HIGHLIGHTS
- Equities fell Wednesday (S&P futures -0.7%), led by tech stock underperformance ahead of Nvidia earnings after the market close.
- The dollar had one of its strongest days of the summer (DXY +0.6%, most since early June), with EURUSD sliding back toward 1.11 ahead of Eurozone inflation data Thursday and Friday.
- Rates markets saw little spillover, with futures largely unchanged as Bunds outperformed peers.
US TSYS: Modest Bear Steepening
Treasuries closed Wednesday flat, having traded throughout the session well within the week's ranges amid a lack of major catalysts.
- Late in the session, the December TY contract was up 1.5 ticks at 114-01+, near the low end of the day's 8 tick range (114-01 to 114-09). The subdued price action contrasted with fairly sharp moves for equities throughout the session on tech stock volatility, as well as notable US dollar strength (DXY +0.6% for one of its strongest sessions of the summer).
- The cash curve leaned bear steeper: the 2-Yr yield is up 1.6bps at 3.8733%, 5-Yr is up 2.1bps at 3.6688%, 10-Yr is up 2.3bps at 3.8444%, and 30-Yr is up 2.1bps at 4.1338%.
- Data was limited: MBA mortgage applications showed flat weekly growth, while the re-started Atlanta Fed Wage Tracker provided further evidence of gradually softening labor market conditions.
- There was little reaction to the $70B 5Y Note auction which went relatively smoothly, with a 0.3bp tail offset by strong peripheral statistics.
- Overnight, attention will be on chipmaker Nvidia's earnings results after the market close, an appearance by Atlanta Fed Pres Bostic, and German inflation data early Thursday morning.
- Thursday's data calendar includes US GDP revisions and weekly jobless claims, as well as the final Treasury coupon supply of the month in the form of 7Y Note.
PRIOR SESSION REFERENCE RATES
REPO REFERENCE RATES (rate, change from prev. day, volume):
- Secured Overnight Financing Rate (SOFR): 5.35%, 0.01%, $2227B
- Broad General Collateral Rate (BGCR): 5.34%, 0.02%, $783B
- Tri-Party General Collateral Rate (TGCR): 5.34%, 0.02%, $753B
- SOFR continues recent increases to 5.35% but remains within recent ranges over the past two months.
New York Fed EFFR for prior session (rate, chg from prev day):
- Daily Effective Fed Funds Rate: 5.33%, no change, volume: $86B
- Daily Overnight Bank Funding Rate: 5.33%, no change, volume: $249B
RRP usage increased $45bn to $389bn today, drifting higher ahead of month-end for technically the highest since Jul 24 as it pulls away from a period closer to a little above $300bn.- The number of counterparties increased by 6 to 74, its highest since Aug 20 and before that Jul 24 as well.
US RATE OPTIONS: Wednesday's SOFR options flow included:
- SFRU4 95.25/95.12/95.00p fly, bought for 2 in 5k
- SFRU4 95.25/95.37cs, bought for 1.25 in 5k
- SFRU4 94.87/95.00cs, traded 11.25 in 9k
- SFRU4 95.12/95.25/95.37c fly, traded 2.25 in 2k
- SFRU4 95.37/95.43cs, traded 0.25 in 8.5k
- SFRU4 95.06p, sold at 4.25 in 3.5k.
- SFRV4 95.50/95.37ps, traded 1.75in 5.5k
- SFRV4 95.37/95.50cs, traded 11 in 2.5k
- SFRV4 95.25/95.43cs with 95.50/95.53cs strip traded 28 in 5k
- SFRV4 95.00/94.87ps traded 0.25 in 4k
- SFRX4 95.31/95.18ps 1x2, bought for flat in 4k
- SFRZ4 95.50/96.00cs 1x2, bought for 7 in 2.5k
- SFRH5 95.81/95.75ps bought for 2 in 5k
- 2QU4 96.75p, bought for 3.5 in 3k
EGBs-GILTS CASH CLOSE: Bunds Outperform Ahead Of Inflation Data
Bunds outperformed global peers Wednesday ahead of the latest round of Eurozone inflation data.
- Core FI enjoyed a modest rally in early trade, helped in part by weaker crude oil prices.
- Eurozone money and lending data pointed to a continuation of soft credit dynamics.
- Yields bounced back from the session lows set in early afternoon, however, amid hedging activity as EUR issuance priced.
- Gilt yields were little changed, with no market-moving data, and a panel appearance by BoE's Mann produced no headlines.
- Periphery EGB spreads closed slightly wider for the most part.
- The schedule gets busier Thursday with an appearance by ECB's Lane, and the August Eurozone inflation data round kicking off with Spain and Germany - MNI's preview is here (PDF).
Closing Yields / 10-Yr Periphery EGB Spreads To Germany
- Germany: The 2-Yr yield is down 1.9bps at 2.385%, 5-Yr is down 2.1bps at 2.165%, 10-Yr is down 2.7bps at 2.261%, and 30-Yr is down 3.4bps at 2.503%.
- UK: The 2-Yr yield is up 0.5bps at 4.114%, 5-Yr is up 0.3bps at 3.914%, 10-Yr is up 0.3bps at 4.001%, and 30-Yr is up 0.9bps at 4.519%.
- Italian BTP spread up 0.6bps at 138.6bps / Spanish up 1.3bps at 83.1bps
EUROPE OPTIONS: Sonia Call Structures Prevalent Wednesday
Wednesday's Europe rates/bond options flow included:
- RXV4 134.50/135.50cs 1x2, bought the 1 for -1 (receive) in 3k
- ERZ4 96.50/96.75/97.25/97.50c condor, bought for 21 in 5k
- ERH5 97.25/97.00/96.75p fly bought for 5 in 5.5k
- 0RH5 98.12/9.37/98.50 broken c fly vs 97.37/97.12ps, bought the fly for flat in 3k
- SFIX4 95.35/95.55/95.75c fly, bought for 6.5 and 6.75 in 7k total
- SFIX4 95.55/95.45/95.20 broken p fly, bought for flat in 2k
- SFIZ4 95.40/95.50/95.60/95.70c condor sold at 2.75 in 2k
- SFIM5 96.50/96.70cs, bought for 5 in 4k
FOREX: EURUSD Slides Back Towards 1.11 Amid Broad Greenback Recovery
- The US dollar has stabilised on Wednesday and the USD index stands 0.56% higher on the session, putting a pause on the steep weakening trend across August. With bunds outperforming global peers ahead of the latest round of Eurozone inflation data tomorrow, EURUSD has weakened 0.65%, steadily edging towards the 1.1100 handle as we approach the APAC crossover.
- Eurozone money and lending data pointed to a continuation of soft credit dynamics, and this has likely weighed on the single currency at the margin.
- The move lower for EURUSD is considered corrective given last week’s appreciation reinforcing a bullish technical set-up. Moving average studies are in a bull-mode position too, highlighting a rising trend. The trend is overbought, a pullback would allow this condition to unwind. Key short-term support to watch is 1.1036, the 20-day EMA.
- Single currency weakness was also notable against the Swiss Franc, which relatively outperforms on the session. EURCHF is set to increase its losing streak to three sessions, extending the pull lower from the August highs to over 200 pips.
- Vols are further biased against the greenback, with EUR, GBP and JPY 1m risk reversals posting a Z-score north of 2 points in favour of USD puts. This is more extreme in the USD/CHF curve, in which 1m risk reversals cleared 1.5 points in favour of puts today for the first time since the onset of COVID in March 2020. This makes the USD weakness this month distinct from the USD-selling phase into end-Dec'23.
- Eurozone inflation data kicks off on Thursday with releases for Germany and Spain in focus. Revisions to US GDP and PCE for Q2 highlight the US data calendar.
Of note:
- EURUSD 5.91bn at 1.1105/1.1200.
- USDJPY 3.51bn at 145.25/145.50 (a little far).
- AUDUSD 1.81bn at 0.6775/0.6805.
- AUDNZD 1.98bn at 1.0920 (thu).
- AUDUSD 1.14bn at 0.6745/0.6750 (fri).
- EURUSD: 1.1085 (481mln), 1.1105 (403mln), 1.1120 (365mln), 1.1140 (415mln), 1.1150 (1.4bn), 1.1160 (291mln), 1.1165 (267mln), 1.1170 (242mln), 1.1175 (1.01bn), 1.1185 (224mln), 1.1200 (1.29bn).
- GBPUSD: 1.3250 (503mln).
- USDJPY: 145.25 (1.43bn), 145.50 (2.08bn).
- AUDUSD: 0.6775 (580mln), 0.6785 (251mln), 0.6800 (425mln), 0.6805 (550mln).
- USDCNY: 7.1500 (834mln).
- USDZAR: 17.50 (550mln), 17.80 (579mln).
EQUITIES: Skittish Pre-Nvidia Results
Equities took successive legs lower in afternoon trade, once again led by tech underperformance ahead of the Nvidia earnings results after the close.
- With a small bounce late in the day, Nasdaq futures are 1.8% on the day), vs 0.7% for the S&P.
- That's despite a 7% rebound in beleaguered Super Micro share prices from the lows (still down over 19%).
- Standout sectors posting losses were consumer discretionary (=1.3%), Tech (-1.2%), and Energy (-0.9%) as oil prices fell, while the only S*P sector in the green in late trade was Utilities.
- Notably just before 2pm ET we saw the biggest sell program (1,099 NYSE names) since Aug 22.
- ESU4 emini fut currently trades at 5604, down 41 points on the day. Key support comes in at 5504.86.
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: 5638.50 @ 14:25 BST Aug 28
- SUP 1: 5504.86 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
S&P E-Minis are in consolidation mode. A bullish theme is intact and the contract traded to a fresh cycle high Monday. Price has recently cleared 5600.75, Aug 1 high, signalling scope for an extension towards key resistance and the bull trigger at 5721.25, Jul 16 high. A break would resume the primary uptrend. Support to watch lies at 5504.86, the 50-day EMA. A clear breach of it is required to instead highlight a potential bearish threat.
COMMODITIES: Crude Recovers Some Losses, Precious Metals Trade Weaker
- Crude recovered some of the earlier losses after a small US crude inventory draw according to the update EIA weekly petroleum data. Crude has jettisoned some of the Libya-related gains, amid high spare capacity from OPEC and upcoming cut unwinding.
- WTI Oct 24 is down 1.2% at $74.6/bbl.
- For WTI futures, a resumption of gains would refocus attention on key resistance at $78.54, the Aug 12 high. For bears, an extension lower would once again expose the $70.88 key support.
- Spot gold has fallen by 0.6% to $2,509/oz today, amidst a strengthening of the US dollar in Wednesday’s session.
- From a technical perspective, bullish conditions in gold remain intact, with focus on a climb towards $2,536.4 next, a Fibonacci projection. Initial support to watch lies at $2,475.4, the 20-day EMA. Short-term weakness would be considered corrective.
- Meanwhile, silver has underperformed, falling by 2.3% to $29.3/oz.
- For silver, a medium-term bearish cycle is still intact and recent gains appear to be a correction - for now.
- Key support is seen at $26.018, the May 2 low, while on the upside the 50-day EMA has been cleared and is a concern for bears. A continuation higher would cancel the bearish theme and expose $30.502 next, a Fibonacci retracement.
- Copper is also down by 2.2% today, at $414/lb.
MNI (NEW YORK)
| Date | GMT/Local | Impact | Country | Event |
| 28/08/2024 | 2200/1800 |  US | Atlanta Fed's Raphael Bostic | |
| 29/08/2024 | 0130/1130 | * |  AU | Private New Capex and Expected Expenditure |
| 29/08/2024 | 0600/0800 | ** |  SE | Retail Sales |
| 29/08/2024 | 0600/0800 | *** | SE | GDP |
| 29/08/2024 | 0700/0900 | *** |  ES | HICP (p) |
| 29/08/2024 | 0700/0900 | ** | SE | Economic Tendency Indicator |
| 29/08/2024 | 0800/1000 | *** |  DE | North Rhine Westphalia CPI |
| 29/08/2024 | 0800/1000 | *** | DE | Bavaria CPI |
| 29/08/2024 | 0900/1100 | ** |  EU | EZ Economic Sentiment Indicator |
| 29/08/2024 | 0900/1100 | * | EU | Consumer Confidence, Industrial Sentiment |
| 29/08/2024 | 0915/1115 | EU | ECB's Lane in panel "Inflation - challenges..." | |
| 29/08/2024 | 1200/1400 | *** | DE | HICP (p) |
| 29/08/2024 | 1230/0830 | *** | US | Jobless Claims |
| 29/08/2024 | 1230/0830 | ** | US | WASDE Weekly Import/Export |
| 29/08/2024 | 1230/0830 | *** | US | GDP |
| 29/08/2024 | 1230/0830 | * |  CA | Current account |
| 29/08/2024 | 1230/0830 | * | CA | Payroll employment |
| 29/08/2024 | 1230/0830 | ** | US | Advance Trade, Advance Business Inventories |
| 29/08/2024 | 1400/1000 | ** | US | NAR Pending Home Sales |
| 29/08/2024 | 1430/1030 | ** | US | Natural Gas Stocks |
| 29/08/2024 | 1530/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 29/08/2024 | 1530/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 29/08/2024 | 1700/1300 | ** | US | US Treasury Auction Result for 7 Year Note |
| 29/08/2024 | 1930/1530 | US | Atlanta Fed's Raphael Bostic | |
| 30/08/2024 | 2330/0830 | ** |  JP | Tokyo CPI |
| 30/08/2024 | 2330/0830 | * | JP | Labor Force Survey |
| 30/08/2024 | 2350/0850 | * | JP | Retail Sales (p) |
| 30/08/2024 | 2350/0850 | ** | JP | Industrial Production |
| 30/08/2024 | 0030/1030 | ** | AU | Retail Trade |
| 30/08/2024 | 0600/0800 | ** | DE | Retail Sales |
| 30/08/2024 | 0600/0800 | ** | DE | Import/Export Prices |
| 30/08/2024 | 0630/0730 |  GB | UK DMO to release FQ3 issuance calendar | |
| 30/08/2024 | 0645/0845 | *** |  FR | HICP (p) |
| 30/08/2024 | 0645/0845 | ** | FR | PPI |
| 30/08/2024 | 0645/0845 | *** | FR | GDP (f) |
| 30/08/2024 | 0645/0845 | ** | FR | Consumer Spending |
| 30/08/2024 | 0700/0900 | ** |  CH | KOF Economic Barometer |
| 30/08/2024 | 0705/0905 | EU | ECB's Schnabel at Ragnar Nurkse Lecture | |
| 30/08/2024 | 0735/0935 | EU | ECB's Schnabel in panel at Ragnar Nurkse | |
| 30/08/2024 | 0755/0955 | ** | DE | Unemployment |
| 30/08/2024 | 0800/1000 | ** |  IT | ISTAT Business Confidence |
| 30/08/2024 | 0800/1000 | ** | IT | ISTAT Consumer Confidence |
| 30/08/2024 | 0830/0930 | ** | GB | BOE M4 |
| 30/08/2024 | 0830/0930 | ** | GB | BOE Lending to Individuals |
| 30/08/2024 | 0900/1100 | *** | EU | HICP (p) |
| 30/08/2024 | 0900/1100 | ** | EU | Unemployment |
| 30/08/2024 | 0900/1100 | *** | IT | HICP (p) |
| 30/08/2024 | 1230/0830 | *** | US | Personal Income and Consumption |
| 30/08/2024 | 1230/0830 | *** | CA | GDP - Canadian Economic Accounts |
| 30/08/2024 | 1230/0830 | *** | CA | Gross Domestic Product by Industry |
| 30/08/2024 | 1230/0830 | *** | CA | CA GDP by Industry and GDP Canadian Economic Accounts Combined |
| 30/08/2024 | 1230/0830 | *** | CA | Gross Domestic Product by Industry |
| 30/08/2024 | 1345/0945 | *** | US | MNI Chicago PMI |
| 30/08/2024 | 1400/1000 | ** | US | U. Mich. Survey of Consumers |
| 30/08/2024 | 1500/1100 | CA | Finance Dept monthly Fiscal Monitor (expected) | |
| 30/08/2024 | 1700/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |
| 31/08/2024 | 0130/0930 | *** |  CN | CFLP Manufacturing PMI |
| 31/08/2024 | 0130/0930 | ** | CN | CFLP Non-Manufacturing PMI |
1841 words