STIR FUTURES: BLOCK: Dec'25 SOFR Buy

• Size set earlier E7bln (in line with MNI expectations and same as 2023/24
  10-year syndis)
• Reoffer price 99.652 to yield 3.141%
• Spread set earlier at MS+66bps (guidance was +68bps area)
• Books closed in excess of E89bln (ex JLM interest)
• Coupon: 3.1%, annual, act/act, short first
• Maturity: 22-June-2035
• HR 103% vs 2.60% Aug-34 Bund
• Settlement: 14-January-2025 (T+5)
• Coupon: Annual ACT/ACT, short first to 22-June-2025
• ISIN: BE0000363722
• Bookrunners: BNPP (DM/B&D) / CACIB / HSBC / JPM / MS

From market source, Bloomberg

U.S. data only having a fairly muted impact on EUR & GBP STIRs, perhaps limited by the already flat rate cutting profile (based on our assumptions) priced into GBP markets and hawkish repricing in EUR STIRs seen in recent weeks.

• The jump in the ISM prices paid component may also result in some cross-market hawkish Fed plays/isolated U.S. hawkish repricing, which would also explain the lack of follow through into EUR & GBP markets.
• ECB-dated OIS pricing ~102bp of cuts through year-end vs. 103.5bp heading into the data, little changed on the day.
• BoE-dated OIS contracts back to little changed on the day, showing 56.5bp of cuts through year-end vs. 58bp heading into the data. 

December's ISM Services survey was largely in line with expectations, with one notable exception: a sharp rise in Prices Paid. 

• The headline index strengthened to 54.1, a little higher than the 53.5 expected (52.1 prior), with New Orders (54.2, 53.7 prior) and Employment (51.4, 51.5 prior) exactly matching survey expectations. But Prices Paid soared to 64.4 (57.5 expected, 58.2 prior), jumping by the most since January to the highest level in 22 months. In contrast, the headline index, new orders, employment, and new export orders indices remain below their October levels.
• We should note that the reports around the turn of the year tend to be volatile and prone to reversals in the subsequent month. In Dec 2023 for example, the report was very poor with an employment reading consistent with recession - but then January's showed a strong rebound with the strongest monthly increase in prices paid since 2012.  As such we would take the upside surprise there with a grain of salt.
• However the report contains several mentions of tariffs, as both a driver of uncertainty/price concerns, as well as higher activity: "Some of the increased business activity seems to have been driven by preparation for demand in the new year, or risk management for impacts from ports strikes and potential tariffs. There was general optimism expressed across many industries, but tariff concerns elicited the most panelist comments."
• Respondents cited "receiving orders for next cycle earlier than usual”; “More activity around possible higher tariffs impacting the supply chain";  “Getting in front of tariffs”;  “Ocean freight is starting to have a backlog of container shipments.”
• Note the December ISM Manufacturing survey's Prices Paid index rose more than expected to 52.5 (50.3 prior, 51.8 survey), a 4-month high. Though this wasn't particularly elevated in the broader context, it could be interpreted as a further sign that inflation pressures have bottomed out - confirmation of the rise in ISM Services Prices Paid in future surveys would be concerning from this perspective.