MNI ASIA MARKETS ANALYSIS: Markets Reverse Early Support

HIGHLIGHTS

• Early session swings tied to Washington Post - both Treasuries and Stocks surged on the report suggesting watered down tariff plan from the incoming Trump administration.
• Rates quickly reversed course after Trump denied that he would water down his plans for a universal tariff plan.
• Record corporate debt issuance for a single session climbed over $50B, rate lock hedging added additional pressure to rates.

MNI US TSYS: Early Market Swings on Universal Tariff Story Denied by Trump

• Treasuries look to finish mostly lower, curves steeper (2s10s climbing to new 3Y high of 37.004) with the short end outperforming.
• Early market swings tied to a Washington Post article reporting the Trump admin was "exploring plans" to apply tariffs to every country “but only cover critical imports”. The report suggests that Trump’s initial tariff plan may track relatively closely with the Biden administration’s targeted tariffs.
• Both rates and equities surged higher on the article - until Trump denied the watered down approach - with Treasuries reversing course and extending lows by midmorning. Stocks walked back support more gradually, near lows in late trade.
• Record corporate debt issuance for a single session climbed over $50B, rate lock hedging added additional pressure to rates.
• Tuesday Data Calendar includes JOLTS, ISM Services and Tsy 10Y Re-Open.

SOFR FIXES AND PRIOR SESSION REFERENCE RATES
​​​​​​​
SOFR Benchmark Settlements:

• 1M -0.00904 to 4.30639 (-0.03952 total last wk)
• 3M -0.00549 to 4.28820 (-0.03509 total last wk)
• 6M +0.00017 to 4.24202 (-0.04298 total last wk)
• 12M +0.01299 to 4.17770 (-0.07460 total last wk)

US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 4.31% (-0.09), volume: $2.398T
• Broad General Collateral Rate (BGCR): 4.29% (-0.07), volume: $845B
• Tri-Party General Collateral Rate (TGCR): 4.29% (-0.07), volume: $821B
• (rate, volume levels reflect prior session)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $102B
• Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $289B

FED Reverse Repo Operation

Well off last week's year-end high of $473.460B (highest level since June 28) RRP usage continues to recede, $231.926B this afternoon from $237.377 Friday. Compares to $98.356B on Friday, December 20 - the lowest level since mid-April 2021. The number of counterparties steady at 57.

US SOFR/TREASURY OPTION SUMMARY

Better SOFR & Treasury put option volume on net so far, SOFR more two-way as early underlying support reversed after Trump denied tempered tariff story by the Washington Post. Tsy options see huge Mar'25 10Y put buying. Projected rate cuts through mid-2025 look weaker vs. late Friday levels (*) as follows: Jan'25 at -2.3bp (-2.8bp), Mar'25 -11.8bp (-13.2bp), May'25 -16.8bp (-17.8bp), Jun'25 -25.8bp (-26.5bp).

SOFR Options:
-10,000 SFRU5 95.43 puts, 6.5 vs. 96.02/0.10%
-15,000 SFRZ5 95.25/95.75 2x1 put spds, 2.0 ref 96.02
-3,000 2QH5 95.00/95.50 put spds 3.5 ref 95.98
+6,000 0QZ5 97.00/98.00 call spds, 10.0 vs. 96.005/0.14%
Block: 10,000 SFRU5 95.62/95.81 put spds 7.0 vs. 10,000 96.75/97.12 call spds, 4.5, 1.0 net package
over 9,400 SFRH5 95.68 puts, 1.5 ref 95.82
2,000 SFRF5/SFRH5 95.87/96.00/96.06 broken call fly spd
2,000 SFRM5 97.00/98.00 call spds ref 95.935
4,000 SFRF5 95.75/95.81/95.87/95.93 put condors ref 95.80

Treasury Options:
over +100,000 (50k blocked) TYH5 106 puts, 14 ref 108-18.5
6,000 TYG5 106 puts, 2
4,500 TYG5 109.5 calls, 15 ref 108-17
2,250 TYG5 104 puts ref 108-15.5
4,700 TYH5 108 puts, 50 ref 108-15

MNI BONDS: EGBs-GILTS CASH CLOSE: Inflation Uptick Sees Bunds Underperform

Core European yields rose to start the week, with Bunds underperforming Gilts Monday.

• State-level German data in the morning correctly pointed to an upside surprise in the preliminary December national level inflation release in the afternoon.
• Having apparently confirmed the trend seen in solid Spanish and Portuguese data last week, inflation breakevens rose (EUR 5Y5Y swap +2.9bp to the highest since mid-Nov at 2.08%), paring ECB cut pricing. Final Eurozone PMIs for December also saw upward revisions and firmer price pressures.
• Supply concerns also weighed on core FI, with UK, Austrian and German auctions Tuesday alongside an expected Belgian 10Y syndication.
• The German curve bear flattened, with the UK's lightly bear steepening.
• Periphery/semi-core spreads tightened, with OATs slightly outperforming in a partial reversal of late December's sell-off.
• Tuesday's early highlights include inflation data from Switzerland, France, Italy, and the Eurozone.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 3.3bps at 2.194%, 5-Yr is up 3.3bps at 2.263%, 10-Yr is up 2.2bps at 2.447%, and 30-Yr is up 1bps at 2.663%.
• UK: The 2-Yr yield is up 1.1bps at 4.433%, 5-Yr is up 1.6bps at 4.401%, 10-Yr is up 1.7bps at 4.61%, and 30-Yr is up 2.3bps at 5.179%.
• Italian BTP spread down 3.8bps at 112.5bps / French OAT down 5.0bps at 81.1bps

MNI OPTIONS: Notable Upside And Vol Buying To Start The Week

MNI FOREX: Greenback Settles Lower Following Tariff Report Induced Volatility

• FX volatility was stoked Monday on the back of a Washington Post report suggesting that US President-elect Donald Trump’s aides are "exploring plans" to apply tariffs to every country “but only cover critical imports”. The potential for slightly less protectionist trade policy bolstered the existing direction of travel for the greenback, with the USD index extending session lows and briefly bringing the DXY’s pullback to around 1.5% from last week’s highs.
• However, President-Elect trump later claimed the article to be fake news and the US dollar partially recovered from its lowest levels. The USD index is currently down 0.64% ~108.30 as we approach the APAC crossover.
• EURUSD surged through 1.0400, and notably rose above the 20-day EMA resistance to print a 1.0437 high, recovering over 200 pips from the 1.0226 lows on Jan 02. The rally was supported by higher-than-expected inflation figures from Germany, substantially narrowing the gap to resistance at the Dec 30 high of 1.0458. Spot has since slipped back to 1.0380.
• Similar strength seen across higher beta currencies such as GBP (+0.76%), which has risen back above 1.25 and will look to initial firm resistance at 1.2562, the 20-day EMA. Similarly in emerging markets, USDMXN is 1.3% lower on the day at 20.35.
• USDJPY volatility was in focus, as the pair slipped from a 157.96 high to a 156.24 low after the news. However, we have recovered roughly 1% from the lows, as the Dec 26 high at 158.08 remains in sight.
• CAD is also 0.6% higher and has received particular attention given PM Trudeau has decided to resign. USDCAD’s pullback is seen as technically corrective at this juncture, with initial firm support only briefly being pierced at 1.4320, the 20-day EMA.
• Swiss and Eurozone inflation data are due early Tuesday, before US ISM Services PMI and JOLTS data headline the docket in the US.

MNI US STOCKS: Late Equities Roundup: Paring First Half Gains

• Stocks are mixed in late trade, scaling back first half gains with S&P Eminis and Nasdaq indexes outperforming DJIA by the bell. Well off this morning's high of 43115.31 the DJIA trades down 51.3 points (-0.12%) at 42680.66, S&P E-Minis up 24.25 points (0.4%) at 6013.75, Nasdaq up 192.4 points (1%) at 19812.54.
• Semiconductor makers continued to benefit from news announced late Friday that Microsoft plans to invest $80B in AI-enabled data centers - at least half of that expected to be in the US. Leading gainers included Micron Technology +10.99%, Teradyne +6.98% while First Solar, Nvidia, KLA Corp, Applied Materials ad Lam Research all gained 3-5% in the second half.
• Interactive media and entertainment shares buoyed the Communication Services sector with Meta +2.79%, Paramount +2.67% and Alphabet +2.26%.
• On the flipside, Utility and Real Estate sectors continued to underperform in late trade, multi-energy providers weighing on the former: Sempra -3.18%, PG&E -2.84%, Xcel Energy -2.19%. Office and Residential investment trusts weighed on the Real Estate sector with UDR -3.48%, Essex Property Trust -3.35% and Kimco -3.24%.
• Reminder, 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.

MNI EQUITY TECHS: E-MINI S&P: (H5) Monitoring Resistance

• RES 4: 6194.19 1.236 proj of the Aug 5 - Sep 3 - Sep 9 price swing   
• RES 3: 6178.75 High Dec 6 and key resistance  
• RES 2: 6163.75 High Dec 16 
• RES 1: 6041.75/6107.50 Intraday high / High Dec 26        
• PRICE: 6015.00 @ 1515 ET Jan 6
• SUP 1: 5911.25/5866.00 Low Jan 3 / Dec 20       
• SUP 2: 5811.65 38.2% retracement of the Aug 5 - Dec 6 bull leg 
• SUP 3: 5784.00 Low Nov 4
• SUP 4: 5698.25 50.0% retracement of the Aug 5 - Dec 6 bull leg

A bear threat in the S&P E-Minis contract remains present despite the most recent gains. The reversal lower from the Dec 26 high, highlights the end of the Dec 20 - 26 correction. Attention is on 5866.00, the Dec 20 low and a key S/T support. Clearance of this level would strengthen a bearish theme. Initial firm resistance is 6107.50, the Dec 26 high. Clearance of this level would highlight a bull reversal and open key resistance at 6178.75, the Dec 6 high.  

MNI COMMODITIES: WTI Crude Slips, Silver & Copper Rally

• WTI is on track for losses today, ending a recent rally. The market is still weighing up sluggish Chinese demand and the eventual return of OPEC barrels against a weaker USD.
• WTI Feb 25 is down by 0.5% at $73.6/bbl.
• Last week’s rally in WTI futures has exposed key short-term resistance at $76.41, the Oct 8 high. On the downside, key short-term support is seen at $70.78, the 20-day EMA.
• By contrast, silver has risen by 1.1% today to $30.0/oz, bringing the gold silver ratio down to its lowest since Dec19.
• A bear cycle in silver that started Oct 23 remains in play - for now. The metal has recently breached support at $29.642, the Nov 28 low, opening $28.446, a Fibonacci retracement.
• Key resistance has been defined at $32.338, the Dec 12 high.
• Meanwhile, copper has rallied by 1.9% to $415/lb, with the red metal buoyed by reports that Trump could pare back his trade tariff policy, which he later denied.
• A bearish trend condition in copper futures remains intact and the latest recovery appears corrective.
• The cycle low late December confirmed a resumption of the downtrend and has paved the way for an extension towards $400.00 and $388.86, a Fibonacci projection.
• Initial firm resistance is $420.05, the 50-day EMA. Key resistance to watch is at $433.50, the Nov 12 high.

TUESDAY DATA CALENDAR

Date	GMT/Local	Impact	Country	Event
07/01/2025	0730/0830	***	CH	CPI
07/01/2025	0745/0845	***	FR	HICP (p)
07/01/2025	0830/0930	**	EU	S&P Global Final Eurozone Construction PMI
07/01/2025	0900/1000	**	EU	ECB Consumer Expectations Survey
07/01/2025	0900/1000	***	DE	Bavaria CPI
07/01/2025	0930/0930	**	GB	S&P Global/CIPS Construction PMI
07/01/2025	1000/1000	**	GB	Gilt Outright Auction Result
07/01/2025	1000/1000	**	GB	Gilt Outright Auction Result
07/01/2025	1000/1100	***	EU	HICP (p)
07/01/2025	1000/1100	**	EU	Unemployment
07/01/2025	1000/1100	***	IT	HICP (p)
07/01/2025	1330/0830	**	CA	International Merchandise Trade (Trade Balance)
07/01/2025	1330/0830	**	US	Trade Balance
07/01/2025	1330/0830	**	CA	International Merchandise Trade (Trade Balance)
07/01/2025	1355/0855	**	US	Redbook Retail Sales Index
07/01/2025	1500/1000	*	CA	Ivey PMI
07/01/2025	1500/1000	***	US	ISM Non-Manufacturing Index
07/01/2025	1500/1000	***	US	JOLTS jobs opening level
07/01/2025	1500/1000	***	US	JOLTS quits Rate
07/01/2025	1630/1130	*	US	US Treasury Auction Result for Cash Management Bill
07/01/2025	1800/1300	**	US	US Note 10 Year Treasury Auction Result
08/01/2025	0030/1130	***	AU	CPI Inflation Monthly