SOFR: Positions In Futures Built On Tuesday, Fly Activity Noted
Aug-13 10:40
OI data points to fresh positions being added across much of the SOFR futures strip on Tuesday, with net long setting dominating through SFRU7, before net short setting moved to the fore from SFRH8 as the strip twist steepened.
- The biggest net OI swing came in the SFRM7 contract, boosted by turnover in the SFRZ6/M7/Z7 fly, which saw ~55K lots trade on the session (dominated by selling of the structure).
| 12-Aug-25 | 11-Aug-25 | Daily OI Change |
| Daily OI Change In Packs |
SFRM5 | 1,207,638 | 1,212,400 | -4,762 | Whites | +45,580 |
SFRU5 | 1,289,070 | 1,263,172 | +25,898 | Reds | +96,526 |
SFRZ5 | 1,379,475 | 1,369,756 | +9,719 | Greens | +197,924 |
SFRH6 | 1,048,865 | 1,034,140 | +14,725 | Blues | +8,133 |
SFRM6 | 902,484 | 879,824 | +22,660 |
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SFRU6 | 887,145 | 878,066 | +9,079 |
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SFRZ6 | 1,008,205 | 963,204 | +45,001 |
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SFRH7 | 742,222 | 722,436 | +19,786 |
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SFRM7 | 932,061 | 818,075 | +113,986 |
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SFRU7 | 584,935 | 575,220 | +9,715 |
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SFRZ7 | 577,909 | 517,765 | +60,144 |
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SFRH8 | 343,794 | 329,715 | +14,079 |
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SFRM8 | 272,917 | 267,105 | +5,812 |
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SFRU8 | 206,036 | 207,858 | -1,822 |
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SFRZ8 | 223,373 | 219,403 | +3,970 |
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SFRH9 | 152,276 | 152,103 | +173 |
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HKD: No Relief for Weak-side of HKD Band, Despite Higher HIBOR Fixings
Jul-14 10:38
- Front-end HIBOR fixings came in higher again overnight (overnight up to 0.20%, one-month up to 1.1486%, both of which are the highest levels since the move to the weak-side of the band last month), however term rates remain more subdued, with one-year HIBOR still lower than mid-June levels and fixing roughly unchanged at 2.9241% today.
- Despite the nascent signs of recovery in HIBOR, FX swap rates remain under pressure. Both overnight and one-week HKD funding rates have struggled to hold above 0.4% despite the lower aggregate balance and higher HIBOR fix. It's these rates that will need to recover to fully endorse a pull lower in USD/HKD which signals the aggregate balance needs to reach a lower equilibrium from here, despite recent intervention phases.
- With higher HIBOR fixings and a lower aggregate balance, why aren't FX swap rates normalising? HKMA's Yue wrote after the local close on Friday that HKD funding demand was strong across May and June, but this waned late last month, and remains the case in mid-July. He highlighted the passing of the seasonal peak in dividend payments, foreign firms repatriating HKD proceeds from capital markets activities as well as fading half year-end funding demand. He did not reference market rumours that HIBOR was being artificially supressed to help aide the refinancing of New World Development Co.'s loan portfolio.
- This leaves focus on corporate activity in H2. Sizeable demand for securities can help narrow the HKD forward discount, which has proved sensitive in recent years to a pick-up in capital markets. This has been muddied in recent weeks by the much-anticipated confidential IPO filing for Shein Group. Reportedly, Shein filed in Hong Kong last week - but the prospectus is confidential, meaning the company keeps some details of the float private for a longer period. This bucks the usual practice for big Hong Kong floats and may muddy valuation estimates, distort demand for exposure and potentially restrain any impact on local rates relative to a public float of the same size.
STIR: Least Conviction On Sept FOMC Cut In A Month
Jul-14 10:33
- Fed Funds implied rates are up to 1.5bp higher from Friday’s close for near-term meetings after President Trump’s weekend threats of 30% tariffs on the EU (the largest source of US imports) ahead of a Aug 1 deadline.
- Trump talking up an upcoming “Major Statement” on Russia has also supported oil futures.
- Increases in implied rates are quickly limited further out the curve owing to the associated growth concerns, with the Mar 2026 rate just 0.5bp higher for example.
- Cumulative cuts from 4.33% effective: 1.5bp Jul, 16bp Sep, 30.5bp Oct, 49bp Dec, 59bp Jan and 73bp Mar.
- Similarly, SOFR futures trade flat to 3 ticks firmer on the day.
- The SOFR implied terminal yield of 3.21% (SFRZ6, -2.5bp) inches lower after Friday’s close of 3.235% was the highest since Jun 20.
- It's a particularly thin docket today, with no notable data or Fedspeak. US CPI looms large tomorrow - the MNI Preview will be out later today but we currently see unrounded estimates for core CPI with a median of 0.24% or average of 0.26% M/M, suggesting downside risk to broad Bloomberg consensus of 0.3%.
OUTLOOK: Price Signal Summary -Monitoring Support in GBPUSD
Jul-14 10:32
- In FX, a corrective cycle in EURUSD remains intact. The primary trend condition is bullish with moving average studies continuing to highlight a dominant uptrend. Support to watch is 1.1660, the 20-day EMA. It has been pierced, a clear break of it would signal scope for a deeper retracement, potentially towards the 50-day EMA at 1.1495. For bulls, a resumption of gains would signal scope for a climb to 1.1851, the Sep 10 2021 high.
- A softer short-term tone in GBPUSD remains in place for now. Price has pierced a key support around the 50-day EMA, at 1.3481. A clear break of this level would undermine a bull theme and signal scope for a deeper retracement. Note that a trendline support - drawn from the Jan 13 low - lies at 1.3419. A break of this support would strengthen a bearish threat. Initial firm resistance to watch is 1.3681, the Jul 4 high.
- USDJPY is trading at its recent highs and a short-term bull cycle remains intact. The pair has recently breached resistance at the 50-day EMA, highlighting a stronger reversal. Note too that 146.77, 76.4% of the Jun 23 - Jul 1 bear leg, has also been cleared, exposing 148.03, the Jun 23 high. Support to watch is 145.20, the 50-day EMA. A clear breach of the average would be bearish.
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