UTILITIES: Orsted (ORSTED Baa1/[N]/BBB[N]/BBB+[N]): Double Outlook Negative

Tsy futures hold moderately lower ahead this morning's $70B 5Y note auction (91282CMD0) at 1130ET. WI is currently running at 4.475%, 27.8bp cheap to last month's modest stop-through sale.

• November auction recap: Tsy futures were little changed after $70B 5Y note auction (91282CMD0) stopped 0.2bp through (first stop since June): drawing 4.197% high yield vs. 4.199% WI; 2.43x bid-to-cover vs. 2.39x for the prior auction.
• Peripheral stats show indirect take-up 64.12% vs. 76.35% prior, directs climbed to highest since Jul 2014 at 24.58% vs.9.47% prior, primary dealer take-up 11.30% vs. 14.17% prior.
• Timing: Results for the latest 5Y note sale will be available shortly after the competitive auction close at 1130ET.

The Richmond Fed's regional manufacturing survey index came in in at -10 as expected in December, the best reading since June (-14 prior). The shipments and employment subindices were flat, but new orders saw a solid improvement to -11 from -19 prior. 

• At the same time, the regional service sector local business conditions index likewise showed improvement, to 14 from 10 prior, with both demand and revenues improving.
• The broad themes of the underlying survey data across both Services and Manufacturing are a continued slowing in price, activity, wage, and employment trends since 2021/2022, albeit now stabilizing a bit higher than recent lows, and with optimism picking up among respondents. The big exception is services sector revenues which rose sharply to 25 from 14, bringing it to levels not seen since early 2021.
• While the report doesn't mention it, the Richmond Fed noted in the October Beige Book that "parts of our District were heavily affected by Hurricane Helene", while recent weak manufacturing readings may have potentially been influenced by previously striking workers at Boeing which is headquartered in Virginia.
• As such these readings represent an improvement from soft conditions but shouldn't be read through directly to broader national conditions.
• Note for manufacturing, the Richmond Fed's improvement bucked the trend of the Philadelphia and Empire surveys deteriorating in December. Overall, those surveys are consistent with a national ISM Manufacturing reading in the high 40s, where it has been for the last 8 months.

• Pick-up in call structure buying since the open, underlying futures steady to mixed through Jun'25:
• +10,000 0QZ5 96.25/96.75/97.25/97.75 call condors 4.25 over SFRZ5 96.50/97.00/97.50/98.00 call condors
• +2,000 0QF5 96.25/96.31 call spds, 0.5 ref 95.925/0.05%
• +2,000 SFRM5/SFRU5 97.00 call spds 4.25