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Free AccessMNI ASIA MARKETS ANALYSIS: Tsys Pare Data-Driven Losses & Oil Swings On OPEC+ Delay
- A mixed session for Treasuries, rallying into US data before a strong sell-off sparked by a surprising shift lower for both initial and continuing jobless claims before surprisingly strong U.Mich inflation expectations. We've finished the session paring some of these losses on an explosion at Rainbow Bridge, closing US-Canada border crossings at Niagara, along with pre-Thanksgiving positioning.
- The strong data saw the greenback extend its bounce from yesterday's lows to almost 1%, despite equities also climbing today. USDJPY has seen an impressive increase whilst CAD has outperformed other peers as a function of USD strength and increasingly so as WTI bounced off lows.
- Front-month crude futures have recouped the majority of earlier losses after announcements of a delay to the OPEC+ ministerial meeting initially sent prices tumbling by as much as 5% on the session. The conference delay comes amid disagreement on output assessment from African nations.
- Thanksgiving in the US and Japan also out tomorrow sees focus on European PMIs and the Riksbank rate decision (preview here).
US TSYS: Off Post-Data Cheaps After Rainbow Bridge Explosion, Pre-Thanksgiving Positioning
- Cash Tsys trade unchanged to 3.5bp cheaper, with the day’s cheapening impetus lead by 5s as has been the case through the session.
- They have seen a two-stage paring of earlier losses, more so at the front-end, first coinciding with the Rainbow Bridge explosion headlines before continuing after a brief pause. There could also be pre-Thanksgiving positioning at play after a sizeable sell-off following stronger than expected US data from jobless claims and U.Mich inflation expectations.
- TYZ3 at 108-26+ is back within the day’s range off a post-data low of 108-19. The short-term trend structure remains bullish, and indeed the contract earlier touched resistance at 109-08+ (Nov 17 high) shortly ahead of lower than expected jobless claims, after which lies 109-20 (Sep 19 high). In case of a renewed turn lower, support is seen at 108-05 (50-day EMA).
- Fed Funds implied rates have firmed to a cumulative +3bp for January, whilst cumulative cuts from current levels show the first cut in June (29bp vs 31.5bp yesterday) and 88bp of cuts to end-2024 (from 92bp).
- US Cash Markets are closed Thursday before an early close on Friday. Futures are open until 1300ET Thursday and 1315ET Friday.
EGBs-GILTS CASH CLOSE: Gilts Weaken As UK Issuance Seen Steady
Gilts underperformed Wednesday as UK bond issuance was not reduced for the 2023/24 fiscal year as much as had been expected.
- Yields opened higher after overnight developments (weak JGB Rinban operation, Israel's cabinet approving a hostage deal with Hamas), before falling in late morning ahead of the UK Autumn Statement and the final major US data of the holiday-shortened week.
- Bunds bounced off support at Tuesday's lows, with news of a delayed German 2024 budget being mulled, but GIlt yields began to pull away even further after the reduction in UK issuance plans from GBP237.8bln to GBP237.3bln was less than expected (MNI's preview saw a median sell-side expectation of GBP220.0bln).
- A higher revision to US UMichigan consumer inflation expectations and strong jobless claims also weighed on core FI.
- The details of the remit saw 10s30s steepen but the UK curve bear flattened on the day, with Germany's twist flattening. As short-end weakness on both curves implied, both the UK and Euro rate strips saw higher implieds, e.g.around 5bp fewer ECB/BoE rate cuts in 2024.
- Periphery spreads were little changed.
- Thursday's highlight is Nov flash PMIs, with some attention also on the Swedish Riksbank decision.
Closing Yields / 10-Yr Periphery EGB Spreads To Germany
- Germany: The 2-Yr yield is up 4bps at 3.034%, 5-Yr is up 2.4bps at 2.545%, 10-Yr is down 0.6bps at 2.56%, and 30-Yr is down 3.2bps at 2.738%.
- UK: The 2-Yr yield is up 6.8bps at 4.613%, 5-Yr is up 6bps at 4.198%, 10-Yr is up 5bps at 4.155%, and 30-Yr is up 8.8bps at 4.625%.
- Italian BTP spread up 0.5bps at 175.6bps / Spanish down 0.1bps at 99.3bps
FOREX: Greenback Extends Recovery Amid Firmer US Data
- Lower-than-expected US jobless claims data sparked some further relief for the greenback on Wednesday, with the USD index (+0.38%) extending the bounce from yesterday’s lows to just shy of 1%. The USD rally was strengthened by some higher revisions to both UMich sentiment data and more importantly, the inflation expectations component.
- USDJPY continued its impressive bounce, rising 0.85% on the session and reaching a high of 149.75 from yesterday’s low of 147.15. The latest pullback works in favour of the view that recent weakness was likely part of a correction that may be over. Tuesday’s price pattern is a dragonfly doji candle, a reversal signal. If correct, it signals scope for a stronger rally that would expose key resistance at 151.95, the Oct 21 2022 high.
- Despite a rally on the US data, USDCAD then had a continued move lower, driven by a bounce off lows for WTI (trimming losses from -4% to -2.25%) with the pair now ~40 pips below pre-Macklem levels and an earlier high of 1.3765. Macklem’s text opened with a dovish acknowledgement that rates may now be sufficiently restrictive to bring inflation to target, although yesterday’s CPI print was subsequently described as encouraging but only a single month with not yet a clear trend of renewed progress.
- The trend outlook is bullish and short-term weakness - for now - appears to be a correction. Moving average studies highlight an uptrend and a resumption of gains would open the bull trigger at 1.3899, the Nov 1 high.
- AUDUSD is a marginal relative outperformer on Wednesday, reflecting RBA’s Bullock noting that the final stretch of reducing inflation to target will take longer than the initial leg. AUDUSD lows of the day closely match with the previous resistance point around 0.6522, which will be monitored closely.
- With both the US and Japan out on Thursday, focus will be on European PMIs and the Riksbank rate decision.
US FI OPTIONS
Wednesday's US rates/bond options flow included:
- TYF4 107.50 puts paper paid 0-18 on 11.1K, delta -21%,
- 0QM4 96.62/96.87/97.00c fly was bought for 4 in 20k (ref 96.12)
EU FI OPTIONS: Mostly Downside, Large Sonia Condor Bought For 2nd Day
Wednesday's Europe rates/bond options flow included:
- ERG4 95.87/95.75ps, bought for 0.75 in 10k
- 2RH4 96.375p, bought for 1.5 in 15k
- SFIM4 94.60/94.70/94.75/94.85c condor, bought for 1.25 in 10k.
US STOCKS: ESA Holding Majority Of Its Gains After Earlier Opening Of Key Resistance
- Equities have pared a large part of the recent slip, which had appeared order-related with the largest sell programs on the TICK index since Nov 16 with close to 1,000 names.
- It leaves the S&P e-mini holding +0.3% gains, underperforming a string of other indices with Nasdaq +0.4%, Dow Jones +0.4% and the Russell 2000 +0.5% (all e-minis).
- The earlier high for the S&P e-mini of 4580.5 cleared resistance at 4571 (Nov 20 high) to open a key resistance at 4597.5 (Sep 1 high).
- SPX gains are led by communication services (+0.8%, driven by 1% or greater gains in Meta and Alphabet) and consumer staples (+0.7%). Intra-session gains have also been helped by a paring of earlier losses for Nvidia (-2.1%) following yesterday’s earnings.
- Energy (-0.3%) lags but having pared earlier losses with the sizeable rebound in WTI front futures.
S&P e-miniSource: Bloomberg
COMMODITIES: Crude Futures Bounce After Sharp 5% Decline, Gold Trend Remains Bullish
- Front-month crude futures have recouped the majority of earlier losses after announcements of a delay to the OPEC+ ministerial meeting initially sent prices tumbling by as much as 5% on the session. The conference delay comes amid disagreement on output assessment from African nations.
- Another US crude inventory stock build, also at Cushing weighed on the WTI-Brent spread.
- A bearish theme in WTI futures remains in play and the latest recovery appears to be a correction. The break lower last week marked an extension of the downtrend that started late September and has maintained a price sequence of lower lows and lower highs. Moving average studies are in a bear-mode position, highlighting bearish sentiment. The focus is on $70.96, a Fibonacci retracement. Key resistance is at $79.65, the Nov 14 high.
- The stronger greenback weighed on precious metals at the margin, with spot gold consolidating back below the 2,000/oz mark for now. The trend condition in Gold remains bullish and this week’s gains reinforce this condition. The move higher signals scope for a test of key short-term resistance at $2009.4, the Nov 7 high. Clearance of this hurdle would confirm a resumption of the uptrend and pave the way for a climb towards $2022.2, the May 15 high.
- Some analysts went further, with Fundstrat’s technician setting an intermediate target" for gold to reach $2,500. In follow-up comments to Business Insider via email, the analyst said a breach of resistance at $2,080 would signal a "definite technical breakout," which they expect to happen and quickly drive gold even higher.
US TSYS/SUPPLY: 42-Day CMB Bill Size Reduced, All Else As Expected
Treasury announces unchanged bill sizes for the 13W ($75B) 26W ($68B), and 52W ($44B) sales next Monday and Tuesday - but in a minimal surprise, reduced the 6W cash management bill size by $5B to $70B.
- Recall regarding yesterday's somewhat surprising announcements that today's 4/8W bill sizes would be reduced, that Treasury has specifically pointed to shorter-dated bills for potential reductions ("modest reductions to short-dated bill auction sizes", per the Refunding policy statement).
- And in no surprise, in line with the Refunding guidance, the 2Y Note size is increased $3B to $54B, 5Y Note size is upped $3B to $55B, and 7Y by $1B to $39B.
- Monday Nov 27 will be a busy return to supply after a holiday break, with both the 2Y and 5Y auctions taking place on the same day; the 7Y auction is Tues Nov 28, rounding out the month of coupon issuance.
- All of the above settle on Nov 30.
FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlement:
1M 5.34289 0.0021
3M 5.37968 0.00166
6M 5.37700 -0.00315
12M 5.23231 -0.00919
New York Fed EFFR for prior session (rate, chg from prev day):
* Daily Effective Fed Funds Rate: 5.33%, no change, volume: $102B
* Daily Overnight Bank Funding Rate: 5.32%, no change, volume: $253B
* Fed Funds volumes tick down just $1B to $102B, still rangebound between $80-110B since August.
REPO REFERENCE RATES for prior session (rate, change from prev. day, volume):
* Secured Overnight Financing Rate (SOFR): 5.31%, no change, $1603B
* Broad General Collateral Rate (BGCR): 5.30%, no change, $584B
* Tri-Party General Collateral Rate (TGCR): 5.30%, no change, $574B
* SOFR holds Monday's 1bp decline to 5.31%, the lowest since Oct 30. SOFR volumes of $1603bn hold close to last week's joint cycle highs of $1640bn.
US DATA: Jobless Claims Surprisingly Pull Back In Payrolls Reference Week (For Initial)
- Initial jobless claims were lower than expected at 209k (cons 227k) in the week to Nov 18, covering the payrolls reference period, after a slightly upward revised 233k (initial 231k).
- The four-week average dipped 1k to 220k, consolidating the climb off a recent low of 206k in mid-Oct back to roughly the 2019 average of 218k.
- Comparing with the previous payrolls reference week in October, latest SA claims have closed the gap with 209k vs 200k, although the 4wk average of 220k is still more notably higher than the 206k of October.
- Continuing claims also came in lower than expected at a seasonally adjusted 1.84M (cons 1.875M) in t he week to Nov 11 after a marginally downward revised 1.862M. It sees a relatively modest pull back compared to the scale of the recent increases that in the prior week pushed to a new ytd high and the highest since Nov’21.
US DATA: Potential Further SA Distortion, This Time Biasing Claims Lower
- In the opposite to last week’s print, we warn that the seasonal adjustment process looks particularly kind (i.e. biasing SA claims lower) this week, at least when compared to a crude comparison of weekly changes in ‘normal’ years defined as 2016-19 and 2022.
- NSA initial claims increased 21.3k to 239k in the week to Nov 18 compared to an average 6k for the same week in those prior years, yet the seasonally adjusted weekly figure declined 24k. The difference implies the adjustment was favorable to the tune of 39k, the most so far this year.
- There’s a similar story in continuing claims. They increased 75k in the NSA data in the week to Nov 11 compared to an average 42k, yet the seasonally adjusted figure fell by 22k. It yields the most favorable figure of the year straight after the prior week’s least favorable result.
US DATA: U.Mich Inflation Expectations Surprisingly Buck Softer NY Fed Expectations
- U.Mich 1Y inflation expectations revised up to 4.5% (cons 4.4, prelim 4.4) after 4.2% in Oct.
- 5-10Y inflation expectations sticks at 3.2% (cons 3.1, prelim 3.2) after 3.0% in Oct, consolidating the surprise push higher in the preliminary print to break above its stable 2.9-3.1% range since 2021 for a highest since 2011.
- It goes against the NY Fed survey of consumer expectations, which whilst for October was released after the U.Mich Nov prelim and saw the 1Y drop almost to its lowest since Apr’21 and the 5Y drop a tenth to 2.7% for its lowest since May.
- Consumer sentiment meanwhile was revised up a little more than expected to 61.3 (cons 61.0) after the preliminary 60.4, leaving a smaller decline from the 63.8 in Oct that first thought. It remains the lowest since May.
FED: Fresh Low Since Jun'21 For RRP Usage Per Counterparty
- The Fed's Reverse Repo facility uptake was near unchanged today at $932bn, further consolidation of the sharp reduction seen late last week (to Thursday’s low of $912bn) having first dropped below the $1tn mark on Nov 9.
- The number of counterparties increased by two to 97, the highest since Nov 14.
- The average $ amount per bid stands at $9.6bn for a new low since Jun’21.
Date | GMT/Local | Impact | Flag | Country | Event |
23/11/2023 | 0700/0800 | ** | ![]() | NO | Norway GDP |
23/11/2023 | 0745/0845 | ** | ![]() | FR | Manufacturing Sentiment |
23/11/2023 | 0815/0915 | ** | ![]() | FR | S&P Global Services PMI (p) |
23/11/2023 | 0815/0915 | ** | ![]() | FR | S&P Global Manufacturing PMI (p) |
23/11/2023 | 0830/0930 | *** | ![]() | SE | Riksbank Interest Rate Decison |
23/11/2023 | 0830/0930 | ** | ![]() | DE | S&P Global Services PMI (p) |
23/11/2023 | 0830/0930 | ** | ![]() | DE | S&P Global Manufacturing PMI (p) |
23/11/2023 | 0900/1000 | ** | ![]() | EU | S&P Global Services PMI (p) |
23/11/2023 | 0900/1000 | ** | ![]() | EU | S&P Global Manufacturing PMI (p) |
23/11/2023 | 0900/1000 | ** | ![]() | EU | S&P Global Composite PMI (p) |
23/11/2023 | 0930/0930 | *** | ![]() | UK | S&P Global Manufacturing PMI flash |
23/11/2023 | 0930/0930 | *** | ![]() | UK | S&P Global Services PMI flash |
23/11/2023 | 0930/0930 | *** | ![]() | UK | S&P Global Composite PMI flash |
23/11/2023 | 1100/0600 | *** | ![]() | TR | Turkey Benchmark Rate |
23/11/2023 | 1330/0830 | * | ![]() | CA | Quarterly financial statistics for enterprises |
24/11/2023 | 2330/0830 | *** | ![]() | JP | CPI |
24/11/2023 | 0001/0001 | ** | ![]() | UK | Gfk Monthly Consumer Confidence |
24/11/2023 | 0030/0930 | ** | ![]() | JP | Jibun Bank Flash Japan PMI |
24/11/2023 | 0700/0800 | *** | ![]() | DE | GDP (f) |
24/11/2023 | 0700/0800 | ** | ![]() | SE | PPI |
24/11/2023 | 0800/0900 | ** | ![]() | ES | PPI |
24/11/2023 | 0900/1000 | *** | ![]() | DE | IFO Business Climate Index |
24/11/2023 | 1000/1100 | ![]() | EU | ECB's Lagarde participates in "Europe in the Future" event | |
24/11/2023 | 1300/1400 | ![]() | EU | ECB's De Guindos remarks and Q&A | |
24/11/2023 | 1330/0830 | ** | ![]() | CA | Retail Trade |
24/11/2023 | 1330/0830 | ** | ![]() | US | WASDE Weekly Import/Export |
24/11/2023 | 1400/1500 | ** | ![]() | BE | BNB Business Sentiment |
24/11/2023 | 1445/0945 | *** | ![]() | US | IHS Markit Manufacturing Index (flash) |
24/11/2023 | 1445/0945 | *** | ![]() | US | S&P Global Services Index (flash) |
24/11/2023 | 1600/1100 | ![]() | CA | Finance Dept monthly Fiscal Monitor (expected) |
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.