GILTS: Some Activity In The Quarterly Futures Roll

SFIH6 96.40/96.35 1x2 put spread, paper pays 1.25 for 20k

The NFIB small business survey saw a slight moderation in both backward- and forward-looking price metrics in December, although the former in particular followed a sharp increase and remains elevated by recent year standards. 

• A net 30% of firms reported price increases compared to three months ago, moderating somewhat after the jump to 34% in Nov (highest since Mar 2023) from 21% in Oct (joint lowest since Aug 2024).
• Putting this 30% into perspective, it has only been higher in two months since May 2023, during which period it averaged 25%. This share averaged ~12% in immediate years after the pandemic.
• Planned price increases have been steadier meanwhile, most recently dropping to a net 28% expecting to increase prices over the next three months vs two months at 30% in Oct-Nov and 31% in Sep. It recently peaked at 32% back in June.
• Whilst down significantly from the 50s in late 2021/early 2022, it continues to remain stubbornly above the ~22% averaged in the pre-pandemic period.
• From the press release: “In December, 64% of small business owners reported that supply chain disruptions were affecting their business to some degree, unchanged from November. Beneath simple yes/no impact binary, there was a positive shift from those reporting a significant impact to those reporting a moderate or mild impact.”
• This unchanged/softer take on supply chain pressures goes against the NY Fed’s global supply chain metric which last week was calculated to be at its highest (most acute pressure) in nearly three years. 

• In the FI space, Bund futures continue to trade closer to their recent highs and a short-term bull cycle is still in play. The latest rally does undermine the bear theme and attention is on resistance around the 50-day EMA, at 128.29. A clear break of this average would highlight a stronger reversal and signal scope for a continuation higher, towards 128.75 initially, the Dec 3 high. Key support and the bear trigger is unchanged at 126.75, the Dec 22 low.
• Gilt futures traded sharply higher last week. The contract is through resistance at 91.93, the Nov 27 high. This strengthens a short-term bullish condition and paves the way for a climb towards 92.72 next, a 1.618 projection of the Dec 16 - 17 - 22 price swing. On the downside, initial support is seen at 91.84, the Jan 8 low. Support at the 20-day EMA lies at 91.51. A break of the average would signal a possible reversal.