CREDIT SUPPLY: nmobiliaria Colonial (COLSM: Baa1/BBB+) Guidance ms+110a

Sizeable options interest at today's cut could help define G10 FX price action into 10am NY time (1500GMT), with the most notable strikes including €2.2bln at 1.0500 in EUR/USD, €2.4bln at 1.0540-50 and the biggest of the day (and almost certainly the entirety of 2024): €6.6bln at 1.0600.

• That last option is composed of 59 different options, €3.0bln of which are put notional, €3.6bln of which are calls - likely made up of year-end edges that looked to steer clear of the Fed meeting on Wednesday and avoid thinner markets toward the end of the week.
• Other notable optionality interest lies lower with $950mln at Y152.45 in USD/JPY and $741mln at Y153.00. AUD/USD eyes A$886mln at $0.6350, while GBP/USD sees £475mln rolling off at 1.2625.

• Fed Funds implied rates have modestly pared Friday’s increase, which built into the second half of the session with support from higher oil prices. Recall that import prices were stronger than expected but with a benign readthrough for core PCE.
• Last week's CPI report still weighs on Dec/Jan meetings but dovish implications have been more than reversed further into 2025.
• Cumulative cuts from 4.58% effective: 24bp Dec 18, 28bp Jan, 42bp Mar, 49bp May and 59bp June.
• Wednesday’s FOMC decision looms large but in the near-term, there’s modest focus on flash US PMIs for December at 0945ET. https://media.marketnews.com/Fed_Prev_Dec2024_c2bc263e41.pdf

• The US Services PMI has been strong for some time now, hovering around 55 since May before increasing to 56.1 in November. Against that, the ISM Services reading saw some surprise weakness in November as it fell from 56.0 to 52.1 for its lowest since Aug. 

   

OI data points to a mix of net short setting and long cover during Friday’s move lower in Tsy futures.

• Net short setting was seen in FV & TY futures, with net long cover elsewhere on the curve.
• The two rounds of positioning swings essentially offset in net DV01 equivalent terms.