MNI ASIA OPEN: Strong Bounce For Global Equities

EXECUTIVE SUMMARY:

• MNI PREVIEW: ECB's Lagarde Opens Door To More December Easing
• MNI POLICY: ECB Leaves Rates Unchanged, Await Dec Data
• MNI SOURCES: EU Commission To Tell Countries To Boost Stimulus
• MNI REALITY CHECK: Canada GDP Slows on 2nd Wave, Trade Tension
• KUDLOW SAYS ECONOMIC RECOVERY DOESN'T DEPEND ON STIMULUS BILL, Bbg
• ITALY REPORTS RECORD NEW DAILY CORONAVIRUS CASES OF 26,831, Bbg

US

US: Pelosi To Mnuchin: Several Unresolved Matters In Stimulus Talks (Politico)
Politico publishes a letter dated today from House Speaker Pelosi to Treas Sec Mnuchin outlining the substantial number of areas which await resolution in the stimulus negotiations: state and local funding, 'safe schools' and child care, testing, tracing and treatment, tax credits, unemployment insurance, OSHA+Liability.

• In other words, the list of unresolved issues is very long and it seems little progress has actually been made on a deal. * With a pre-election deal already having been discounted as impossible, though, little market reaction. The negotiations will have to wait until there is further political clarity following the Nov 3 election.

EUROPE

ECB: The European Central Bank laid the groundwork for additional stimulus in December at its meeting on Thursday, saying it will "recalibrate" its monetary policy tools to mitigate the economic threat posed by the Covid-19 pandemic's second wave following the publication of staff macroeconomic projections. For more see 10/29 main wire at 1434ET.

CANADA

ECONOMY: Canada's GDP growth is seen slowing for a second month in August from the burst of spending after the spring Covid lockdown, with future obstacles including a second wave of the virus and trade tensions following next week's U.S. election, industry sources told MNI.

OVERNIGHT DATA

US DATA: US Jobless Claims Drop 40K in Oct. 24 Week

• U.S. weekly jobless claims fell by 40,000 to 751,000 in the week ended Oct. 24, still elevated from pre-pandemic levels but not yet showing a substantial spike since a second wave of Covid-19 spread across the nation. Continuing claims for the week ending Oct. 17 was 7,756,000, down 709,000 from the previous week.

US DATA: Q3 GDP +33.1%; PCE +40.7%
U.S. GDP rose at an annual rate of 33.1% in Q3, above market expectations for a 32% increase, according to figures released Thursday by the Bureau of Economic Analysis.

• That mainly reflected increases in PCE (+40.7%), exports (+59.7%), nonresidential fixed investment (+20.3%), and residential fixed investment (+59.3%).
• Those increases were partially offset by a decline in federal government spending (-6.2%), reflecting fewer fees paid to administer PPP loans, the BEA said. State and local government spending also fell in Q3.
• The GDP price index rose 3.6% after falling 1.8% in Q2. The PCE price index increased 3.7% following a 1.6% drop in Q2. Excluding food and energy prices, the PCE price index was up 3.5% in Q3 compared with a 0.8% decline in Q2.
• Disposable personal income fell 13.2% in Q3 after surging by 44.3% in Q2. The personal savings rate slowed to 15.8% in Q3 compared with 25.7% in Q2.

CANADA SEP BUILDING PERMITS +17.0% MOM; RESIDENTIAL BUILDING PERMITS +6.9%; NON-RESIDENTIAL +40.6%

MARKET SNAPSHOT

European bourses closing levels:

• EuroStoxx 50 down 3.51 points (-0.12%) at 2965.09
• FTSE 100 down 1.05 points (-0.02%) at 5601.77
• German DAX up 37.56 points (0.32%) at 11622.23
• French CAC 40 down 1.45 points (-0.03%) at 4579.91

US TSY SUMMARY

Tsys have receded all the way back to early Monday levels late Thursday. After a higher start to the session, futures trade broadly weaker after the close on heavier volumes (TYZ over 1.8M) as equities stage a strong rebound (ESZ0 +60.0) after Wed's rout. Yld curves sharply steeper, especially in the short end.

• Despite the apparent risk-off unwinds risk-metrics have not changed, virus case counts continue to rise, Europe contemplates broader lock-down measures to contain, will red-zones in the US be far behind?
• Election angst: countdown to next Wed's presidential elections winding down, trade has grown choppy amid a mix of unwinds and cross-current flow. Equities rallied sharply, partially driven by "fear of missing out" FOMO buying on the bounce; sources cited ongoing Asia bank selling Tsys to draw down Tsy positions after risk parity sold both Tsys and equities on Wednesday. Deal-tied hedging and month end flow also relevant.
• Another auction tail, US Tsy $53B 7Y Note auction (91282CAU5) drew 0.600% rate (0.462% last month) vs. 0.587% WI; 2.24 bid/cover vs. 2.42 prior.
• The 2-Yr yield is up 0.4bps at 0.1505%, 5-Yr is up 4bps at 0.3701%, 10-Yr is up 5.7bps at 0.828%, and 30-Yr is up 5.8bps at 1.6115%.

US TSY FUTURES CLOSE: Back Near Early Monday Levels

After a higher start to the session, futures trading broadly weaker after the bell on heavier volumes (TYZ over 1.8M) as equities stage a strong rebound after Wed's rout. Yld curves sharply steeper, especially in the short end. Update:

• 3M10Y +7.226, 74.155 (L: 66.17 / H: 74.829)
• 2Y10Y +6.013, 68.06 (L: 62.11 / H: 68.565)
• 2Y30Y +6.333, 146.653 (L: 140.371 / H: 147.891)
• 5Y30Y +2.376, 124.416 (L: 120.986 / H: 125.722)
• Current futures levels:
• Dec 2Y down 0.5/32 at 110-13.25 (L: 110-13.25 / H: 110-14)
• Dec 5Y down 4.25/32 at 125-20.25 (L: 125-19.75 / H: 125-26)
• Dec 10Y down 12.5/32 at 138-13 (L: 138-11.5 / H: 138-28.5)
• Dec 30Y down 1-5/32 at 172-28 (L: 172-20 / H: 174-13)
• Dec Ultra 30Y down 1-29/32 at 215-22 (L: 215-02 / H: 218-18)

US EURODLR FUTURES CLOSE: Long End Of Strip Weaker

• Dec 20 steady at 99.755
• Mar 21 +0.005 at 99.795
• Jun 21 steady at 99.80
• Sep 21 +0.005 at 99.805
• Red Pack (Dec 21-Sep 22) -0.01 to +0.005
• Green Pack (Dec 22-Sep 23) -0.025 to -0.015
• Blue Pack (Dec 23-Sep 24) -0.04 to -0.03
• Gold Pack (Dec 24-Sep 25) -0.06 to -0.05

US DOLLAR LIBOR: Latest settles

• O/N +0.00075 at 0.08100% (-0.00038/wk)
  
• 1 Month +0.00138 to 0.14913% (-0.00712/wk)
• 3 Month +0.00000 to 0.21438% (-0.00212/wk)
• 6 Month -0.00125 to 0.24288% (-0.00650/wk)
• 1 Year +0.00337 to 0.33100% (-0.00563/wk)

US TSYS: Short Term Rates

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 0.09% volume: $59B
• Daily Overnight Bank Funding Rate: 0.08%, volume: $172B

• Secured Overnight Financing Rate (SOFR): 0.08%, $910B
• Broad General Collateral Rate (BGCR): 0.06%, $333B
• Tri-Party General Collateral Rate (TGCR): 0.06%, $309B
• (rate, volume levels reflect prior session)

• Tsy 20Y-30Y, $1.734B accepted vs. $3.942B submission
• Next scheduled purchase:
• Fri 10/30 1100-1120ET: TIPS 7.5Y-30Y, appr $1.225B

PIPELINE: Boeing Launched

Boeing Launched, leads session but well off late Apr's massive $25B jumbo:

• Date $MM Issuer (Priced *, Launch #)
• 10/29 $4.9B #Boeing 4pt: $1B +3Y +180, $1.4B +5Y +240, $1.1B +7Y +265, $1.4B +10Y +280a (issued $25B via 7pt jumbo on April 30: $3B 3Y +425, +450: $3.5B 5Y, $2B 7Y, $4.5B 10Y and $5.5B 30Y, $3B 20Y +440, $3.5B 40Y +462.5)
• 10/29 $1.5B #Philip Morris $750M +5Y +58, $750M 10Y +103 (issued $2.25B on Apr 29: $750M each 3Y +100, 5Y +125 and 10Y +155)
• 10/29 $750M #Stanley Black & Decker 30Y +112.5
• 10/29 $650M #Baxter Int WNG 10Y +90
• 10/29 $500M *Swedish Export Credit Corporation (SEK) 2Y +5
• 10/29 $500M IFFIm 3Y Red S vaccine bond +18a
• 10/29 $Benchmark State Development & Inv 5Y +160a

FOREX: Greenback Extends Strength, ECB Flags Dec Policy Tweak

The ECB rate decision was seen by markets as a placeholder for December's likely more critical meeting. Lagarde and the executive board stopped just short of pre-announcing another stimulus package before the end of the year, with the governing council seen waiting for an update to economic projections and further national fiscal aid before composing such a 'recalibration' of policy. This prompted EUR to lag, and USD to outperform into the Thursday close.

• Greenback strength may have also carried an element of pre-setting ahead of October month-end Friday. Equity underperformance this week has prompted the bulk of month-end models to signal USD demand into the Friday close.
• Preliminary GDP data from France, Germany, the Eurozone and Canada take focus Friday and are expected to echo the pattern seen in Thursday's US GDP release -showing a firm, but insufficient bounce back from the lockdown-induced slumps suffered in Q2. October MNI Chicago PMI data also crosses. ECB's Mersch, de Guindos & Weidmann speak post-rate decision.

EGBs-GILTS CASH CLOSE: ECB Pre-Commits

ECB Pres Lagarde delivered a dovish message in her post-meeting press conference, signaling a "recalibration" in policy at the December meeting that could encompass any or all of the bank's instruments (PEPP/QE adjustments, even, some market participants speculated, a rate hike?). Periphery spreads fell sharply though Bunds/Gilts didn't fully participate as they weakened in tandem w US Tsy selling (pre-election position squaring seen). Closing Levels / 10-Yr Periphery EGB Spreads:

• Germany: The 2-Yr yield is down 2bps at -0.809%, 5-Yr is down 1.9bps at -0.832%, 10-Yr is down 1.1bps at -0.636%, and 30-Yr is down 0.9bps at -0.224%.
• UK: The 2-Yr yield is up 0.5bps at -0.057%, 5-Yr is up 0.5bps at -0.067%, 10-Yr is up 0.8bps at 0.221%, and 30-Yr is up 1.3bps at 0.767%.
• Italian BTP spread down 6.2bps at 132.8bps
• Spanish bond spread down 3.4bps at 76.9bps
• Portuguese PGB spread down 3.5bps at 74bps
• Greek bond spread down 10.7bps at 158.9bps

UP TODAY