MNI China Daily Summary: Wednesday, July 3

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CHINA PBOC CONDUCTS CNY2 BILLION VIA 7-DAY REVERSE REPOS WEDS

CHINA SETS YUAN CENTRAL PARITY AT 7.1312 WEDS VS 7.1291

MNI: US MBA: MARKET COMPOSITE -2.6% SA THRU JUN 28 WK

US MBA: REFIS -2% SA; PURCH INDEX -3% SA THRU JUNE 28 WK

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Futures Through Next Resistance, Presence Of 40-Year Auction Doesn’t Prevent Flattening

GILTS
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Gilt futures are through the previously identified resistance level at 97.44, presenting a greater risk to the bearish technical backdrop in that contract.

  • The contract shows as high as 97.53 on the move.
  • The early curve flattening holds.
  • The impending long end supply (GBP2bn of 4.00% Oct-63 gilts) hasn’t prevented the flattening.
  • A quick look at wider RV into the auction shows 40s trading a little off cycle cheaps on the 30-/40-/50-Year butterfly. Liquidity/maturity preference for 30s and 50s may explain some of the cheapening move on that structure during the latest round of core global FI weakness.

Fig. 1: UK 30-/40-/50-Year Butterfly (bp)

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Gilt futures are through the previously identified resistance level at 97.44, presenting a greater risk to the bearish technical backdrop in that contract.

  • The contract shows as high as 97.53 on the move.
  • The early curve flattening holds.
  • The impending long end supply (GBP2bn of 4.00% Oct-63 gilts) hasn’t prevented the flattening.
  • A quick look at wider RV into the auction shows 40s trading a little off cycle cheaps on the 30-/40-/50-Year butterfly. Liquidity/maturity preference for 30s and 50s may explain some of the cheapening move on that structure during the latest round of core global FI weakness.

Fig. 1: UK 30-/40-/50-Year Butterfly (bp)

Keep reading...Show less