasonally-adjusted German CPI suggests sequential core and services inflation accelerated in December. Respective mid-term momentum measures were mixed and did not see a major shift this month, however. The December data overall points towards some inflation stickiness at an elevated level.
- Overall core inflation accelerated to 0.26% M/M SA (0.17% in Nov, 3.1% annualized) on a seasonally adjusted basis per Buba, as services inflation accelerated to 0.26% M/M (0.09% in Nov, 3.2% annualized). Even so, the rate of sequential services CPI remained below its 2024 average of 0.34%.
- Manufactured goods ex-energy inflation meanwhile remained broadly unchanged, at 0.25% M/M (vs 0.26% in Nov, 3.1% annualized).
- 3M/3M measures were mixed: core 0.78% (0.75% prior), services 0.73% (0.79% prior), and manufactured goods ex-energy was 0.88% (0.71% prior).
LOOK AHEAD: Tuesday Data Calendar: JOLTS, ISM Services, Tsy 10Y Re-Open
- US Data/Speaker Calendar (prior, estimate)
- 7-Jan 0800 Richmond Fed Barkin economic outlook, (text, Q&A)
- 7-Jan 0830 Trade Balance (-$73.8B, -$78.3B)
- 7-Jan 1000 JOLTS Job Openings (7.744M, 7.750M)
- 7-Jan 1000 JOLTS Job Openings Rate (4.6%, --)
- 7-Jan 1000 JOLTS Quits Level (3.326M, --), Rate (2.1%, --)
- 7-Jan 1000 JOLTS Layoffs Level (1.633M, --), Rate (1.0%, --)
- 7-Jan 1000 ISM Services Index (52.1, 53.5)
- 7-Jan 1000 ISM Services Prices Paid (58.2, 57.5)
- 7-Jan 1000 ISM Services Employment (51.5, 51.1)
- 7-Jan 1000 ISM Services New Orders (53.7, 54.0)
- 7-Jan 1130 US Tsy $85B 42D CMB auction
- 7-Jan 1300 US Tsy $39B 10Y Note re-open (91282CLW9)
US STOCKS: Chip Makers, Interactive Media Shares Leading First Half Gainers
Stocks are trading higher early Monday, tech sector strength helping SPX Eminis rise to the best levels since December 27. Currently, the DJIA trades 353.54 points (0.83%) at 43082.63, S&P E-Minis up 76.5 points (1.28%) at 6065, Nasdaq up 351.3 points (1.8%) at 19971.12.
Semiconductor makers continued to benefit from news announced late Friday that Microsoft plans to invest $80B in AI-enabled data centers - at least of which are expected to be in the US. Leading gainers included Micron Technology +10.98%, Super Micro Compute +10.17%, Teradyne +6.40% while First Solar, Nvidia, KLA Corp, Applied Materials ad Lam Research all gained 5-6% in the first half.
Meanwhile, interactive media and entertainment shares buoyed the Communication Services sector with Alphabet +3.18%, Meta +2.99% and Paramount +2.44%.
On the flipside, Utility and Real Estate sectors underperformed early Monday, multi-energy providers weighing on the former: Eversource -1.88%, Sempra -1.63%, Ameren -1.60%. Office and Residential investment trusts weighed on the Real Estate sector with BXP Inc -2.34%, Camden Property -1.90%, Kimco -1.64%.
Reminder, the next round of quarterly earnings kicks off mid-January with Blackrock, Bank of NY Melon, Wells Fargo, JP Morgan, Goldman Sachs, Citigroup, US Bancorp, M&T Bank and PNC all reporting between January 13-16.
