MNI ASIA OPEN: 10Y Yld Tops 200 DMA

EXECUTIVE SUMMARY

• MNI: Fed's Bostic Favors Fast Taper Start in Oct-Dec Timeframe
• MNI BRIEF: NY Fed: 3-Year Inflation Expectations At 8-Yr High
• EU WON'T IMPOSE TRAVEL CURBS ON U.S. DESPITE COVID SURGE, Bbg

US

FED: Atlanta Fed President Raphael Bostic said Monday his base case would be to begin a fast tapering process in the October to December range, but if job increases come in bigger than expected in the coming months then taper could be moved forward.

• "We've made a substantial amount of progress," he said about prices, adding that "we're well on the road to substantial progress toward our goal" on employment. "My sense is that if we are able to continue this for the next month or two we'll have made substantial progress toward the goal, and should be thinking about what our new policy positions should be," he told reporters after giving remarks at a Prosperity Partnership event.
• "Right now I'm thinking in the October to December range," he said about beginning taper, adding he'd be "open to moving it forward." For more see MNI Policy main wire at 1151ET.

US/CPI Preview: Focus turns to Wed's Consumer Price Index after last Friday's better than expected July jobs data (+943k; May/Jun up-revisions add +119k) helps Fed take another step in the right direction on "substantial further progress". Sell-side economists invariably expect a pick-up in the inflation metric, but at a slower pace than prior reads, others anticipating continued slow down over the medium term as Covid Delta-variant weighs.

• Deutsche Bank: Looks for "0.6%mom on headline, and 0.5% on core (0.1ppt above consensus on both). In the details, look for continued outperformance new cars, used cars (even as wholesale prices measured by the Manheim index fell another 2.6%mom in July), and lodging away, which have experienced surging demand amid soft supply."
• Morgan Stanley: Expect "headline CPI inflation increased by 0.46%M in July vs. 0.90%M in June, lowering the year-over-year from 5.4% to 5.3%." Ex food/energy: MS forecasts "core CPI inflation in July increased by 0.36%M compared to 0.88%M in June. This would lower the year-over-year rate from 4.5% to 4.3%."
• TD Securities: Forecast consensus 0.5%, core 0.4%. CPI "probably rose strongly again, but not nearly as strongly as in recent months." TD expects "slowing in coming months as airfares, lodging and new vehicle prices slow and used vehicle prices reverse some of their earlier surge; a reversal is already evident for wholesale prices, as the Manheim index was -2.6% m/m in July after -1.3% m/m in June."

OVERNIGHT DATA

• US BLS: JOLTS OPENINGS RATE 10.073M IN JUN
  
• US BLS: JOLTS QUITS RATE 2.7% IN JUN

MARKETS SNAPSHOT

Key late session market levels:

• DJIA down 72.53 points (-0.21%) at 35137.32
• S&P E-Mini Future down 1 points (-0.02%) at 4428.75
• Nasdaq up 37 points (0.2%) at 14873.66
• US 10-Yr yield is up 2 bps at 1.317%
• US Sep 10Y are down 7/32 at 133-25
• EURUSD down 0.0019 (-0.16%) at 1.1743
• USDJPY up 0.03 (0.03%) at 110.28
• WTI Crude Oil (front-month) down $1.56 (-2.28%) at $66.71
• Gold is down $34.68 (-1.97%) at $1728.33

• EuroStoxx 50 up 2.61 points (0.06%) at 4177.15
• FTSE 100 up 9.35 points (0.13%) at 7132.3
• German DAX down 16.04 points (-0.1%) at 15745.41
• French CAC 40 down 3.78 points (-0.06%) at 6813.18

US TSY SUMMARY: Early Bid Evaporates

• Democrats Dump Debt Limit From Budget Resolution? Politico headlines on Dems budget resolution: "Democrats omit debt limit from budget that launches $3.5T party-line spending plan", the prospect of quick passage keeping lid on early bid in rates, misc acct selling 10s-30s.
• Tsys followed German Bunds lower around midmorning -- otherwise no obvious headline driver by midmorning; 10YY climbed to session high of 1.3221% during second half -- well over the 200DMA 1.2908%.
• Focus turns to Wed's Consumer Price Index after last Friday's better than expected July jobs data (+943k; May/Jun up-revisions add +119k) helps Fed take another step in the right direction on "substantial further progress". Sell-side economists invariably expect a pick-up in the inflation metric, but at a slower pace than prior reads, others anticipating continued slow down over the medium term as Covid Delta-variant weighs.
• The 2-Yr yield is up 1bps at 0.2183%, 5-Yr is up 2.3bps at 0.7903%, 10-Yr is up 2bps at 1.317%, and 30-Yr is up 1.7bps at 1.9624%.

US TSY FUTURES CLOSE

• 3M10Y +2.096, 126.462 (L: 121.589 / H: 127.136)
• 2Y10Y +1.036, 109.502 (L: 106.356 / H: 110.634)
• 2Y30Y +0.767, 174.081 (L: 171.607 / H: 175.073)
• 5Y30Y -0.528, 117.078 (L: 116.313 / H: 118.246)
• Current futures levels:
• Sep 2Y down 0.875/32 at 110-8.125 (L: 110-08.125 / H: 110-09.625)
• Sep 5Y down 4.25/32 at 123-31.75 (L: 123-30.75 / H: 124-07.75)
• Sep 10Y down 6.5/32 at 133-25.5 (L: 133-23.5 / H: 134-06.5)
• Sep 30Y down 16/32 at 163-22 (L: 163-17 / H: 164-18)
• Sep Ultra 30Y down 1-3/32 at 197-4 (L: 196-30 / H: 198-22)

US EURODOLLAR FUTURES CLOSE

• Sep 21 steady at 99.875
• Dec 21 -0.005 at 99.820
• Mar 22 steady at 99.840
• Jun 22 steady at 99.790
• Red Pack (Sep 22-Jun 23) -0.02 to -0.005
• Green Pack (Sep 23-Jun 24) -0.05 to -0.03
• Blue Pack (Sep 24-Jun 25) -0.055 to -0.05
• Gold Pack (Sep 25-Jun 26) -0.045 to -0.035

SHORT TERM RATES

US DOLLAR LIBOR: Latest Settles

• O/N +0.00025 at 0.07875% (+0.00162 total last wk)
• 1 Month +0.00012 to 0.09525% (+0.00462 total last wk)
• 3 Month -0.00113 to 0.12725% (+0.01063 total last wk) ** (Record Low: 0.11800% on 6/14)
• 6 Month +0.00025 to 0.14963% (-0.00375 total last wk)
• 1 Year +0.00037 to 0.23775% (+0.00225 total last wk)

• Daily Effective Fed Funds Rate: 0.10% volume: $70B
• Daily Overnight Bank Funding Rate: 0.08% volume: $248B

• Secured Overnight Financing Rate (SOFR): 0.05%, $891B
• Broad General Collateral Rate (BGCR): 0.05%, $367B
• Tri-Party General Collateral Rate (TGCR): 0.05%, $347B
• (rate, volume levels reflect prior session)

• Tsy 10Y-22.5Y, $1.401B accepted vs. $3.586B submission
• Next scheduled purchases
• Tue 8/10 1010-1030ET: Tsy 4.5Y-7Y, appr $6.025B
• Wed 8/11 1010-1030ET: Tsy 22.5Y-30Y, appr $2.025B
• Thu 8/12 1010-1030ET: TIPS 1Y-7.5Y, appr $2.025B
• Thu 8/12 1500ET Update NY Fed Operational Purchase Schedule

FED: Reverse Repo Operations

NY Fed reverse repo usage climbs to $981.765B from 70 counterparties vs. $952.134B on Friday. Compares to record high of $1,039.394B on Friday, July 30.

PIPELINE: Swappable Issuance Surges

• Date $MM Issuer (Priced *, Launch #)
• 08/09 $3.1B #Thermo Fisher $700M 7Y +65, $1.2B 10Y +80, $1.2B 20Y +95
• 08/09 $2.5B #BMW US $750M 3Y +33, $750M 3Y FRN/SOFR+38, $500M 5Y +50, $500M 10Y +65
• 08/09 $2B #Unilever Capital $500M 3NC1 +20, $850M 10Y +50, $650M 30Y +70
• 08/09 $1.5B Uber 58NC3 4.5%a
• 08/09 $1.25B #Simon Property Grp $550M 5Y +60, $700M 10Y +100
• 08/09 $1.1B NRG Energy 10.5NC5.5 3.75%
• 08/09 $1.1B #Duke Energy $650M 10Y +70, $450M 30Y +93
• 08/09 $1B #Huntington Ingalls $400M 2NC1 +45, $600M 7Y +95
• 08/09 $1B *CVS Health Corp WNG 10Y +87.5
• 08/09 $650M #Regions Financial 7Y +75
• 08/09 $500M #ConAgra Brands 2NC1 +37.5
• 08/09 $500M McKesson 5Y +75a
• 08/09 $500M #Equitable Fncl Life 3Y +38
• 08/09 $Benchmark Bell Canada 10Y +90a, 30Y +125a

EGBs-GILTS CASH CLOSE: Long-End Gilts Impress To Start The Week

Monday saw modest gains with some curve flattening in core FI.

• Gilts outperformed Bunds, with the long end particularly strong and 5s30s flattening significantly.
• Periphery spreads vs Bunds came in a little as well, with risk seen mixed most of the day.
  
• Few catalysts during the session, and volumes were thin, with some anticipation of Wednesday's key U.S. inflation figures.
• No ECB / BOE speakers and limited data today (German trade balance); a little more data Tuesday (German ZEW) but again no scheduled speakers.
  
• No bond supply either; Tuesday sees the UK sell GBP2.75bln of Jul-31 Gilt.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 0.7bps at -0.75%, 5-Yr is up 0.3bps at -0.725%, 10-Yr is down 0.4bps at -0.46%, and 30-Yr is down 1.1bps at -0.012%.
• UK: The 2-Yr yield is down 0.4bps at 0.135%, 5-Yr is down 1.8bps at 0.278%, 10-Yr is down 2.7bps at 0.584%, and 30-Yr is down 5.7bps at 0.953%.
• Italian BTP spread down 1.2bps at 101.2bps / Spanish down 0.3bps at 69.4bps

FOREX: Narrow G10 Ranges, CHF The Clear Laggard

• G10FX held fairly tight ranges to start the week, with a lack of tier one data and markets firmly focused on Wednesday's U.S. inflation readings.
• The US dollar traded from very minor negative territory back into the green as broad optimism following Friday's jobs report resurfaced.
• The Swiss franc was the clear underperformer, with both EURCHF (+0.4%) and USDCHF (0.52%) making a move to the topside. After making fresh lows from December below 107.35 EURCHF has had a notable bounce back above 1.08. USDCHF is set to post a fourth consecutive day of gains, potentially eyeing a move towards resistance from the July highs at 0.9275. The continued resilience of US equity indices potentially underpinning the slight away from safety with no significant domestic headlines.
• A shaky commodity complex, driven by the increased volatility in gold stemming from the gap lower overnight, weighed on AUD , NZD and CAD, all retreating between 0.15-0.25%. However, a distinct lack of catalysts failed to garner much momentum in currency markets.
• Aussie NAB Business Confidence overnight before German ZEW sentiment data during European hours. No notable data on the U.S docket before Wednesday's CPI data.