MNI ASIA MARKETS ANALYSIS: Still Digesting Noisy CPI Data

HIGHLIGHTS

• Treasuries look to finish firmer but off knee-jerk post-data highs as markets looked past the soft initial CPI inflation to core distortions, the addition of partial October figures and significant methodological issues.
• The Bank of England cut its policy rate by 25 basis points in December by the narrowest possible margin, with a five-to-four vote in the Monetary Policy Committee, and said that the case for further easing was becoming more finely balanced.
• The European Central Bank left its three key interest rates unchanged on Thursday and confirmed in an updated economic assessment that inflation should stabilise at the 2% target in the medium term.
• Higher-than-expected ECB growth forecasts prompted a moderate push higher for the Euro, optimism cooled, however, as an ECB sources report underscores Lagarde's message that "Any talk of rate increases was seen as premature".

US TSYS

MNI US TSYS: Early Volatility on Noisy CPI Inflation Data, New Methodologies

• Treasuries look to finish higher - but well off this morning's post-data knee-jerk highs after softer than expected CPI inflation data as markets dug deeper into the BLS release. Headline inflation came in softer than expected across monthly average and Y/Y measures in the November (and partial October) report, but caveats abound.
• Currently, TYH6 trades +8 at 112-24 vs. 112-31 high, the move higher has exposed 113-00+, a Fibonacci retracement. Clearance of this level would open 113-07, the Dec 3 high. It is possible that recent gains are corrective.
• It appears that the November aggregate indices were downwardly biased by distortionary housing CPI readings for November (even if, as we note, it will never be known whether the bias was to the upside or the downside given October's data will never be collected).
• The Cleveland and Atlanta Feds have published their usual measures of underlying inflation following the delayed/abbreviated Oct/Nov CPI report. As with the latter, the measures of October and November inflation were soft but carried significant methodological issues, and should be interpreted with caution.
• No substantive reaction in Tsys to the BoE cutting 25bp with a five-to-four vote in the Monetary Policy Committee, the ECB left its three key interest rates unchanged and confirmed in an updated economic assessment that inflation should stabilise at the 2% target in the medium term.
• Friday data calendar: Home Sales, Michigan Sentiment, and NY Fed Williams will be interviewed on CNBC at 0830ET. 

REFERENCE RATES
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US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 3.69% (+0.00), volume: $3.289T
• Broad General Collateral Rate (BGCR): 3.66% (+0.02), volume: $1.343T
• Tri-Party General Collateral Rate (TCR): 3.66% (+0.02), volume: $1.312T
• (rate, volume levels reflect prior session)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 3.64% (+0.00), volume: $94B
• Daily Overnight Bank Funding Rate: 3.64% (+0.00), volume: $170B

FED Reverse Repo Operation:

RRP usage inches up to $11.708B with 7 counterparties this afternoon vs. Wednesday's $10.361B. Compares to last Thursday's $0.838B (lowest level since mid-March 2021); this years highest excess liquidity measure: $460.731B on June 30.

US SOFR/TREASURY OPTION SUMMARY

SOFR & Treasury options flow appears mixed overall after this morning's data-driven volatility. Underlying futures still bid but off post-data highs - markets fading initial dovish reaction to the softer-than-expected CPI data as markets take continue to digest the data. Nevertheless, projected rate cut pricing large steady vs. morning levels (*): Jan'26 at -6.6bp, Mar'26 at -16.8bp, Apr'26 at -23.6bp, Jun'26 at -37.6bp.

SOFR Options:
+4,000 SFRZ6 98.00/0QZ6 97.87 call spds, 0.5 
+1,000 SFRF6 96.43 straddles, 10.0 vs. 96.50/0.44%
-6,000 SFRZ7 96.75 straddles, 86.0 ref 96.815
-3,000 SFRZ6 97.00 calls, 24.5 vs. 96.945/0.26%
3,000 SFRH6 96.12/96.25/96.37/96/50 call condors ref 96.50
3,900 SFRU6/2QU6 97.00/97.50 call spd spd
+6,000 SFRF6 96.37/96.43 2x1 put spds, 1.5
Block, -2,500 SFRH6 96.31/96.62/96.87 1x3x2 broken call flys, 9.25 net
Block, 3,897 SFRF6 96.31/96.37/96.43/96.50 put condors vs. 96.56/96.62 call spds, 1.5 net
+8,375 SFRZ6 96.25/96.87/97.25 broken put flys, 4.5-4.75 ref 96.925
+4,000 SFRF6 96.625/96.75 call spds, 1.0
+7,000 SFRF6 96.50/96.625 call spds, 3.25 vs 96.50/0.28%
1,300 SFRF6 96.37/96.50/96.62/96.81 call condors ref 96.495
Block/screen, -9,774 SFRF6 96.375/96.50/96.625/96.8125 broken call condor, 6.5 vs 96.49
-2,000 SFRF6 96.25/96.37 put spds, 0.5

Treasury Options:
3,700 TYF6 115.5/116.75 1x2 call spds ref 112-20
11,000 TYH6 111 puts, 16 ref 112-22
3,000 FVF6 109.5 calls, 8 ref 109-17.25
2,000 TYF6 112/112.5/113/114 call condors, 23 net ref 112-23
5,000 USG6 108/112 put spds ref 115-24
5,000 TYG6 112.5/113 strangles, 60 ref 112-22
Highlight: over +58,000 TYH6 113.5 calls, 33-34 ref 112-22 to -21.5 (+50k earlier in wk)
over 13,000 TYH6 114 calls, 24-25
+2,000 TYH6 112.5 calls vs TYF6 112.75 calls, 47 net
-2,000 TUF6/TUG6 104.5 put spds, 6
2,000 TUF6/TUG6 104.62 put spds
1,000 USH6 113/114/115 put flys ref 115-16
2,046 FVG6 108.25/108.75/109.0 put trees vs. 1,364 FVF6 108.75 puts
+2,000 TYG6 111/112/112.5 broken put trees, 7
-5,000 TYG6 113.5 calls, 16
Block +6,500 TYF6 111.5 puts, 1 ref 112-19
2,450 FVF6 109.5 calls, 7 ref 109-12
over +10,000 TYF6 112.75 calls, 13 vs. 112-20/0.40%
over +17,600 TYF6 114 calls, 2 vs. 112-23.5/0.06%

MNI BONDS: EGBs-GILTS CASH CLOSE: Gilts Underperform As BOE Out-Hawks ECB

EGB yields fell but Gilt yields rose in a busy session Thursday.

• The first major flashpoint of the day was the BOE, which despite delivering the fully-priced  25bp cut triggered a Gilt sell-off led by the front-end amid an expression of a "closer call" on future cuts as well as lack of dovish surprise in the vote split (5-4 as expected).
• While EGBs saw some modest weakness post-BOE compared to Gilts, they would see a notable rise in yields to session highs on the ECB decision which included higher-than-expected growth forecasts. (MNI's review of the ECB meeting is here.)
• However, yields would ultimately pare back from the highs, with ECB's Lagarde noting that rate hike talk was premature, and US CPI showed softer-than-anticipated price pressures (albeit in a messy, delayed report).
• The UK curve twist flattened, with Germany's bull flattening. Periphery/semi-core EGB spreads closed tighter, narrowing alongside equity gains in the European afternoon.
• Friday's schedule includes UK public finances and retail sales data as well as various eurozone confidence surveys, along with a slew of ECB speakers (at least 9 on the docket including Chief Econ Lane). 

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is unchanged at 2.137%, 5-Yr is down 1.6bps at 2.45%, 10-Yr is down 1.4bps at 2.85%, and 30-Yr is unchanged at 3.485%.
• UK: The 2-Yr yield is up 3.7bps at 3.745%, 5-Yr is up 2.4bps at 3.937%, 10-Yr is up 0.6bps at 4.481%, and 30-Yr is down 1.5bps at 5.208%.
• Italian BTP spread down 1.6bps at 68.9bps  / French OAT down 0.4bps at 70.6bps

MNI EGB OPTIONS: Sonia Upside Notable After BOE Decision

• Thursday's Europe rates/bond options flow included:
• Pre-ECB Eurozone
  • OEG6 115.75/116.50RR, bought the put for -1 (receive) in 4k
  • RXH6 125/123ps, bought for 15 in 3k
  • 0RH6 97.75/97.68/97.62p ladder. Bought for -1.5 (receive) in 2k.
• Post-ECB Eurozone
  • RXH6 126.50/125.50 put spread vs. DUH6 106.60/106.40 put spread on a 1/5.6 ratio, paper paid 28 for the RX to sell the DU at 4 on 3K vs. 16.8K
• Pre -BOE UK
  • SFIG6 96.60/96.70cs, bought for 1.25 in 7.5k
  • SFIG6 96.40/96.50/96.60/96.70c condor, bought for 5 in 10k.
  • SFIZ6 97.15/97.25cs vs 96.25/96.15ps, bought the cs for 0.25 in 2k
• Post-BOE UK
  • SFIM6 96.55/96.75/96.95 call fly paper paid 4.75 on 10K
  • SFIZ6 98.00 call, bought for 1.5 in 23k total

MNI FOREX: GBP Rallies Post-BOE, But Momentum Dissipates

• In line with this week’s theme of waning appetite across G10 currency markets, pockets of intra-day momentum quickly stalled, prompting very moderate adjustments for the major pairs overall. GBP had an impressive rally following a tweak to the BOE’s guidance, however, only sits marginally firmer on the session as we approach the APAC crossover.
• GBPUSD popped from 1.3350 as the BOE signalled the MPC are approaching the neutral rate and gained further traction following the below-expectation US CI data. However, prior highs around the 1.3450 did a good job at capping the price action. Spot has subsequently fallen back to 1.3380, just above unchanged levels on Thursday.
• The front-end of the EURGBP vol curve has fallen sharply today: 1m implied is below 3.4% for the first time since 2024, which was itself a life-time low on the series going back to 1998. As a result, EURGBP front-end vols are now the lowest they've been for this time of year, ever.
• Elsewhere, higher-than-expected growth forecasts from the ECB also prompted a moderate push higher for the Euro, although optimism was dampened as an ECB sources report underscores Lagarde's ultimate message today: that "Any talk of rate increases was seen as premature". EURUSD held a 50 pip range over all of today’s event risk, perhaps paving the way for contained ranges heading into year-end.
• The Norwegian Krone remains the strongest in G10 after Norges Bank remained on hold as expected but revisions to the rate path pushed back on significant easing expectations ahead. EURNOK fell 0.6% to 11.91, erasing a solid chunk of this week’s advance.
• All the focus now turns to the BOJ, where markets expect a 25bp rate hike to 0.75%. USDJPY has kept a tight 155.29-155.97 range ahead of the decision, while short-term technical parameters appear well defined at 154-158.
• UK and Canadian retail sales are also scheduled Friday, alongside US existing home sales data.

MNI FX OPTIONS: Expiries for Dec19 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1500(E3.0bln), $1.1600(E1.1bln), $1.1650(E1.2bln), $1.1675-80(E3.0bln), $1.1700-05(E2.0bln), $1.1750-60(E4.4bln), $1.1785-00(E4.8bln), $1.1850(E2.0bln), $1.1900(E2.0bln), $1.2000(E3.2bln)
• USD/JPY: Y153.00($2.8bln), Y154.00($1.4bln), Y155.00($2.2bln), Y156.00($1.4bln), Y157.00($1.3bln), Y158.00($1.9bln)
• GBP/USD: $1.3350-55(Gbp486mln)
• EUR/GBP: Gbp0.8800(E1.3bln), Gbp0.8825-30(E883mln), Gbp0.8850(E529mln), Gbp0.9000(E1.4bln)
• AUD/USD: $0.6600-05(A$943mln), $0.6625(A$551mln), $0.6650(A$842mln), $0.6675(A$1.3bln), $0.6700(A$1.6bln)
• AUD/NZD: N$1.1300(A$1.1bln)
• NZD/USD: $0.5630(N$594mln)
• USD/CAD: C$1.3800($940mln), C$1.3825($1.8bln), C$1.3900($1.7bln), C$1.3950($1.2bln), C$1.4000($1.5bln), C$1.4050($1.1bln), C$1.4200($1.6bln)
• USD/CNY: Cny7.2500($829mln), Cny7.3000($1.1bln)

MNI US STOCKS: Late Equities Roundup: CPI Data Caveats Temper Early Equity Gains

• Stocks are holding moderate to decent gains in the case of the tech-heavy Nasdaq late Thursday, off early session highs amid a couple rounds of program selling as participants continue to digest this morning's noisy CPI inflation data.
• Stocks had surged higher following the softer-than-expected CPI inflation data, but the caveats within the data (the number of M/M categories included for October is very limited: Gasoline, New and Used vehicles) has tempered sentiment somewhat.
• Currently, the DJIA trades up 81.14 points (0.17%) at 47,967.07 vs. 48,365.93 high, S&P E-Mini Futures up 48.75 points (0.72%) at 6,872.0 high, Nasdaq up 295.5 points (1.3%) at 22,988.6 vs. 23,149.61 high.
• Information Technology and Consumer Discretionary sector shares led advances in late trade, tech stocks reversing midweek losses: Micron Technology +12.35% after reporting better than expected fiscal Q1 results late Wednesday: late Wednesday of $4.78 per diluted share, up from $1.79 a year earlier.
• Additional tech stocks leaders included: Sandisk Corp +7.2%, Western Digital +6.84%, Lam Research +6.15%, Seagate Technology +5.82% and Palantir Technologies +4.7%.
• Meanwhile, the Consumer Discretionary sector was buoyed by Starbucks +5.32%, DoorDash +4.94%,  Lululemon Athletica +4.62% and Tesla +4.03% and Williams-Sonoma +2.85%
• Conversely, a mix of Financial, Industrials and Energy sector shares declined in the first half: FactSet Research Systems -4.67%, Generac Holdings -4.57%, Diamondback Energy -4.06%, Marathon Petroleum -3.78%, APA -3.41%, Lennar -3.23% and Phillips 66 -2.79%.

MNI EQUITY TECHS: E-MINI S&P: (H6) Corrective Cycle

• RES 4: 7042.67 2.0% Upper Bollinger Band
• RES 3: 7014.00 High Oct 30 and the bull trigger
• RES 2: 6932.25/6988.00 High Dec 15 / 12
• RES 1: 6870.74 20-day EMA   
• PRICE: 6838.50 @ 14:27 GMT Dec 18
• SUP 1: 6771.50 Intraday low
• SUP 2: 6737.71 61.8% retracement of the Nov 21 - Dec 11 rally
• SUP 3: 6678.58 76.4% retracement of the Nov 21 - Dec 11 rally
• SUP 4: 6583.00 Low Nov 21  

The pullback in S&P E-Minis has resulted in a breach of both the 20- and 50-day EMAs. This strengthens a short-term bear theme and signals scope for a deeper retracement of the recent bull phase between Nov 21 - Dec 11. Sights are on 6737.71, a Fibonacci retracement. Note that the key support and reversal trigger lies at 6583.00, the Nov 21 low. For bulls a resumption of gains would refocus attention on key resistance at 7014.00, the Oct 30 high.

MNI COMMODITIES: Crude Edges Up Amid Sanctions Threat, Precious Metals Decline

• WTI is higher on the day, after gaining on reports that the US plans to introduce further Russia sanctions if Putin does not agree to a peace deal, alongside a US move to blockade all sanctioned Venezuelan oil.
• WTI Jan 26 up 0.2% at $56.1/bbl.
• Venezuela may have to start to shut-in some oil wells due to low storage capacity as maximum capacity could be reached in about 10 days, Bloomberg said.
• Despite the move, a bearish theme in WTI futures remains intact. Moving average studies are in a bear-mode position, highlighting a dominant downtrend.
• A key support and the bear trigger at $56.11, the Oct 17 low has been breached, opening $53.77, a Fibonacci projection. On the upside, initial resistance is at $59.02, the 50-day EMA.
• Elsewhere, spot gold has mostly traded in a tight range today, currently down by 0.3% at $4,324/oz, as dollar price action was relatively muted despite soft US CPI data.
• The trend structure in gold remains bullish, with attention on key resistance and the bull trigger at $4,381.5, the Oct 20 high.
• Meanwhile, silver has underperformed, with price down 1.7% at $63.1/oz at typing.
• Despite this, silver is still ~5.5% higher this week, as it remains supported by a squeeze in physical markets.
• Trend signals in silver remain bullish, with moving average studies still in a bull position, highlighting a dominant medium-term uptrend. Sights are on $68.397 next, a Fibonacci projection.

FRIDAY DATA CALENDAR

Date	GMT/Local	Impact	Country	Event
19/12/2025	0700/0700	***	GB	Public Sector Finances
19/12/2025	0700/0800	**	DE	PPI
19/12/2025	0700/0800	*	DE	GFK Consumer Climate
19/12/2025	0700/0800	**	SE	Retail Sales
19/12/2025	0700/0700	***	GB	Retail Sales
19/12/2025	0745/0845	**	FR	PPI
19/12/2025	0800/0900	**	SE	Economic Tendency Indicator
19/12/2025	0830/0930		EU	ECB Wage Tracker
19/12/2025	0900/1000	**	EU	EZ Current Account
19/12/2025	0900/1000	**	IT	ISTAT Consumer Confidence
19/12/2025	0900/1000	**	IT	ISTAT Business Confidence
19/12/2025	1100/1100	**	GB	CBI Distributive Trades
19/12/2025	1200/1300		EU	ECB Cipollone Remarks, Roundtable at Aspen Institute
19/12/2025	1200/1200		GB	BOE Market Participants Survey
19/12/2025	1330/0830	**	CA	Retail Trade
19/12/2025	1400/1500	**	BE	BNB Business Confidence
19/12/2025	1500/1000	***	US	NAR existing home sales
19/12/2025	1500/1000	***	US	U. Mich. Survey of Consumers
19/12/2025	1500/1000	**	US	University of Michigan Surveys of Consumers Inflation Expectation
19/12/2025	1500/1600	**	EU	Consumer Confidence Indicator (p)
19/12/2025	1510/1610		EU	ECB Lane Lecture at Central Bank of Ireland
19/12/2025	1630/1630		GB	BOE to announce APF Q4 Sales Schedule
19/12/2025	1800/1300	**	US	Baker Hughes Rig Count Overview - Weekly
19/12/2025	1800/1300	**	US	Baker Hughes Rig Count Overview - Weekly
19/12/2025	1800/1300	**	US	Baker Hughes Rig Count Overview - Weekly