MNI ASIA MARKETS ANALYSIS: Data Sets Hawkish Pre-Payrolls Tone
MNI (NEW YORK) - HIGHLIGHTS:
- Higher US Yields On Solid Macro Data Assist Dollar Recovery, USDJPY Above 146.00
- WTI Weakens on Week, Spot Gold Edges Lower
- Busy Week Ahead Includes US Nonfarm Payrolls And Likely Bank of Canada Rate Cut
US TSYS: Week Ends On A Soft Note, With Long Weekend And Payrolls Eyed
Treasury yields rose Friday to cap a negative week, as solid economic data continued to set a cautious tone ahead of next week's key nonfarm payrolls report.
- Treasuries saw a modest sell-off in early trade as solid activity data weighed again. Core PCE inflation was in line but consumer spending and MNI Chicago PMI surprised to the upside (softer UMichigan consumer inflation expectations helped limit the hawkish follow-through).
- The sell-off resumed in the afternoon as volumes picked up sharply after the European cash market close, characterized by bear steepening in the curve.
- There was no obvious evident catalyst outside of the aforementioned solid data, but some desks speculated on the impact of month-end dynamics and position squaring ahead of the long weekend and next Friday's payrolls.
- 10Y yields were set for their highest weekly close in 3 weeks, having fully erased the Powell-Jackson Hole rally from last Friday.
- All that being said, Dec TY futures traded in a relatively narrow 14 point range on the day, with a sense of a "holding pattern" prevailing ahead of a busy week. Dec 24 T-Note future is down 10/32 at 113-18, having traded in a range of 113-16.5 to 113-30.5.
- Next week's holiday-shortened calendar (U.S. markets close for Labor Day Monday) is highlighted by Friday's employment report, the outcome of which will more or less cement market expectations for either a 25bp or 50bp Fed cut two weeks later. Payrolls are preceded by a slew of employment data (jobless claims, JOLTS, ADP), as well as the ISM Services and Manufacturing surveys.
- Cash yields: the 2-Yr yield is up 3.3bps at 3.9268%, 5-Yr is up 4.7bps at 3.7131%, 10-Yr is up 4.8bps at 3.9092%, and 30-Yr is up 4.7bps at 4.1928%.
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
US: SOFR FIX - 30/08/24 - Source BBG/CME
- 1M 5.19535 -0.0052
- 3M 5.01662 0.00093
- 6M 4.70877 0.01055
- 12M 4.21768 0.02063
REPO REFERENCE RATES (rate, change from prev. day, volume):
- Secured Overnight Financing Rate (SOFR): 5.33%, -0.02%, $2088B
- Broad General Collateral Rate (BGCR): 5.32%, -0.02%, $777B
- Tri-Party General Collateral Rate (TGCR): 5.32%, -0.02%, $745B
STIR: Effective Fed Funds Rate - New York Fed EFFR for prior session (rate, chg from prev day):
- Daily Effective Fed Funds Rate: 5.33%, no change, volume: $97B
- Daily Overnight Bank Funding Rate: 5.32%, -0.01%, volume: $260B
ON RRP: RRP uptake climbed $50bn today to $433bn for a typical month-end increase.
- It’s above the $413bn from Jul 31 but below the $665bn from Jun 28 (further boosted by quarter-end) and similar to the $440bn from May 31.
- The number of counterparties increased by 3 to 72.
US SOFR/TREASURY OPTION SUMMARY
Friday's US SOFR Options flow included:
- SFRU4 95.06/95.00ps 1x2, bought for 1.75 in 4k
- SFRU4 95.18/95.31/95.43c fly bought for 1.75 in 2k.
- SFRX4 95.18/94.87ps bought for half in 5k
- SFRZ4 95.18/94.87ps, bought for 1 in 2.5k
- SFRM5 97.00/9750cs sold at 10.5 in 2.5k.
- 0QU4 96.37/96.87cs vs 2QU4 96.75/97.25cs, sold the 1yr at 10 in 2.5k.
- 0QV4 96.68/96.63ps 2x3, bought for 14.25 in 5k
EGBs-GILTS CASH CLOSE: Bunds Weaken As EZ Services HICP Proves Sticky
Core EGB curves flattened to close the week and month Friday, with Gilts outperforming Bunds.
- Short-end German yields reversed Thursday's fall, as ECB cut pricing faded on an acceleration in Eurozone August services inflation and an unexpected fall in Eurozone unemployment to all-time lows.
- Hawkish-leaning comments by ECB's Schnabel also weighed.
- U.S. data in the afternoon weighed on global core FI once again, with PCE inflation in line but consumer spending strong and MNI Chicago PMI surprising to the upside (though softer UMichigan consumer inflation expectations helped limit bond downside).
- The German curve bear flattened on the day, with the UK's leaning bull flatter, with outperformance in the 5Y and 30Y tenors.
- Periphery EGB spreads closed wider by 1-2bp, with BTPs and GGBs underperforming. Portugal's credit rating is under review by S&P after the close (PGB spreads were marginally wider).
- Next week's docket includes final August PMIs, and the Eurozone Q2 GDP final estimate which will help inform
Closing Yields / 10-Yr Periphery EGB Spreads To Germany
- Germany: The 2-Yr yield is up 3.4bps at 2.391%, 5-Yr is up 3.3bps at 2.189%, 10-Yr is up 2.5bps at 2.299%, and 30-Yr is up 2.2bps at 2.546%.
- UK: The 2-Yr yield is down 0.3bps at 4.109%, 5-Yr is down 0.7bps at 3.912%, 10-Yr is down 0.4bps at 4.015%, and 30-Yr is down 1.3bps at 4.531%.
- Italian BTP spread up 2.2bps at 140.2bps / Portuguese up 1bps at 61.2bps
EUROPE OPTIONS: Euro Rates Call Structures Feature To Close The Month
Friday's Europe rates/bond options flow included:
- OEV4/OEX4 120.5/121.25/121.75c flies spread, bought for 3.5 in 6.7k
- ERZ4 96.75/96.87/97.00/97.12c condor, bought for 4.75 in 10k
- ERH5 98.00 call bought for 5.5 in 5k
- ERM5 97.87/98.12 call spread bought for 6 in 10k
FOREX: Higher US Yields Assist Greenback Recovery, USDJPY Above 146.00
- The USD index extended its most recent bounce on Friday, with higher yields in the US assisting the more positive greenback sentiment. U.S. data weighed on global core FI once again, with PCE inflation in line but consumer spending strong and MNI Chicago PMI surprising to the upside.
- The movement in yields has notably weighed on the Japanese Yen, with USDJPY gradually moving higher throughout the session and retaking the 146 handle. Session gains total 0.85% and the pair looks set to secure a close above the 100-week moving average of 144.62.
- A positive weekly close this week is only the second since late June, but may signal a consolidative phase, rather than any firm bounce while prices continue to trade below the Aug 15 high and the 20-day EMA - key upside levels for USDJPY.
- An accompanying, albeit brief, bout of risk off in equities weighed on the likes of AUD and NZD, while EURUSD continued the weakness seen across much of Wednesday and Thursday. Although this week’s move lower in EURUSD appears corrective and a bullish theme remains intact, the pair is hovering in close proximity of short-term support at 1.1047, the 20-day EMA.
- In similar vein, GBPUSD has moved 0.4% lower on Friday, and is set to close lower on the week, after printing at the highest level since March 2022 earlier in the week. Overall, a bullish theme remains in place and the latest shallow pullback is considered corrective. Firm support is not seen until 1.3019, the 20-day EMA.
- Final Eurozone PMIs will cross on Monday with volumes expected to be light owing to the US Labour Day holiday.
FX OPTIONS: Larger FX Option Pipeline
- EUR/USD: Sep03 $1.1115-25(E1.5bln)
USD/JPY: Sep03 Y145.75-95($1.4bln), Y148.50-60($1.1bln); Sep04 Y146.25-35($1.3bln)
EQUITY TECHS: E-MINI S&P: (U4) Bulls Remain In The Driver’s Seat
- RES 4: 5821.25 1.00 proj of the Apr 19 - Jul 16 - Aug 5 price swing
- RES 3: 5800.00 Round number resistance
- RES 2: 5721.25 High Jul 16 and Key resistance
- RES 1: 5669.00 High Aug 26
- PRICE: 5632.25 @ 14:28 BST Aug 30
- SUP 1: 5561.25/5512.95 Low Aug 29 / 50-day EMA
- SUP 2: 5438.75/5319.50 Low Aug 14 / 9
- SUP 3: 5182.00 Low Aug 8
- SUP 4: 5120.00 Low Aug 5 and the bear trigger
- A bullish theme S&P E-Minis remains intact and the contract is trading closer to its recent highs. A resumption of gains would pave the way for a climb towards key resistance and the bull trigger at 5721.25, the Jul 16 high. A break would resume the primary uptrend. Support to watch lies at 5512.95, the 50-day EMA. A clear breach of it is required to instead highlight a potential bearish threat. The latest move lower appears corrective.
COMMODITIES: WTI Weakens on Week, Spot Gold Edges Lower
- Crude futures have fallen sharply today, putting WTI down 1.5% on the week. Expectations of OPEC+ increasing output from October have offset any drawn-out cuts in Libya.
- WTI Oct 24 is down by 2.9% at $73.6/bbl.
- OPEC+ is set to proceed with its plans to bring barrels back to the market from October according to six Reuters sources inside the group.
- For WTI futures, a stronger resumption of gains would refocus attention on key resistance at $78.54, the Aug 12 high. However, an extension lower would once again expose the $70.88 key support, the Aug 5 low.
- Spot gold has fallen by 0.7% to $2,503/oz today, having dipped below the $2,500 level earlier in the session.
- The yellow metal has fallen marginally over the week, having hit a record high on August 20. However, trend conditions are unchanged and remain bullish.
- Focus is on a climb towards $2,536.4 next, a Fibonacci projection. Initial support to watch lies at $2,481.9, the 20-day EMA.
- Meanwhile, silver is underperforming and is down by 2.0% at $28.8/oz, leaving the precious metal down by over 3% on the week.
- A medium-term bearish cycle in silver remains intact, with focus on key support at $26.018, the May 2 low. A continuation higher would cancel the bearish theme and expose $30.502 next, a Fibonacci retracement.
Date | GMT/Local | Impact | Country | Event |
31/08/2024 | 0130/0930 | *** | CN | CFLP Manufacturing PMI |
31/08/2024 | 0130/0930 | ** | CN | CFLP Non-Manufacturing PMI |
02/09/2024 | 2300/0900 | ** | AU | S&P Global Manufacturing PMI (f) |
02/09/2024 | 0030/0930 | ** | JP | S&P Global Final Japan Manufacturing PMI |
02/09/2024 | 0130/1130 | * | AU | Building Approvals |
02/09/2024 | 0145/0945 | ** | CN | S&P Global Final China Manufacturing PMI |
02/09/2024 | 0615/0815 | ** | CH | Retail Sales |
02/09/2024 | 0715/0915 | ** | ES | S&P Global Manufacturing PMI (f) |
02/09/2024 | 0745/0945 | ** | IT | S&P Global Manufacturing PMI (f) |
02/09/2024 | 0750/0950 | ** | FR | S&P Global Manufacturing PMI (f) |
02/09/2024 | 0755/0955 | ** | DE | S&P Global Manufacturing PMI (f) |
02/09/2024 | 0800/1000 | ** | IT | PPI |
02/09/2024 | 0800/1000 | *** | IT | GDP (f) |
02/09/2024 | 0800/1000 | ** | EU | S&P Global Manufacturing PMI (f) |
02/09/2024 | 0830/0930 | ** | GB | S&P Global Manufacturing PMI (Final) |
03/09/2024 | 2301/0001 | * | GB | BRC-KPMG Shop Sales Monitor |
03/09/2024 | 0130/1130 | AU | Balance of Payments: Current Account | |
03/09/2024 | 0630/0830 | *** | CH | CPI |
03/09/2024 | 0700/0300 | * | TR | Turkey CPI |
03/09/2024 | 0700/0900 | *** | CH | GDP |
03/09/2024 | 1245/1345 | GB | BOE's Breeden moderating ECB and European Banking Authority panel | |
03/09/2024 | 1345/0945 | *** | US | S&P Global Manufacturing Index (final) |
03/09/2024 | 1400/1000 | *** | US | ISM Manufacturing Index |
03/09/2024 | 1400/1000 | * | US | Construction Spending |
03/09/2024 | 1530/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
03/09/2024 | 1530/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
03/09/2024 | 1700/1300 | ** | US | US Treasury Auction Result for 52 Week Bill |
03/09/2024 | 1700/1300 | * | US | US Treasury Auction Result for Cash Management Bill |
03/09/2024 | - | CA | Bank of Canada Meeting | |
04/09/2024 | 0130/1130 | *** | AU | Quarterly GDP |
04/09/2024 | 0700/0900 | EU | ECB's Elderson at Joint European Banking Authority and ECB conference | |
04/09/2024 | 0900/1100 | ** | EU | PPI |
04/09/2024 | 1100/0700 | ** | US | MBA Weekly Applications Index |
04/09/2024 | - | *** | US | Domestic-Made Vehicle Sales |
04/09/2024 | 1230/0830 | ** | US | Trade Balance |
04/09/2024 | 1230/0830 | ** | CA | International Merchandise Trade (Trade Balance) |
04/09/2024 | 1255/0855 | ** | US | Redbook Retail Sales Index |
04/09/2024 | 1345/0945 | *** | CA | BOC Policy Decision |
04/09/2024 | 1400/1000 | ** | US | Factory New Orders |
04/09/2024 | 1400/1000 | *** | US | JOLTS jobs opening level |
04/09/2024 | 1400/1000 | *** | US | JOLTS quits Rate |
04/09/2024 | 1400/1000 | US | MNI Connect Video Conference on the U.S. Fiscal Policy Outlook | |
04/09/2024 | 1430/1030 | CA | BOC Governor Press Conference | |
04/09/2024 | 1800/1400 | US | Fed Beige Book | |
05/09/2024 | 0130/1130 | ** | AU | Trade Balance |
05/09/2024 | 0545/0745 | ** | CH | Unemployment |
05/09/2024 | 0600/0800 | ** | DE | Manufacturing Orders |
05/09/2024 | 0730/0930 | ** | EU | S&P Global Final Eurozone Construction PMI |
05/09/2024 | 0830/0930 | ** | GB | S&P Global/CIPS Construction PMI |
05/09/2024 | 0830/0930 | GB | BOE DMP Data | |
05/09/2024 | 0900/1100 | ** | EU | Retail Sales |
05/09/2024 | 0900/1000 | ** | GB | Gilt Outright Auction Result |
05/09/2024 | 1215/0815 | *** | US | ADP Employment Report |
05/09/2024 | 1230/0830 | *** | US | Jobless Claims |
05/09/2024 | 1230/0830 | ** | US | Non-Farm Productivity (f) |
05/09/2024 | 1400/1000 | *** | US | ISM Non-Manufacturing Index |
05/09/2024 | 1430/1030 | ** | US | Natural Gas Stocks |
05/09/2024 | 1500/1100 | ** | US | DOE Weekly Crude Oil Stocks |
06/09/2024 | 0130/1130 | ** | AU | Lending Finance Details |
06/09/2024 | 0600/0800 | ** | DE | Trade Balance |
06/09/2024 | 0600/0800 | ** | DE | Industrial Production |
06/09/2024 | 0645/0845 | * | FR | Industrial Production |
06/09/2024 | 0645/0845 | * | FR | Foreign Trade |
06/09/2024 | 0700/0900 | EU | ECB's Elderson speech at ESCB Conference | |
06/09/2024 | 0900/1100 | *** | EU | GDP (final) |
06/09/2024 | 0900/1100 | * | EU | Employment |
06/09/2024 | 0900/1100 | * | IT | Retail Sales |
06/09/2024 | 1230/0830 | *** | US | Employment Report |
06/09/2024 | 1230/0830 | *** | CA | Labour Force Survey |
06/09/2024 | 1230/0830 | ** | US | WASDE Weekly Import/Export |
06/09/2024 | 1245/0845 | US | New York Fed's John Williams | |
06/09/2024 | 1400/1000 | * | CA | Ivey PMI |
06/09/2024 | 1500/1100 | US | Fed Governor Christopher Waller | |
06/09/2024 | 1700/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |