MNI ASIA OPEN: Yields Climb Ahead Eco-Summit

EXECUTIVE SUMMARY

MNI US: Pending Home Sales Suggest Little Let Up In Housing Pressures
MNI US DATA: Atlanta Fed GDPNow Slows On Larger Housing Hit
MNI: Pressure Mounts To Disburse Ukraine Aid - EU Sources

US

US: Pending home sales posted a smaller-than-expected decline in July of -1% (cons. -2.6%) from a slightly downward revised -8.9% in June for -22.5% Y/Y.

• Small reprieve compared to the sizeable declines in both existing (-5.9%) and new (-12.6%) sales in July but is of little comfort at the lowest level since 2011 when looking through the Apr'20 low.
• Leading characteristic suggests further downside ahead for existing sales, which are already down 25% from their January peak [see chart] and it follows weekly purchase mortgage applications hitting new lows since 2016 when looking beyond the initial pandemic slump.
• It comes as Tsy front end yields continue to move higher, with 2YY +3bps on the day at 3.36% and within 10bps of June highs that in turn were the highest since late 2007.

EUROPE

EU/UKRAINE: EU member states are still searching for a solution to the months-long impasse on funding the exceptional Macro-Financial Assistance program for Ukraine, but sources say political pressure is mounting for a deal to be agreed quickly.

• The bulk of the EUR9 billion exceptional MFA announced in May has been held up by German objections to any further use of joint borrowing by the EU, with only EUR1 billion disbursed to date.
• “There is strong backing for the idea that we need to move swiftly to support Ukraine,” an EU source told MNI, adding that member states acknowledge that disbursement of the funds was now a matter of “urgency”. For more see MNI Policy main wire at 1117ET Wednesday.

US TSYS: 30Y Yield Back Over 3.3%

• Tsy 30YY tapped session high of 3.3278% later in the second half after holding near lows following smaller-than-expected decline in July of -1% (cons. -2.6%) from a slightly downward revised -8.9% in June for -22.5% Y/Y.
• Tsy futures held lower range after $45B 5Y note auction (91282CFH9) tailed: 3.230% high yield vs. 3.217% WI; 2.30x bid-to-cover vs. 2.46x last month.
• Yield curves scaling back portion on Tue's steepening, 2s10s -2.943 at -28.719. Heavy overall volumes (TYU2>2.5M) tied to Sep/Dec roll picking up.
• Focus remains on KC Fed's annual Jackson Hole Economic Symposium: Reassessing Constraints on the Economy and Policy, starts Friday w/ Chairman Powell speaking at 1000ET (0800 local), text is expected but no Q&A. Markets keen on pivot after cooling data or will the Fed maintain hawkish stance to squelch inflation.
• Currently, 2-Yr yield is up 8.9bps at 3.3885%, 5-Yr is up 6.7bps at 3.2314%, 10-Yr is up 6bps at 3.1057%, and 30-Yr is up 6.2bps at 3.3166%.

OVERNIGHT DATA

• US JUL DURABLE NEW ORDERS +0.0%; EX-TRANSPORTATION +0.3%
  
• US JUN DURABLE GDS NEW ORDERS REV TO +2.2%
• US JUL NONDEF CAP GDS ORDERS EX-AIR +0.4% V JUN +0.9%

• US NAR JUL PENDING HOME SALES INDEX 89.8 V 90.7 IN JUN
• US NAR JUL PENDING HOME SALES -1.0% MOM; -19.9% YOY

• US MBA: REFIS -3% SA; PURCH INDEX -1% SA THRU AUG 19 WK
• US MBA: UNADJ PURCHASE INDEX -21% VS YEAR-EARLIER LEVEL
• US MBA: 30-YR CONFORMING MORTGAGE RATE 5.65% VS 5.45% PREV

• US EIA: CRUDE OIL STOCKS EX SPR -3.28M TO 421.7M AUG 19 WK
• US EIA: DISTILLATE STOCKS -0.66M TO 111.6M IN AUG 19 WK
• US EIA: GASOLINE STOCKS -0.03M TO 215.6M IN AUG 19 WK
• US EIA: CUSHING STOCKS +0.43M TO 25.8M BARRELS IN AUG 19 WK

MARKETS SNAPSHOT

Key late session market levels:

• DJIA up 79.52 points (0.24%) at 32990.25
• S&P E-Mini Future up 14.75 points (0.36%) at 4145.25
• Nasdaq up 70.5 points (0.6%) at 12452.11
• US 10-Yr yield is up 6 bps at 3.1057%
• US Sep 10Y are down 12.5/32 at 117-7.5
• EURUSD down 0.0004 (-0.04%) at 0.9966
• USDJPY up 0.3 (0.22%) at 137.08
• Gold is up $2.6 (0.15%) at $1750.75

• EuroStoxx 50 up 14.94 points (0.41%) at 3667.46
• FTSE 100 down 16.6 points (-0.22%) at 7471.51
• German DAX up 25.83 points (0.2%) at 13220.06
• French CAC 40 up 24.74 points (0.39%) at 6386.76

US TSY FUTURES CLOSE

• 3M10Y +3.67, 32.093 (L: 21.343 / H: 34.218)
• 2Y10Y -2.891, -28.667 (L: -28.667 / H: -23.91)
• 2Y30Y -2.515, -7.482 (L: -8.937 / H: -3.995)
• 5Y30Y -0.413, 8.259 (L: 5.173 / H: 10.105)
• Current futures levels:
• Sep 2Y down 3.875/32 at 104-14.375 (L: 104-14.25 / H: 104-21.25)
• Sep 5Y down 7/32 at 111-5 (L: 111-01.75 / H: 111-18.75)
• Sep 10Y down 13/32 at 117-7 (L: 117-03.5 / H: 117-29)
• Sep 30Y down 1-01/32 at 136-15 (L: 136-05 / H: 137-28)
• Sep Ultra 30Y down 1-26/32 at 148-00 (L: 147-24 / H: 150-09)

US 10YR FUTURE TECHS: (U2)‌‌ Heading South

• RES 4: 122-02 High Aug 2 and key resistance
• RES 3: 120-29 High Aug 4
• RES 2: 119-31/120-22 High Aug 15 / 10
• RES 1: 118-14/119-00 High Aug 22 / 20-day EMA
• PRICE: 117-10 @ 16:19 BST Aug 24
• SUP 1: 117-07 61.8% retracement of the Jun 14 - Aug 2 bull cycle
• SUP 2: 117-04 Low Aug 24
• SUP 3: 116-26+ Low Jun 29
• SUP 4: 116-11 Low Jun 28

Treasuries maintain a bearish tone following recent weakness that resulted in a break of the 20- and 50-day EMA levels. 118-05, 50.0% of the Jun 14 - Aug 2 bull cycle, has also been cleared and this signals scope for an extension towards 117-14+ next, the Jul 21 low and Tuesday’s low print. Support at 117-07, the 61.8% retracement, has been tested, but a clear break below is required before 116-26+ support can be considered.

US EURODOLLAR FUTURES CLOSE

• Sep 22 -0.010 at 96.628
• Dec 22 -0.030 at 95.995
• Mar 23 -0.030 at 95.955
• Jun 23 -0.035 at 96.020
• Red Pack (Sep 23-Jun 24) -0.05 to -0.045
• Green Pack (Sep 24-Jun 25) -0.055 to -0.045
• Blue Pack (Sep 25-Jun 26) -0.055 to -0.055
• Gold Pack (Sep 26-Jun 27) -0.07 to -0.055

SHORT TERM RATES

US DOLLAR LIBOR: Latest settlements

• O/N +0.00886 to 2.32143% (+0.00029/wk)
• 1M +0.01115 to 2.45486% (+0.06815/wk)
• 3M +0.01314 to 3.01000% (+0.05229/wk) * / **
• 6M -0.07214 to 3.49343% (-0.05414/wk)
• 12M -0.01200 to 4.07914% (+0.06328/wk)
• * Record Low 0.11413% on 9/12/21; ** New 14Y high: 3.01000% on 8/24/22

• Daily Effective Fed Funds Rate: 2.33% volume: $91B
• Daily Overnight Bank Funding Rate: 2.32% volume: $281B

• Secured Overnight Financing Rate (SOFR): 2.27%, $952B
• Broad General Collateral Rate (BGCR): 2.26%, $390B
• Tri-Party General Collateral Rate (TGCR): 2.26%, $383B
• (rate, volume levels reflect prior session)

FED Reverse Repo Operation

NY Fed reverse repo usage recedes to $2,237.072B w/ 102 counterparties vs. $2,250.718B prior session. Record high still stands at $2,329.743B from Thursday June 30.

PIPELINE: $1.25B Swedish Export Cr Corp (SEK) 2Y SOFR Priced

• Date $MM Issuer (Priced *, Launch #)
• 08/24 $1.25B *Swedish Export Cr Corp (SEK) 2Y SOFR+20
• 08/24 $1B *Federal Farm Credit Bank (FFCB) 2Y +8

EGBs-GILTS CASH CLOSE: Short-End UK Yields Continue To Soar

The UK short end continued its sell-off Wednesday, with the curve bear steepening and badly underperforming its global peers. Higher inflation expectations on the back of soaring energy prices continues to be the key driver.

• At the beginning of last week, 2Y Gilts were trading just above 2%, but at one point today traded at 2.95% and posted a 6th straight post-2008 high close.
• BoE rates are now seen exceeding 4.3% by mid-next year (up 27bp implied on the day, and vs under 3% two weeks ago). ECB rate hike pricing has ticked up too but not to the same extent (mid-2023 seen just under 2%).
• Periphery spreads were fairly well behaved, with BTP spreads narrowing slightly.
• Attention remains firmly on Friday's speech by Fed Chair Powell at Jackson Hole.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany:

• Germany: The 2-Yr yield is up 6.7bps at 0.921%, 5-Yr is up 5.4bps at 1.158%, 10-Yr is up 5.1bps at 1.37%, and 30-Yr is up 1.7bps at 1.504%.
• UK: The 2-Yr yield is up 21.9bps at 2.938%, 5-Yr is up 20.3bps at 2.703%, 10-Yr is up 12.2bps at 2.698%, and 30-Yr is up 5.1bps at 2.934%.
• Italian BTP spread down 1.5bps at 231.8bps / Greek up 0.6bps at 262.5bps

FOREX: Sharp EURUSD Bounce Keeps Lid On Greenback Advance

• The USD Index spent the majority of Wednesday trading in positive territory, recovering modestly from the data-inspired dip during yesterday’s session. However, a quick spike in EURUSD weighed on the broader dollar, sending the DXY briefly into negative territory. Momentum quickly waned and the index has now consolidated at unchanged levels ahead of the APAC crossover.
• EURUSD’s bounce from 0.9920 to 0.9999 had no apparent newsflow attached to the move. However, flow driven price action was likely in play given the close proximity to the WMR fixing window around 1600BST.
• The USDJPY dip overnight to 136.17 was well supported and price action was buoyed by the upward trajectory for US yields throughout the session. After regaining the 137 handle, the pair largely shrugged off the fix-related volatility.
• Broader G10 ranges have remained subdued. The likes of AUD, NZD and GBP have all fallen between 0.4%-0.55% and are underperforming G10 peers, while NOK and SEK post modest gains.
• Headlines suggesting the China FX regulator informally warns several banks against shorting the Chinese yuan sparked an immediate dip in USDCNH from 6.8850 to 6.86. With market sentiment skewed towards buying the dip in USD/CNH, combined with fresh property concerns in China, the pair grinded back above 6.88, narrowing the gap with the earlier cycle highs at 6.8876.
• Thursday will bring the minutes of the ECB's July policy meeting and the German IFO business survey. Focus remains on Fed Chair Powell’s remarks from Jackson Hole, scheduled for Friday.

Thursday Data Calendar

Date	GMT/Local	Impact	Flag	Country	Event
25/08/2022	0600/0800	***		DE	GDP (f)
25/08/2022	0645/0845	**		FR	Manufacturing Sentiment
25/08/2022	0700/0900	**		ES	PPI
25/08/2022	0800/1000	***		DE	IFO Business Climate Index
25/08/2022	0900/1000	**		UK	Gilt Outright Auction Result
25/08/2022	1000/1100	**		UK	CBI Distributive Trades
25/08/2022	1130/1330			EU	ECB publishes accounts of July 20-21 meet
25/08/2022	1230/0830	*		CA	Payroll employment
25/08/2022	1230/0830	**		US	Jobless Claims
25/08/2022	1230/0830	***		US	GDP (2nd)
25/08/2022	1230/0830	**		US	WASDE Weekly Import/Export
25/08/2022	1300/1500	**		BE	BNB Business Sentiment
25/08/2022	1430/1030	**		US	Natural Gas Stocks
25/08/2022	1530/1130	**		US	US Bill 04 Week Treasury Auction Result
25/08/2022	1530/1130	*		US	US Bill 08 Week Treasury Auction Result
25/08/2022	1700/1300	**		US	US Treasury Auction Result for 7 Year Note