US TSY FUTURES: Net Short Setting Dominated Weds As Markets Prepped For Trump
OI points to net short setting across much of the curve on Wednesday, as markets reacted to the election result. The only round of apparent net long cover came in WN futures.
| 06-Nov-24 | 05-Nov-24 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 4,435,424 | 4,395,233 | +40,191 | +1,456,531 |
FV | 6,327,029 | 6,247,448 | +79,581 | +3,314,978 |
TY | 4,606,545 | 4,544,999 | +61,546 | +3,998,716 |
UXY | 2,203,160 | 2,180,449 | +22,711 | +1,969,291 |
US | 1,860,335 | 1,832,970 | +27,365 | +3,461,460 |
WN | 1,733,354 | 1,743,063 | -9,709 | -1,884,895 |
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| Total | +221,685 | +12,316,081 |
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STIR: 50bp Of Fed Cuts To Year-End
- Fed Funds implied rates have cooled a little off yesterday’s highs, but the path remains at the high end of the range over the past two months and is in-line with the median 2024 dot.
- Cumulative cuts from 4.83% effective: 23bp Nov, 50bp Dec, 71bp Jan and 121bp June.
- A recap of overnight Fedspeak from some prominent members either side of median:
- Gov. Kugler (voter) unsurprisingly maintained a dovish tone, having already revealed she “strongly supported” the 50bp cut last month. She noted the healthy level of jobs creation is very welcome (following Friday’s payrolls) but sees several metrics pointing toward market cooling. She’ll back more cuts if inflation progress continues and whilst she isn’t sure where the neutral rate is, policy is currently way above it.
- NY Fed’s Williams (voter) told the FT in an interview that the 50bp cut in September was not a “rule of how we act” in the future, echoing Powell. The jobs report shows the economy is in good health with the current stance of policy well positioned. The goal is to move interest rates to a neutral setting with forward looking indicators closer to target.
- St Louis Fed’s Musalem (’25) viewed further gradual rate reductions as appropriate over time whilst penciling in a rate path “slightly above” the median dot. The jobs report showed the labor market is strong, with both the labor market and inflation in a “good place”.
- Bostic (’24) seems likely to headline today’s STIR-related Fedspeak in a moderated conversation on the economic outlook at 1245ET (no text). They’ll be the first relevant comments since payrolls for the hawkish-leaning FOMC member.
- Note that VP Jefferson (voter) is set to give his first public remarks since May but will dwell on financial stability, talking on the discount window at 1930ET.
STIR: OI Points To Mix Of Short Setting & Long Cover In SOFR Futures On Monday
OI suggests that there was a relatively balanced mix of net short setting and long cover during Monday’s sell off in SOFR futures.
- Long cover was slightly more prominent in the front end of the strip, while short setting was more prominent further out.
- Friday’s post-NFP sell off extended, as Fed rate cut pricing faded further.
- Upcoming STIR bullet will give exacts when it comes to the latest Fed pricing.
| 07-Oct-24 | 04-Oct-24 | Daily OI Change |
| Daily OI Change In Packs |
SFRU4 | 1,264,083 | 1,283,233 | -19,150 | Whites | -12,675 |
SFRZ4 | 1,126,522 | 1,148,143 | -21,621 | Reds | -7,169 |
SFRH5 | 1,009,178 | 1,008,738 | +440 | Greens | +8,560 |
SFRM5 | 866,183 | 838,527 | +27,656 | Blues | +23,378 |
SFRU5 | 681,580 | 682,670 | -1,090 |
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SFRZ5 | 956,620 | 965,695 | -9,075 |
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SFRH6 | 598,878 | 605,598 | -6,720 |
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SFRM6 | 608,740 | 599,024 | +9,716 |
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SFRU6 | 571,985 | 545,806 | +26,179 |
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SFRZ6 | 619,793 | 620,656 | -863 |
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SFRH7 | 357,277 | 358,094 | -817 |
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SFRM7 | 310,560 | 326,499 | -15,939 |
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SFRU7 | 255,795 | 261,506 | -5,711 |
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SFRZ7 | 244,806 | 229,932 | +14,874 |
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SFRH8 | 194,606 | 188,135 | +6,471 |
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SFRM8 | 164,697 | 156,953 | +7,744 |
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USDJPY TECHS: Price Signal Summary - EURUSD Bear Threat Remains Present
- In FX, EURUSD maintains a softer tone and is trading at its recent lows. The pair has breached support at 1.1002, the Sep 11 low, and what appears to be the midpoint of a double top reversal pattern on the daily chart. The break lower strengthens a bearish theme and signals scope for weakness towards 1.0945 next, 61.8% of the Aug 1 - Sep 25 bull leg. Initial firm resistance is at 1.1076, the 20-day EMA. First resistance is at 1.1039, the 50-day EMA.
- GBPUSD also maintains a softer short-term tone following last week’s sell-off, and the pair is trading at its lows. Cable has breached support at the 20-day EMA and pierced the 50-day EMA at 1.3112. A clear break of this average would strengthen a bearish threat and open 1.3049, 50.0% of the Aug 8 - Sep 25 bull leg. Clearance of this level would expose 1.3002, the Sep 11 low. Initial resistance to watch is 1.3217, the 20-day EMA.
- USDJPY is holding on to the bulk of its recent gains. Last week’s rally resulted in a break of the 50-day EMA, a bullish development that undermines a recent bearish theme and highlights a stronger reversal. Sights are on 149.39, the Aug 15 high. Clearance of this level would strengthen a bullish outlook. Initial firm support is 144.95, the 20-day EMA.
