BONDS: EGBs-GILTS CASH CLOSE: Bull Steepening Continues On Soft Euro Inflation
Jan-31 17:38
The German and UK curves bull steepened for a 2nd consecutive session Friday as Eurozone inflation pressures appeared softer than expected to start the year.
- Following on from Thursday's post-ECB rally, Bunds led gains across the space as German regional and French inflation data came in softer than expected.
- ECB implied rate cuts deepened, with around 81bp total expected by year-end (up 10bp from pre-data).
- In other data, UK mortgage approvals were firmer than expected, with consumer credit in-line; the ECB's Survey of Professional Forecasters saw respondents revised 2025
growth expectations down. - OATs notably outperformed the rest of the semi-core (and periphery) EGB space, with spreads narrowing after an apparent deal on the 2025 budget seemingly reducing near term fiscal/political risks. Periphery EGB spreads widened slightly as an intraday equity rally faded.
- Next week's European calendar includes the BoE decision (25bp rate cut expected, along with new forecasts and a press conference) and the Eurozone-wide flash inflation print.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 8.9bps at 2.119%, 5-Yr is down 8bps at 2.235%, 10-Yr is down 5.9bps at 2.46%, and 30-Yr is down 4.6bps at 2.713%.
- UK: The 2-Yr yield is down 3.7bps at 4.219%, 5-Yr is down 2.9bps at 4.224%, 10-Yr is down 2.2bps at 4.538%, and 30-Yr is up 0.1bps at 5.126%.
- Italian BTP spread up 1.2bps at 109.3bps / French OAT down 1.8bps at 73.4bps
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US TSYS: Tsy Curves Look To Finish 2024 at June'22 Highs
Dec-31 19:18
- Treasuries look to finish the last trading session of 2024 lower after reversing Tuesday morning support. Markets closed Wednesday for New Years day, resume full trade Thursday.
- The Mar'25 10Y contract trades 108-25.5 (-5.5) late in the day, 10Y yield near session high of 4.5871%. Curves bounced off flatter levels, 2s10s climbing to 34.344 -- the highest level since June 2022.
- Short end support, in turn, helped projected rate cuts into early 2025 gain momentum vs. late Monday levels (*) as follows: Jan'25 steady at -2.8bp, Mar'25 -14.6bp (-13.6bp), May'25 -20.6bp (-19.5bp), Jun'25 -29.8bp (-28.8bp).
- No substantive reaction to this morning's housing and regional Dallas Fed services activity data. Looking ahead to Thursday data (prior, est): Initial Jobless (219k, 221k) and Continuing Claims (1.910M, 1.890M) at 0830ET; S&P Global US Manufacturing PMI (48.3, 48.3) at 0945ET; Construction Spending MoM (0.4%, 0.3%) at 1000ET.
- Treasury supply: $85B 4- & $80B 8W bill auctions at 1130ET, $64B 17W bill auction at 1300ET.
COMMODITIES: WTI Futures, Gold Holding Higher
Dec-31 18:47
WTI futures are trading higher today as the contract extends recent gains. A stronger reversal to the upside would refocus attention on key short-term resistance at $76.41, the Oct 8 high. Initial firm resistance is unchanged at $71.97. A bear threat in Gold remains present. The yellow metal traded sharply lower on Dec 18 and the move undermines a recent bull theme. A resumption of weakness would open key support at $2536.9, the Nov 14 low.
- WTI Crude up $0.9 or +1.27% at $71.88
- Natural Gas down $0.32 or -8.13% at $3.618
- Gold spot up $19.24 or +0.74% at $2625.86
- Copper down $6.95 or -1.7% at $402.3
- Silver down $0.1 or -0.34% at $28.8383
- Platinum up $3.96 or +0.44% at $908.02
US STOCKS: Late Equity Roundup: Tech & Interactive Media Sectors Underperforming
Dec-31 18:36
- Stocks are trading near session lows after reversing early session gains. Though off this year's record highs (SPX Eminis 6178.75, DJIA 45,073.63, Nasdaq 20,204.58) major averages will finish the year with double digit gains: SPX Eminis +19.5%, DJIA +13.1%, while the Nasdaq gained 29.9%!
- Currently, the DJIA trades down 92.19 points (-0.22%) at 42474.46, S&P E-Minis down 28 points (-0.47%) at 5929.75, Nasdaq down 147 points (-0.8%) at 19337.13.
- Information Technology and Communication Services shares underperformed continued to underperform late Tuesday, shares of software and semiconductor makers weighing on the tech sector: Nvidia -1.61%, Advanced Micro Devices -1.36%, Crowdstrike Holdings -1.28%.
- Interactive media and entertainment shares weighed on the Communication Services sector: Alphabet -0.9%, Live Nation -0.76%, Netflix -0.60%, Meta -0.41%.
- On the positive side, Energy and Materials sectors outperformed in the second half, oil & gas stocks buoyed the Energy sector as crude prices continued to rise (WTI +1.0 at 71.99): APA Corp +3.59%, Marathon Petroleum +2.46%, Occidental Petroleum +2.15%.
- Meanwhile, shares of chemical & fertilizer makers supported the Materials sector: Mosaic +2.44%, Celanese +1.42%, Dow +1.37%.
- Looking ahead, the next round of quarterly earnings kicks off mid-January with Blackrock, Bank of NY Melon, Wells Fargo, JP Morgan, Goldman Sachs, Citigroup, US Bancorp, M&T Bank and PNC all reporting between January 13-16.
