MNI ASIA OPEN: Data Improving, Fed Blackout Nears

EXECUTIVE SUMMARY

• MNI: Faster Fed Taper Possible, Rate Hike Room Limited
• MNI: Fed Clamps Down on Senior Leaders' Stock Trading
• MNI DATA BRIEF: US Sept Existing Home Sales Fastest Since Jan
• Fed Gov Waller: FED MAY HAVE TO ACT FASTER IF INFLATION STAYS TOO HIGH, Bbg
• BOE TO DEFY BETS ON NOVEMBER HIKE, 3 FORMER RATE-SETTERS SAY, Bbg

US

FED: The Federal Reserve could consider speeding up its tapering of bond purchases if inflation continues at a rapid pace, but the order of its exit plans may prevent rate rises from moving much earlier into 2022, former Federal Reserve staffers told MNI.

• While the base case remains for inflation to fall in 2022 towards the central bank's 2% target, consistent with a taper anticipated to run from late this year until June or July, the ex-staffers said there are heightened risks inflation could remain high.
• "If they don't move by next spring or summer it will reinforce a sense among many consumers and businesspeople and financial market participants that the central bank doesn't really care that much about inflation that could reinforce the momentum toward inflation remaining high or even going up further," said Andrew Levin, a former Fed Board economist who served as a special adviser to ex-chair Janet Yellen.

Tsy Ylds Make Multi-Month Highs As Wkly Jobless Claims Recede

• Tsys held weaker but off lows after weekly and continuing claims came out lower than est (290k vs. 297k est; 2.481M vs. 2.548M est), Philly Fed lower than exp at 23.8 vs. 25.0 est and mixed details (orders, shipments and employment solid).
• Tsys futures recede back to lower half relatively narrow session range after Sep existing home sales climbed 7% to 6.29M, better than 6.09M est.
• Swap curve flattened with short end widening on back of heavy (14k) Block/crosses in Eurodollar Red packs in the first half, likely payer/sale driven while AerCap issued $51B in debt over 9-tranches spanning 2-20Y generated rate lock selling as well. Spds should reverse/narrow as supply hedges unwound.
• Fed Chair Powell joins policy panel discussion hosted by South African Reserve Bank Friday at 1100ET -- probably last to speak before media Blackout late Friday (through Nov 4 -- FOMC on Nov 2-3).
• Late Tsy yields: 2-Yr yield is up 4.9bps at 0.4342%, 5-Yr is up 4.8bps at 1.2133%, 10-Yr is up 2.1bps at 1.678%, and 30-Yr is down 0.4bps at 2.1307%.

OVERNIGHT DATA

• US JOBLESS CLAIMS -6K TO 290K IN OCT 16 WK
  
• US PREV JOBLESS CLAIMS REVISED TO 296K IN OCT 09 WK
• US CONTINUING CLAIMS -0.122M to 2.481M IN OCT 09 WK

• US OCT PHILADELPHIA FED MFG INDEX 23.8

• "This autumn season looks to be the best home-selling season in 15 years," NAR chief economist Lawrence Yun told reporters. Firms' pivot to allowing employees to work from home will help drive home sales, while a shortage of housing supply continues to pressure prices, which are up 13.3% yoy.
• Inventory dipped in September and Yun anticipates the seasonal decline in supply to continue through the fourth quarter. Properties on average stayed on the market for 17 days in September, matching the record low seen in August.

MARKETS SNAPSHOT

Key late session market levels:

• DJIA down 97.93 points (-0.28%) at 35512.1
• S&P E-Mini Future down 0.25 points (-0.01%) at 4528
• Nasdaq up 51.6 points (0.3%) at 15173.25
• US 10-Yr yield is up 2 bps at 1.6763%
• US Dec 10Y are down 14.5/32 at 130-6
• EURUSD down 0.0027 (-0.23%) at 1.1624
• USDJPY down 0.42 (-0.37%) at 113.89
• Gold is down $1.51 (-0.08%) at $1780.54

• EuroStoxx 50 down 16.44 points (-0.39%) at 4155.73
• FTSE 100 down 32.8 points (-0.45%) at 7190.3
• German DAX down 50.36 points (-0.32%) at 15472.56
• French CAC 40 down 19.44 points (-0.29%) at 6686.17

US TSY FUTURES CLOSE

• 3M10Y +2.033, 161.874 (L: 158.163 / H: 162.658)
• 2Y10Y -2.905, 123.824 (L: 123.28 / H: 128.006)
• 2Y30Y -5.48, 169.011 (L: 168.867 / H: 176.103)
• 5Y30Y -5.423, 91.311 (L: 91.167 / H: 98.055)
• Current futures levels:
• Dec 2Y down 3.75/32 at 109-21.125 (L: 109-20.75 / H: 109-24)
• Dec 5Y down 11.25/32 at 121-19.5 (L: 121-18.5 / H: 121-29)
• Dec 10Y down 14.5/32 at 130-6 (L: 130-04.5 / H: 130-18.5)
• Dec 30Y down 12/32 at 157-24 (L: 157-07 / H: 158-05)
• Dec Ultra 30Y down 18/32 at 189-23 (L: 188-19 / H: 190-16)

US EURODOLLAR FUTURES CLOSE

• Dec 21 -0.010 at 99.805
• Mar 22 -0.020 at 99.780
• Jun 22 -0.050 at 99.645
• Sep 22 -0.065 at 99.475
• Red Pack (Dec 22-Sep 23) -0.10 to -0.08
• Green Pack (Dec 23-Sep 24) -0.095 to -0.085
• Blue Pack (Dec 24-Sep 25) -0.08 to -0.06
• Gold Pack (Dec 25-Sep 26) -0.055 to -0.04

SHORT TERM RATES

US DOLLAR LIBOR: Latest settlements

• O/N -0.00050 at 0.07275% (-0.00038/wk)
• 1 Month +0.00350 to 0.08925% (+0.00888/wk)
• 3 Month -0.00437 to 0.12388% (+0.00025/wk) ** Record Low 0.11413% on 9/12/21
• 6 Month -0.00025 to 0.17025% (+0.00975/wk)
• 1 Year -0.00025 to 0.29650% (+0.01688/wk)

• Daily Effective Fed Funds Rate: 0.08% volume: $72B
• Daily Overnight Bank Funding Rate: 0.07% volume: $271B

• Secured Overnight Financing Rate (SOFR): 0.03%, $857B
• Broad General Collateral Rate (BGCR): 0.05%, $360B
• Tri-Party General Collateral Rate (TGCR): 0.05%, $334B
• (rate, volume levels reflect prior session)

• Tsys 10Y-22.5Y, $1.401B accepted vs. $3.944B submission
• Next scheduled purchase
• Fri 10/22 1010-1030ET: Tsy 4.5Y-7Y, appr $6.025B

FED Reverse Repo Operation -- Lowest in a Week

NY Fed reverse repo usage recedes to $1,458.605B from 78 counterparties from $1,493.961B on Wednesday. Record high remains at $1,604.881B from Thursday, September 30.

PIPELINE: $21B AerCap 9-Tranche Jumbo Launched

• Date $MM Issuer (Priced *, Launch #)
• 10/21 $21B #AerCap 9-tranche jumbo: $1.75B 2Y +70, $500M 2Y FRN/SOFR+68, $3.25B 3Y +90, $1B 3NC1 +100, $3.75B 5Y +125, $3.75B 7Y +150, $4B 10Y +165, $1.5B 12Y +175, $1.5B 20Y +175
• 10/21 $3B *CADES (Caisse d'Amortissement de la Dette Sociale) 5Y LIBOR+5
• 10/21 $500M #Santander Chile 10Y +150

EGBs-GILTS CASH CLOSE: 10Y Gilts Touch Fresh Post-2019 High

Gilts significantly underperformed Bunds Thursday, with bear steepening in the curve. Supply and rate hike reconsiderations were the session's themes.

• France (E7.5bln) Spain (E5bln) and UK Green (GBP6bln) provided the supply, helping weigh on the space. Euribor and Short-Sterling futures weakened a few ticks after Wednesdays move higher.
• Further down the curve, 10Y Gilt yields touched a fresh post-2019 high. 10s30s flattening in Germany was notable (that segment now at the flattest since the pandemic started in March 2020).
• Periphery spreads saw little change.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 1.2bps at -0.646%, 5-Yr is up 4.1bps at -0.432%, 10-Yr is up 2.5bps at -0.101%, and 30-Yr is down 1.8bps at 0.273%.
• UK: The 2-Yr yield is up 2.5bps at 0.709%, 5-Yr is up 4.6bps at 0.864%, 10-Yr is up 5.4bps at 1.202%, and 30-Yr is up 5.6bps at 1.443%.
• Italian BTP spread up 0.3bps at 104.3bps / Spanish down 0.4bps at 62.6bps

FOREX: Late Greenback Strength Halts USD Losing Streak

• The dollar strengthened in the latter half of the US session, in line with higher US yields and amid a slightly more cautious tone for risk. This will likely bring a six-day losing streak for the dollar index to a halt.
• Broad commodity weakness lent support to the greenback overall, causing risk-tied G10 currencies to halt their most recent trends higher.
• AUDUSD and NZDUSD suffered losses in the region of 0.75%, with Kiwi reversing the entirety of yesterday's gains and also putting an end to a run of six winning sessions. Additionally, with USDJPY dipping back below 114 and risk suffering, crossJPY was a notable laggard on Thursday.
• USDJPY matched the Oct 15 lows at 113.65 and any further yen strength may target the 113.00 low from Oct 12, although USDJPY dips are still considered technically corrective.
• Elsewhere the CHF also garnered some support, with EURCHF dipping back below 1.07 and to the lowest levels since November 2020. Some analysts have noted this may increase the likelihood of additional SNB intervention.
• In the EM space, the moves were more pronounced. A CBRT surprise 200bps rate cut prompted a near 3% sell off in TRY, closely followed by significant drops in high beta currencies such as ZAR and BRL.
• A fairly busy European data docket on Friday, with UK retail sales preceding European Flash Manufacturing and Services PMIs. Canadian August retail sales are also due.
• Fed Chair Powell will feature in a policy panel discussion w/ SARB before going into media blackout through the November FOMC meeting.