MNI ASIA MARKETS ANALYSIS: Existing Home Sales Disappoint

US TSYS Corporate Debt Issuance Hedging Tempers Post 2Y Auction Support

• Treasuries look to finish mildly higher Tuesday, near the middle of a generally narrow session range. Tsys extended highs briefly (TYU4 tapped 111-00) after the $69B 2Y Note auction stopped 2.1bp through (4.434% high yld vs. 4.455% WI).
• Tsy futures quickly reversed amid comparatively heavy rate lock hedging vs. corporate issuance: $12B United Health over 8 tranches, and $5B Occidental Petroleum over 5 tranches.
• Tsys gained earlier after weaker than expected existing home sales: 3.89m (cons 3.99m) after an unrevised 4.11m in May. It sees sales fall -5.4% M/M and a fourth consecutive monthly decline worth a cumulative -11% which has more than offset the 9.5% jump back in Feb.
• Tsy Sep'24 10Y futures are currently trading 110-26 (+3), above initial technical support of 110-21+, the 20-day EMA. Otherwise bullish theme in Treasuries remains intact despite a fade in prices through late last week and into Monday morning. Short-term pullbacks are proving to be corrective at this stage. The contract has traded through resistance at 111-10+, the Jul 8 high.
• Focus turns to Wednesday's Wholesale/Retail Inventories, Flash PMIs and New Home Sales; Tsy supply includes $30B 2Y FRN Note and $70B 5Y Notes.
• Early Wednesday equity earnings from: Tenet Healthcare, Evercore, AT&T, Amphenol, CME Group, Old Dominion Freight Line, Blackstone Mortgage Trust, International Paper, Boston Scientific, Applied Digital, Lennox International, Fiserv, General Dynamics, Thermo Fisher Scientific, NextEra Energy, Otis Worldwide, Stifel Financial and NextEra Energy.

SOFR FIXES AND PRIOR SESSION REFERENCE RATES

SOFR Benchmark Settlements:

• 1M +0.00008 to 5.34958 (+0.00283/wk)
• 3M +0.00124 to 5.28460 (+0.00161/wk)
• 6M +0.00485 to 5.14408 (+0.00940/wk)
• 12M +0.01590 to 4.83735 (+0.03709/wk)

• Secured Overnight Financing Rate (SOFR): 5.33% (-0.01), volume: $2.120T
• Broad General Collateral Rate (BGCR): 5.32% (+0.00), volume: $792B
• Tri-Party General Collateral Rate (TGCR): 5.32% (+0.00), volume: $769B
• (rate, volume levels reflect prior session)

• Daily Effective Fed Funds Rate: 5.33% (+0.00), volume: $84B
• Daily Overnight Bank Funding Rate: 5.32% (+0.00), volume: $226B

FED Reverse Repo Operation

RRP usage recedes to $389.837B from $395.901B on Monday. Number of counterparties falls to 64 from 77 prior. Today's usage compares to $327.066B on Monday, April 15 -- the lowest level since mid-May 2021.

SOFR/TEASURY OPTION SUMMARY

SOFR and Treasury options remained mixed on modest volume Tuesday, Aug'24 Treasury option squaring ahead this Friday's expiration. Projected rate cut pricing into year end are steady to mildly higher vs. Tuesday morning levels (*): July'24 at -2.5% w/ cumulative at -0.6bp at 5.323%, Sep'24 cumulative -25.1bp (-24.3bp), Nov'24 cumulative -39.6bp (-38.5bp), Dec'24 -62.2bp (-61.1bp). Salient flow includes:

• SOFR Options:
  • +4,000 SFRZ4 94.68/95.00 2x1 put spds, 0.25 ref 95.31
  • +10,000 SFRX4 95.31/95.43/95.56 call flys, 1.875 ref 95.31
  • +2,000 SFRV4/SFRZ4 95.25 straddle spds, 6.5 net ref 95.30
  • -1,000 0QU4 96.12 straddles, 36.0 ref 96.155
  • +4,000 SFRU5 94.50/SFRZ5 94.50 put spds 2.25, covered
  • 5,000 SFRH5 94.68/95.00 2x1 put spds, 0.5
  • 5,000 SFRU5 96.25/SFRZ5 94.50 1x2 put spds
  • +5,000 SFRQ4 94.68/94.81 put spds 1.0 ref 94.915
  • 5,850 SFRX4 95.31/95.43/95.56 call flys
  • 5,000 SFRZ4 95.50 calls
  • 10,000 SFRZ4 97.00 calls, 1.5
  • 3,000 SFRV4 95.62/SFRZ4 95.50 call spds ref 95.30
• Treasury Options: Reminder, August options expire this Friday
  • -30,000 TYQ4 110 puts, 1 vs. 110-29.5/0.08% (OI 106,288)
  • +5,000 TYV4 114 calls, 17
  • 1,650 TYQ4 110/110.5 put spds, 4 ref 110-27
  • over 7,900 TYU 112 calls, 20 ref 110-28.5
  • Block/screen, 14,000 TYQ4 110.75 straddles, 31 ref 110-25.5
  • 3,800 wk1 TY 110 put vs. 111/111.5 call spds, expire Aug 2
  • 3,000 FVQ 106.75/107 put spds

EGBs-GILTS CASH CLOSE: Semi-Core, Periphery EGB Spreads Widen

Core EGBs outperformed Gilts Tuesday, with periphery/semi-core spreads widening.

• Gilts underperformed Bunds early in the session in a continuation of Monday's price action as next week's BoE decision remained in focus, with little impact on the day from speakers (ECB's de Guindos, Lane) or supply (Gilt linker, Schatz).
• Early in the afternoon session, OAT spreads widened sharply with no apparent headline trigger, with a broader flight-to-safety move seeing equities fall, Bunds strengthen and periphery EGB spreads also widen. Some desks pointed to much earlier headlines that leftists planned to take take measures to scrap French pension reforms.
• 10Y OAT/Bund widened almost 4bps on the day to close at 69.6bps, highest since early July.
• The German curve bull steepened, with UK yields down 3-4bp across the curve. Gilts' underperformance meant the 10Y spread to Bunds hit the widest levels since mid-June.
• Wednesday's main focus will be flash July PMI data.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 5-Yr yield is down 6.4bps at 2.397%, 10-Yr is down 5.6bps at 2.439%, and 30-Yr is down 4.5bps at 2.634%.
• UK: The 2-Yr yield is down 3.7bps at 4.025%, 5-Yr is down 4bps at 3.94%, 10-Yr is down 3.7bps at 4.124%, and 30-Yr is down 3.3bps at 4.636%.
• Italian BTP spread up 3bps at 130.8bps / Greek up 4.6bps at 99.9bps

EGB Options: Light, Mixed Rates Trade Tuesday

Tuesday's Europe rates/bond options flow included:

• OEU4 115.50p, paper pays 10.5 in 8.3k
• ERV4 96.50 puts, bought for 1.5 in 4k
• SFIU4 95.05/95.10/95.20 1x1.5x0.5 call fly, paper pays 1.25 in 5k

FOREX EUR/JPY Cracks Key Support, Opens Next Leg Lower

• JPY remains a market highlight, as the currency is the strongest performer in G10 for another session - helping tip AUD/JPY over 5% off the cycle high posted pre-intervention. Critically, EUR/JPY has also broken below major psychological support at the Y170.00 mark and looks to secure a close below the 50-dma - hard-worn support that successfully contained weakness on several occasions over the past few months. Clustered support at 167.53-75 could be key on the next downleg.
• Global growth dynamics remain key, with concerns around the Chinese economy weighing heavily on industrial metals and energy products through the Tuesday session, dragging growth-, risk- and commodity-tied currencies lower in the process. As a result, NOK, AUD and NZD traded poorly into the close.
• Focus Wednesday turns to pivotal prelim PMI data from the Eurozone, UK and US. The UK numbers could take particular focus given it's the last look at economic data ahead of the August Bank of England decision on Thursday next week - for which markets are priced on a knife edge, split between unchanged, and a first 25bps rate cut of the cycle.
• Outside of the data, the Bank of Canada decision is also due. Markets are speculating over the potential for a back-to-back rate cut, however some signs of resilience in certain inflation metrics could contain the BoC at this stage.

Late Equity Roundup: Broadline Retailers, Chemical Makers Leading

• Stocks are holding modest gains late Tuesday, near the middle of narrow session ranges as the pace of equity earnings announcements gain momentum. Currently, the DJIA is up 56.53 points (0.14%) at 40474.09, S&P E-Minis up 0.5 points (0.01%) at 5612, Nasdaq up 21 points (0.1%) at 18030.26.
• Consumer Discretionary and Materials sectors led gainers in late trade, broadline retailers buoyed the discretionary sector: Amazon +3.6% following recent upgrade from Morgan Stanley, Pool Corp +0.85%, Ulta +0.54%. Chemical companies supported the Materials sector: Sherwin-Williams +6.77% after reporting better than expected earnings, Smurfit Westrock +2.67%, Air Products & Chemicals +2.03%.
• On the flipside, Energy sector shares underperformed, oil and gas shares weighing on the former for the second consecutive session: Diamondback Energy -2.76%, Philips 66 -2.15%, Hess -2.0%. Meanwhile, support for Information Technology sector evaporated in the second half, semiconductor shares weaker: NXP Semiconductors -8.96%, ON Semiconductors -4.53%, Analog Devices and Texas Instruments both -2.3%.
• Reminder, Tuesday afternoon earnings announcements expected from: Tesla, Texas Instruments, Seagate Technology, Enphase Energy, Alphabet, Visa and Capital One Financial Corp.
• Early Wednesday: Tenet Healthcare, Evercore, AT&T, Amphenol, CME Group, Old Dominion Freight Line, Blackstone Mortgage Trust, International Paper, Boston Scientific, Applied Digital, Lennox International, Fiserv, General Dynamics, Thermo Fisher Scientific, NextEra Energy, Otis Worldwide, Stifel Financial and NextEra Energy.

COMMODITIES Crude Loses Ground, Copper, Iron Ore Slip Further

• Crude is ending the day on track for its lowest close since June 10. Pressure comes from continued ceasefire talks between Israel and Hamas, while demand concerns are offsetting potential supply risks from Canadian wildfires.
• WTI Sep 24 is down 1.7% at $77.1/bbl.
• For WTI futures, the 50-day EMA gave way during the sell-off late last week, opening the potential for further losses toward $76.95.
• The broader commodities complex also remained soft today, most notably in iron ore and copper, which slipped to multi-month lows, amid a lack of major policy support in China following the Third Plenum.
• Copper is down another 0.9% to $416/lb, while iron ore has fallen by 1.0%, both to their lowest levels since early April.
• For copper, the bearish corrective cycle persists with price now below the Fibonacci retracement at $426.12. Key support is at $402.35, the March 27 low.
• By contrast, spot gold has edged up by 0.3% to $2,404/oz.
• Despite the pullback across the second half of last week and on Monday, the medium-term trend for gold still points higher.
• The previous breach of key resistance at $2,450.1, the May 20 high, opens the $2,500.00 handle next. Initial support is at $2,391.7, the 20-day EMA.

WEDNESDAY DATA CALENDAR

Date	GMT/Local	Impact	Flag	Country	Event
24/07/2024	2300/0900	***		AU	Judo Bank Flash Australia PMI
24/07/2024	2301/0001	*		UK	Brightmine pay deals for whole economy
24/07/2024	0030/0930	**		JP	Jibun Bank Flash Japan PMI
24/07/2024	0600/0800	*		DE	GFK Consumer Climate
24/07/2024	0645/0845			EU	ECB's de Guindos at ECB/IMF conference
24/07/2024	0700/0900	**		ES	PPI
24/07/2024	0715/0915	**		FR	S&P Global Services PMI (p)
24/07/2024	0715/0915	**		FR	S&P Global Manufacturing PMI (p)
24/07/2024	0730/0930	**		DE	S&P Global Services PMI (p)
24/07/2024	0730/0930	**		DE	S&P Global Manufacturing PMI (p)
24/07/2024	0800/1000	**		EU	S&P Global Services PMI (p)
24/07/2024	0800/1000	**		EU	S&P Global Manufacturing PMI (p)
24/07/2024	0800/1000	**		EU	S&P Global Composite PMI (p)
24/07/2024	0830/0930	***		UK	S&P Global Manufacturing PMI flash
24/07/2024	0830/0930	***		UK	S&P Global Services PMI flash
24/07/2024	0830/0930	***		UK	S&P Global Composite PMI flash
24/07/2024	0900/1000	**		UK	Gilt Outright Auction Result
24/07/2024	1100/0700	**		US	MBA Weekly Applications Index
24/07/2024	1200/1400			EU	ECB's Lane at ECB/IMF conference
24/07/2024	1345/0945			CA	BOC Monetary Policy Report
24/07/2024	1345/0945	***		CA	Bank of Canada Policy Decision
24/07/2024	1345/0945	***		US	S&P Global Manufacturing Index (Flash)
24/07/2024	1345/0945	***		US	S&P Global Services Index (flash)
24/07/2024	1400/1000	***		US	New Home Sales
24/07/2024	1430/1030	**		US	DOE Weekly Crude Oil Stocks
24/07/2024	1430/1030			CA	BOC Governor Press Conference
24/07/2024	1530/1130	**		US	US Treasury Auction Result for 2 Year Floating Rate Note
24/07/2024	1700/1300	*		US	US Treasury Auction Result for 5 Year Note