US: This Week's Moves Show Markets Still Not Taking Trump Pledges at Face Value
Feb-13 12:53
Price action across G10 FX this week has seen no let-up in intraday vol and shows that spot prices are still subject to notable headline risk, and are yet to slip into any 'buy the rumour, sell the fact' mode.
- The USD strength that follow Trump's "RECIPROCAL TARIFFS!!!" post today is the latest sign that markets may be insufficiently pricing the President's policy pledges - despite his administration signalling for over a week that a reciprocal tariff announcement is due.
- The argument holds for Trump's communiques on Ukraine - having pledged to solve the crisis early in his campaign - him following through has triggered downside in oil, strength in equities and a rally for the EUR.
- MUFG write that the biggest potential positive from these talks would be a restoration of energy supplies from Russia, which would pose major downside risks to the current bullish price action in natural gas and support their forecasts for a EUR/USD rebound later this year.
- ING note that headlines are likely to continue this week and can't expect much of a trend change here. As such, they expect the current rally in European FX to continue until at least the end of the week.
- JPM spot desk see the FX market as feeling tired, with tariff threats the only positive support for the USD here, and the question is how much positivity is now in the price for any ceasefire announcement.
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US TSYS: Early SOFR/Treasury Option Roundup
Jan-14 12:43
Mixed SOFR/Treasury options flow reported overnight, leaning towards downside put structures in the lead up to this morning's PPI data. Underlying futures modestly firmer but scaling off of early London session highs. Projected rate cuts through mid-2025 continue to retreat, current vs. late Friday levels* as follows: Jan'25 steady at -0.7bp, Mar'25 steady at -4.9bp, May'25 -9.0bp (-8.4bp), Jun'25 -16.5bp (-16.3bp), Jul'25 steady at -18.7bp.
- SOFR Options:
- 3,200 SFRJ5 95.62/95.75/95.81/95.88 broken put condors
- 3,200 SFRU5 95.87 puts vs. 95.87/96.12 call spds
- 7,000 SFRJ5 95.50/95.56 put spds ref 95.835
- 2,000 SFRM5 95.37/95.62 put spds ref 95.835
- -3,500 SFRU5 95.00/95.75 2x1 put spds, 12.0 ref 95.885
- Treasury Options:
- 1,100 USJ5 110/112/114 put flys
- 2,250 FVG5 106.25/106.75/107.50 broken call flys
- 2,000 TYJ5 107/107.5 put spds ref 107-14
- 4,500 TYG5 107 puts
- +10,000 TYG5 108 calls, 16 vs. 107-15/0.32%
EGB SYNDICATION: 10-year GGB: Final terms
Jan-14 12:29
- Spread set earlier at MS+102bp (guidance was MS+107bps area)
- Size: E4bln (top of the E3-4bln range MNI expected)
- Books in excess of E40.5bln (inc JLM interest)
- Maturity: 15 June 2035
- Settlement: 21 January, 2025 (T+5)
- ISIN: GR0124041758
Via Bloomberg / market source
OUTLOOK: Price Signal Summary - Trend Needle In Bunds Points South
Jan-14 12:27
- In the FI space, the trend in Bund futures remains bearish and last week’s extension reinforces this theme. The contract has cleared key support at 132.00, the Nov 6 low. The clear break of this level strengthens a bearish theme. Sights are on the 130.00 handle next. Key short-term resistance is at 133.03, the 20-day EMA. Gains would be considered corrective and allow an oversold condition to unwind. First resistance is at 131.71, the Jan 9 high.
- The trend condition in Gilt futures is unchanged, it remains bearish and last week’s fresh cycle lows reinforce current conditions. The latest move down also highlights an acceleration of the trend. Sights are on 88.87 next, a 2.764 projection of the Dec 20 -27 - Jan 2 price swing. Initial resistance is at 90.31, last Thursday’s intraday high. Resistance at the 20-day EMA, is at 91.86. The EMA is seen as an important hurdle for bulls.
