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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.
EXECUTIVE SUMMARY
- MNI: Fed Sees 75bp Hike As New Baseline- Ex-Officials
- MNI: Fed’s Bowman – Hike Rapidly To Get Real Rates Positive
US
FED: Federal Reserve officials are likely to support repeating June's aggressive 0.75-percentage-point interest rate increase in July and possibly again in September to tackle inflation that is showing little sign of slowing, former officials told MNI.
- An even larger 1-pp hike cannot be ruled out if inflation or inflation expectation trends worsen, the former officials said, though the FOMC is likely to shy away from adding to an uncertain environment with yet another alteration to its policy path.
- "I believe they’ll do 75 in July because they’ll need a very good reason not to. There’s not a great deal of new inflation information coming in between the June and July meetings," former Atlanta Fed President Dennis Lockhart said in an interview. "They feel pretty good about how the 75 was absorbed at this last meeting, so there is some bias for not making one more change and being steady with 75 through the July meeting." For more see MNI Policy main wire at 1028ET.
FED: The Federal Reserve should raise rates by 75 basis points in July and by 50 basis points at subsequent meetings in orderly to rapidly move real interest rates into positive territory, Fed Governor Michelle Bowman said Thursday.
- “Based on current inflation readings, I expect that an additional rate increase of 75 basis points will be appropriate at our next meeting as well as increases of at least 50 basis points in the next few subsequent meetings, as long as the incoming data support them,” she said in prepared remarks to the Massachusetts Bankers Association.
- “I am committed to a policy that will bring the real federal funds rate back into positive territory,” she said. Bowman said she is concerned by a recent spike inflation expectations.
US TSYS: Second Round Weak PMIs Tempers Forward Rate Hike Guidance
Tsys trade higher after the bell -- well off midmorning highs to near middle of the session range.- Not much of a reaction after 229k weekly claims, 1.315M continuing claims slightly above estimates, 226k and 1.312M respectively, Tsy ylds continued to ease (30YY slipped to 3.1438% low in the first half) after second consecutive set of weak PMIs:
- Mfg: 52.4 vs expected 56.0 and last of 57.0
- Services: 51.6 vs expected 53.3 and last of 53.4
- Comp: 51.2 vs expected 53.0 and last of 53.6
- Meanwhile, Fed speakers bang on about another 75bp hike in July (Fed Gov Bowman, w/ additional 50bp hikes by year end) -- a temporary silver lining for stocks as the economic slow-down (still not good news) quells further rate hike pricing by year end. Indeed, markets started to price in rate cuts by early-mid 2023.
- SPX eminis futures ESU2 currently +19.5 (0.41%) at 3782.25 vs. 3797.25 high. DJIA +29.11 (0.1%) at 30509.55; Nasdaq +109.4 (1%) at 11162.19.
- Eurodollar futures anticipated repricing earlier: near term recession expectations remain as futures inversion crept forward: Dec'22 currently trading 96.24 vs. Mar'23 at 96.28, w/ EDH3/EDH4 at -48.5. Interpretation: Since Wed's Senate testimony from Fed Chair Powell, futures pricing END of rate hikes has migrated from mid-2023 to end of this year. Pricing fluid as markets contend with ongoing slowdown.
OVERNIGHT DATA
- US JOBLESS CLAIMS -2K TO 229K IN JUN 18 WK
- US PREV JOBLESS CLAIMS REVISED TO 231K IN JUN 11 WK
- US CONTINUING CLAIMS +0.005M to 1.315M IN JUN 11 WK
- US Q1 CURRENT ACCOUNT GAP -$291.4
- US Q4 CURRENT ACCOUNT REVISED TO -$224.8
- US FLASH JUNE SERVICES PMI 51.6 (FCST 53.3); MAY 53.4
- US FLASH JUNE MANUFACTURING PMI 52.4 (FCST 56.0); MAY 57.0
- US FLASH JUNE COMPOSITE PMI 51.2 (FCST 53.0); MAY 53.6
MARKETS SNAPSHOT
Key late session market levels:
- DJIA up 99.13 points (0.33%) at 30579.64
- S&P E-Mini Future up 24.5 points (0.65%) at 3786.5
- Nasdaq up 143.3 points (1.3%) at 11191.25
- US 10-Yr yield is down 7.5 bps at 3.0814%
- US Sep 10Y are up 21/32 at 117-19.5
- EURUSD down 0.0033 (-0.31%) at 1.0532
- USDJPY down 1.29 (-0.95%) at 134.97
- WTI Crude Oil (front-month) down $2.14 (-2.02%) at $104.04
- Gold is down $10.39 (-0.57%) at $1827.24
- EuroStoxx 50 down 28.35 points (-0.82%) at 3436.29
- FTSE 100 down 68.77 points (-0.97%) at 7020.45
- German DAX down 231.69 points (-1.76%) at 12912.59
- French CAC 40 down 33.3 points (-0.56%) at 5883.33
US TSY FUTURES CLOSE
- 3M10Y -10.277, 146.542 (L: 138.649 / H: 156.225)
- 2Y10Y -2.07, 7.316 (L: 4.587 / H: 16.424)
- 2Y30Y +0.355, 19.052 (L: 14.469 / H: 29.759)
- 5Y30Y +4.365, 5.929 (L: -0.793 / H: 12.972)
- Current futures levels:
- Sep 2Y up 3.5/32 at 104-24.25 (L: 104-18.625 / H: 105-02)
- Sep 5Y up 13.5/32 at 111-17 (L: 111-00.5 / H: 112-01.75)
- Sep 10Y up 20.5/32 at 117-19 (L: 116-25.5 / H: 118-08)
- Sep 30Y up 30/32 at 136-29 (L: 135-24 / H: 137-29)
- Sep Ultra 30Y up 1-8/32 at 152-09 (L: 150-20 / H: 153-27)
US 10Y FUTURES TECH: (U2) Corrective Cycle Extends
- RES 4: 120-00 Round number resistance
- RES 3: 119-16+ High Jun 1
- RES 2: 119-03+ 76.4% retracement of the May 26 - Jun 14 bear leg
- RES 1: 118-25+ 50-day EMA
- PRICE: 118-05 @ 15:32 BST Jun 23
- SUP 1: 116-25+ Intraday low
- SUP 2: 115-20/114-07+ Low Jun 17 / Low Jun 14 and bear trigger
- SUP 3: 114-00 Round number support
- SUP 4: 113-19 Low Jun 19, 2009 (cont)
Treasuries continue to strengthen. Thursday’s gains have resulted in a break of the 20-day EMA suggesting potential for a continuation higher with the focus on 118-25+ next, the 50-day EMA. The primary trend direction remains down however and current gains are still considered corrective. Initial firm support to watch is 115-20, the Jun 17 low. A break would signal the end of the current corrective cycle and would open the bear trigger at 114-07+.
US EURODOLLAR FUTURES CLOSE
- Sep 22 +0.005 at 96.690
- Dec 22 +0.050 at 96.230
- Mar 23 +0.095 at 96.280
- Jun 23 +0.120 at 96.40
- Red Pack (Sep 23-Jun 24) +0.110 to +0.125
- Green Pack (Sep 24-Jun 25) +0.105 to +0.115
- Blue Pack (Sep 25-Jun 26) +0.085 to +0.10
- Gold Pack (Sep 26-Jun 27) +0.080 to +0.085
SHORT TERM RATES
US DOLLAR LIBOR: Latest settlements
- O/N -0.00029 to 1.57100% (+0.00357/wk)
- 1M -0.00914 to 1.62357% (+0.01128/wk)
- 3M +0.01272 to 2.19729% (+0.10143/wk) * / **
- 6M +0.00872 to 2.83529% (+0.05586/wk)
- 12M -0.04657 to 3.53329% (-0.05257/wk)
- * Record Low 0.11413% on 9/12/21; ** New 2+Y high: 2.19729% on 6/23/22
- Daily Effective Fed Funds Rate: 1.58% volume: $85B
- Daily Overnight Bank Funding Rate: 1.57% volume: $261B
- Secured Overnight Financing Rate (SOFR): 1.45%, $942B
- Broad General Collateral Rate (BGCR): 1.46%, $378B
- Tri-Party General Collateral Rate (TGCR): 1.46%, $359B
- (rate, volume levels reflect prior session)
FED Reverse Repo Operation, Second Consecutive High
NY Federal Reserve/MNI
NY Fed reverse repo usage climbs to new record high of $2,285.442B w/ 99 counterparties vs. prior record $2,259.458.
PIPELINE: UAE 2Pt Size Set: $1.75B
- Date $MM Issuer (Priced *, Launch #)
- 06/23 $3B *KFW 3Y SOFR+22
- 06/23 $1B *AFD (French Dev Bank) 2Y SOFR+22
- 06/23 $1.75B United Arab Emirates 10Y +100, 30Y +175
EGBs-GILTS CASH CLOSE: Historic Rally As Recession Talk Swirls
EGBs had one of their strongest daily rallies in recent history Thursday, as much weaker-than-expected June flash PMI data indicated rapidly weakening European economic activity.
- Amid a bull steepening curve move, Bobl yields fell at one point by the fastest (over 30bp) since 1998, and closed about 60bp off the month's highs.
- Bunds rallied the most in a decade, testing support at 1.40%.
- Periphery EGBs and Gilts couldn't keep pace with the blistering German rally.
- The UK curve shifted down in parallel by about 20bp through the 10Y segment.
- BTP spreads widened, while GGBs underperformed.
Closing Yields / 10-Yr Periphery EGB Spreads To Germany:
- Germany: The 2-Yr yield is down 25bps at 0.812%, 5-Yr is down 26.2bps at 1.159%, 10-Yr is down 21.2bps at 1.426%, and 30-Yr is down 14.9bps at 1.686%.
- UK: The 2-Yr yield is down 20.5bps at 1.939%, 5-Yr is down 20.5bps at 1.961%, 10-Yr is down 18.2bps at 2.317%, and 30-Yr is down 15.9bps at 2.572%.
- Italian BTP spread up 5.1bps at 195.8bps / Greek up 11.2bps at 234.7bps
FOREX: EURJPY Dives 1.6% On Weak PMIs/Global Growth Concerns
- The Euro sustained early pressure on Thursday following a very disappointing set of Eurozone preliminary PMI data. With German and French services and manufacturing sectors growing far slower than forecast, EURUSD feel just shy of 100 pip to print a low of 1.0483 ahead of NY trade.
- Amid growing US recession fears USDJPY had also underperformed throughout early trade on Wednesday, but the weakness extended in the lead up to a dismal set of US PMI numbers that included a 23-month low for Manufacturing and 5-month low for Services.
- While the data had no lasting impact on the greenback, the underlying risk-off tone continued to dampen the EURJPY exchange rate, down 1.6% for the session.
- The pair has been maintaining a bullish technical outlook of late, however, the sharp pullback during today’s session indicates the pair’s ongoing short-term sensitivity to bouts of poorer global sentiment. The move down has narrowed the gap with initial firm support residing at 140.62, the 20-day EMA. In similar vein, AUDJPY has maintained a downward trajectory and has had an even larger adjustment of -1.70%
- Elsewhere, the Norwegian central bank rate decision delivered mixed messages: the bank raised rates by 50bps - a larger hike than forecast - but indicated this more sizeable pace of tightening would not be maintained further out the curve, with just 25bps likely to follow in August. As a result, the NOK trades close to unchanged against the Euro, despite initial supportive price action.
- Looking ahead to tomorrow, markets will get Japanese core CPI data and it is worth noting New Zealand are out for a local holiday. In Europe, UK retail sales for May will be published shortly before German IFO data. University of Michigan sentiment data headlines the US docket.
- RBA Governor Lowe is due to participate in a panel discussion at an online event hosted by the Union Bank of Switzerland as well as potential comments from Fed’s Bullard and BOE’s Pill and Haskel.
Friday Data Calendar
| Date | GMT/Local | Impact | Flag | Country | Event |
| 24/06/2022 | 2301/0001 | ** |  | UK | Gfk Monthly Consumer Confidence |
| 24/06/2022 | 0600/0700 | *** | | UK | Retail Sales |
| 24/06/2022 | 0700/0900 | *** |  | ES | GDP (f) |
| 24/06/2022 | 0800/1000 | *** |  | DE | IFO Business Climate Index |
| 24/06/2022 | 0800/1000 | ** |  | IT | ISTAT Consumer Confidence |
| 24/06/2022 | 0800/1000 | ** | | IT | ISTAT Business Confidence |
| 24/06/2022 | 1130/0730 |  | US | St. Louis Fed's James Bullard | |
| 24/06/2022 | 1130/1330 |  | EU | ECB de Guindos Panels UBS Discussion | |
| 24/06/2022 | 1230/0830 | * |  | CA | Payroll employment |
| 24/06/2022 | 1230/0830 | ** | | US | WASDE Weekly Import/Export |
| 24/06/2022 | 1300/1500 | ** |  | BE | BNB Business Sentiment |
| 24/06/2022 | 1330/1430 | | UK | BOE Pill Speaks at Walter Eucken Institute Conference | |
| 24/06/2022 | 1345/1445 | | UK | BOE Haskel Panels Chatham House London Conference | |
| 24/06/2022 | 1400/1000 | *** | | US | New Home Sales |
| 24/06/2022 | 1400/1000 | *** | | US | Final Michigan Sentiment Index |
| 24/06/2022 | 1500/1100 | | CA | Finance Dept monthly Fiscal Monitor (expected) | |
| 24/06/2022 | 2000/1600 | | US | San Francisco Fed's Mary Daly |
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.
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