MNI ASIA OPEN: Sen Warren: Investigate Fed Trading Practices

EXECUTIVE SUMMARY

• WARREN CALLS ON SEC TO INVESTIGATE TRADES BY FED OFFICIALS, Bbg
• U.S. WILL ENFORCE COMMITMENTS CHINA MADE IN PHASE-ONE DEAL, Bbg
• JAPAN PM KISHIDA: WILL TAKE DRASTIC MEASURES TO BOOST INCOME OF FRONTLINE WORKERS ... WANT TO CONSIDER CASH PAYOUTS TARGETTED TO THOSE HARDEST HIT BY THE PANDEMIC, Bbg

US TSYS: Tsys Pare Early Losses As Eqs Tumble

Tsys trading weaker by the close, off midmorning lows after a brief risk-off move as equities tumbled. Inside ranges for rates and equities while Oil and crude climbed, WTI tapped 78.38 high.

• No apparent headline driver, but underlying risk-off tone continues ahead Fri's Sep NFP data (+450k est vs. +243k prior). That's not to say there were no headlines that underscore the risk off tone, just nothing new to spur the midmorning moves.
• Headlines such as U.S. WILL ENFORCE COMMITMENTS CHINA MADE IN PHASE-ONE DEAL (Bbg), CHINA RUNNING ABOUT $5B SHORT ON AG BUYING. COMMITMENTS (and ongoing reports of China military jets flying through Taiwan defense zone either dropped over the weekend or are ongoing.
• Session rate flow included two-way in short end from fast$, real$ selling in 10s, swap-tied buying in 2s. Modest deal-tied hedging in 3s-5s.
• Tsy Sec Yellen and Chicago Fed Evans will be interviewed on CNBC early Tuesday (0730ET and 0830ET respectively). Data on tap: Trade Balance (-$70.7B), Markit US Services and Composite PMIs, ISM Services Index (60.0).
• The 2-Yr yield is up 1.4bps at 0.2776%, 5-Yr is up 1.6bps at 0.9441%, 10-Yr is up 1.7bps at 1.4789%, and 30-Yr is up 1.8bps at 2.0463%.

OVERNIGHT DATA

• US AUG FACTORY ORDERS +1.2%; EX-TRANSPORT NEW ORDERS +0.5%
  
• US AUG DURABLE ORDERS +1.8%
• US AUG NONDEFENSE CAP GOODS ORDERS EX AIRCRAFT +0.6%

• CANADIAN AUG BUILDING PERMITS -2.1% MOM
• CANADA RESIDENTIAL BUILDING PERMITS -8.3%; NON-RESIDENTIAL +12.3%

MARKET SNAPSHOT

Key late session market levels:

• DJIA down 332.19 points (-0.97%) at 33997.36
• S&P E-Mini Future down 57 points (-1.31%) at 4287
• Nasdaq down 311.6 points (-2.1%) at 14257.11
• US 10-Yr yield is up 1.7 bps at 1.4789%
• US Dec 10Y are down 3/32 at 132-2.5
• EURUSD up 0.003 (0.26%) at 1.1627
• USDJPY down 0.17 (-0.15%) at 110.87
• WTI Crude Oil (front-month) up $1.76 (2.32%) at $77.69
• Gold is up $5.13 (0.29%) at $1766.31

US TSY FUTURES CLOSE

• 3M10Y +2.159, 144.261 (L: 141.24 / H: 147.111)
• 2Y10Y +0.349, 119.931 (L: 118.599 / H: 122.499)
• 2Y30Y +0.59, 176.88 (L: 175.399 / H: 180.238)
• 5Y30Y +0.682, 110.427 (L: 108.976 / H: 112.388)
• Current futures levels:
• Dec 2Y down 1/32 at 110-1.75 (L: 110-01.25 / H: 110-03)
• Dec 5Y down 2.5/32 at 122-31.5 (L: 122-28.5 / H: 123-04.25)
• Dec 10Y down 3.5/32 at 132-2 (L: 131-27.5 / H: 132-08.5)
• Dec 30Y down 7/32 at 160-4 (L: 159-15 / H: 160-20)
• Dec Ultra 30Y down 11/32 at 192-21 (L: 191-13 / H: 193-16)

US EURODOLLAR FUTURES CLOSE

• Dec 21 +0.010 at 99.835
• Mar 22 +0.005 at 99.860
• Jun 22 +0.005 at 99.805
• Sep 22 +0.005 at 99.70
• Red Pack (Dec 22-Sep 23) steady
• Green Pack (Dec 23-Sep 24) -0.005 to steady
• Blue Pack (Dec 24-Sep 25) +0.005 to +0.010
• Gold Pack (Dec 25-Sep 26) +0.010 to +0.020

Short Term Rates

US DOLLAR LIBOR: Latest settlements

• O/N -0.00188 at 0.07250% (-0.00238 total last wk)
• 1 Month +0.00263 to 0.07788% (-0.00988 total last wk)
• 3 Month -0.00650 to 0.12663% (+0.00088 total last wk) ** Record Low 0.11413% on 9/12/21
• 6 Month -0.00150 to 0.15550% (+0.00162 total last wk)
• 1 Year -0.00288 to 0.23200% (+0.00525 total last wk)

• Daily Effective Fed Funds Rate: 0.08% volume: $68B
• Daily Overnight Bank Funding Rate: 0.07% volume: $257B

• Secured Overnight Financing Rate (SOFR): 0.05%, $928B
• Broad General Collateral Rate (BGCR): 0.05%, $371B
• Tri-Party General Collateral Rate (TGCR): 0.05%, $372B
• (rate, volume levels reflect prior session)

• Tsy 22.5Y-30Y, $1.999B accepted vs. $5.372B submission
• Next scheduled purchases
• Tue 10/05 1100-1120ET: Tsy 7Y-10Y, appr $3.225B
• Wed 10/06 1010-1030ET: Tsy 10Y-22.5Y, appr $1.425B
• Thu 10/07 1010-1030ET: TIPS 7.5Y-30Y, appr $1.225B
• Fri 10/08 1010-1030ET: Tsy 0Y-2.25Y, appr $12.425B

Fed: Reverse Repo Operation

NY Fed reverse repo usage climbs to $1,399.173B from 77 counterparties vs. $1.385.991B on Friday. Compares to Thursday, September 30 record high of $1,604.881B.

PIPELINE: Royal Bank of Canada 4Pt Fix/FRN Launched

• Date $MM Issuer (Priced *, Launch #)
• 10/04 $3.5B #Bank of Nova Scotia 5Y +17
• 10/04 $2.75B #Royal Bank of Canada $1B 3Y +30, $500M 3Y FRN/SOFR+34, $900M 5Y +48, $350M 5Y FRN/SOFR+59
• 10/04 $1.25B #FS KKR Capital $500M 3Y +120, $750M 7Y +190
• 10/04 $500M L-Bank 7Y LIBOR +10
• 10/04 $Benchmark Bain Capital investor call
• 10/04 $Benchmark General Mills investor call
• Expected this week:
• 10/05 $500M KFW 2024 tap FRN/SOFR+11a

EGBs-GILTS CASH CLOSE: Steeper To Start The Week

European FI weakened in a bear-steepening move, with Gilts and Bunds trading largely in line with each other to start the week. Periphery spreads were a little wider.

• Weaker equities and continuing supply-side energy concerns did not translate into a safe-haven bid in core FI, though Gilts mounted a decent comeback in the afternoon with yields briefly turning lower on the session.
• Little data of note, and no market-moving commentary from today's central bank speakers. Most notable was ECB's de Guindos who stressed that while there were no signs of notable wage increases yet, the ECB will remain vigilant to second-round effects from recent price gains.
• The ESM completed its 2021 Funding with a E2bln no-grow tap sale of Dec-24 bonds.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is unchanged at -0.703%, 5-Yr is up 0.7bps at -0.574%, 10-Yr is up 1bps at -0.214%, and 30-Yr is up 1.2bps at 0.268%.
• UK: The 2-Yr yield is up 0.7bps at 0.406%, 5-Yr is up 0.6bps at 0.629%, 10-Yr is up 0.9bps at 1.011%, and 30-Yr is up 1.2bps at 1.379%.
• Italian BTP spread up 0.8bps at 104.4bps / Spanish up 0.3bps at 65bps

FOREX: Swiss Franc Outperforms As Risk Falters, Cad Rallies With Oil

• Since making fresh 12-month highs last week, the dollar index has retreated for a third consecutive session, losing roughly a quarter of a percent on Monday, boosting the Euro, Aussie and Kiwi in the process.
• The greenback was unable to catch a bid with higher US yields early in the session, however happily retreated as yields tracked lower during NY hours. With the focus firmly on September payrolls on Friday, pre-positioning/profit taking may be working against the dollar.
• CHF was a beneficiary to the risk-off tone and was the best performing G10 currency. USDCHF fell 0.7% with roughly a 100 pip move off the 0.9328 highs posted shortly after the open.
• GBPUSD was strongly supported on Monday, grinding from a 1.3530 base all the way to print a high at 1.3640. Despite the uptick, the pair maintains a bearish technical theme and initial resistance is seen at the 1.3662 zone.
• Fresh cycle highs in crude futures buoyed the Canadian Dollar and Norwegian Krone, both rising around half a percent and largely ignoring the waning sentiment across equity markets.
• Faltering equities did impact pockets of the EM FX space. EM currency indices fell around 0.4% with substantial declines noted in both ZAR (-1.15%) and BRL (-1.4%).
• The main risk event overnight will be the RBA rate decision and statement where consensus looks for the RBA to leave its monetary policy settings unchanged. ISM Services PMI will headline the US data calendar on Tuesday.