MNI ASIA OPEN: FI/Risk Relief Rally After BoE Move To Calm Mkt

EXECUTIVE SUMMARY

• MNI: Fed's Bostic Would Like Rates At 4.25%-4.5% By Yearend
• MNI BRIEF: BOE Delays Gilt Sales, Acts To Steady Longer End
• MNI: Draghi Resisting Budget Changes -Officials

US TSYS: Tsys Finish Near Highs, BoE Surprise Bond Buy Program

• The vast majority of the GBP1.025bln in offers accepted by the BoE were made up of two Gilts: 1.25% Jul-51 (GBP670.1mln) and 3.75% Jul-52 (GBP157.7mln). Going forward the BoE will hold daily operations from 14:15-14:45 UK time until 14 Oct. Size is set at the same GBP5bln for future auctions although the BOE "retains the discretion to alter any of the terms at any time"
• Still off pre-BOE tax cut annc levels w/ 30YY currently at 3.6763 (-.1491) Yield curves initially bull steepened to new highs (2s10s -23.62) before reversing and snapping flatter (2s10s -4.681 to -39.084 after the bell).
• Any reaction to Inventories data (and multiple Fed speakers on the session, for that matter) were lost in the shuffle: August reading of the Advance Goods Trade Balance -$87.3B vs. -89.0B est, preliminary August reading of Wholesale Inventories is +1.3% MoM vs. +0.4$ est.
• Tsys holding near highs after $36B 7Y note auction (91282CFL0) stops through: 3.898% high yield vs. 3.905% WI; 2.57x bid-to-cover vs. 2.65x last month.
• The 2-Yr yield is down 19.9bps at 4.0836%, 5-Yr is down 26.4bps at 3.9202%, 10-Yr is down 24bps at 3.7052%, and 30-Yr is down 14.7bps at 3.6781%.

US

FED: Atlanta Fed President Raphael Bostic said Wednesday he would like interest rates in the 4.25%-4.5% range by yearend and then would like to see how the economy plays out from there, adding that inflation has been stubbornly high.

• "Inflation is still high and too high and it is not moving enough speed back down to our 2% target and that's driven really by the continuing imbalance between the demand and supply to meet it," he told reporters on a call after speaking at a banking event. "It's caused me to really adjust my policy thinking. I had originally thought that we would need to really just mildly restrict this policy stance." for more see MNI Policy main wire at 1135ET.

UK

BOE: The Bank of England will delay the start of its active gilt sales until Oct 31 and make temporary purchases to stabilise the longer-end of the bond market after the steep sell-off of recent days, policymakers said in a statement on Wednesday.

• Saying that continuing dysfunction would be a “material risk to UK financial stability”, the BOE said it would make “temporary and targeted” purchases “at an urgent pace”.
• The purchases will take place from today through Oct 14 and will be unwound “in a smooth and orderly fashion” when risks to market functioning subside, it said.

EUROPE

ITALY: Caretaker Italian Prime Minister Mario Draghi is resisting attempts by the incoming right-wing coalition to make significant changes to the 2023 budget, but if necessary could ask for an extension of the Oct 15 deadline to submit a draft of the spending plans to the European Commission, finance ministry sources told MNI.

• While Draghi is in contact with the likely next prime minister Giorgia Meloni, sharing technical information for a smooth transition of power, he considers it would be mistaken to introduce new policy measures into a budget which is traditionally prepared at this time, and whose broad outlines are already taking shape.
• “Lots of calls are happening, information sharing. Not only between the leaders but with their economic people so they can move quickly when they get here,” one finance ministry source said.

OVERNIGHT DATA

• US ADVANCE WHOLESALE INVENTORIES ROSE 1.3 % IN AUG.
  
• US AUG. WHOLESALE INVENTORIES RISE 1.3%; EST. 0.4%
• US ADVANCE RETAIL INVENTORIES ROSE 1.4 % IN AUG.

• US NAR AUG PENDING HOME SALES INDEX 88.4 V 90.2 IN JUL
• US NAR AUG PENDING HOME SALES -2.0% MOM; -24.2% YOY

MARKETS SNAPSHOT

• DJIA up 624.28 points (2.14%) at 29754.41
• S&P E-Mini Future up 82.75 points (2.26%) at 3743.25
• Nasdaq up 248.8 points (2.3%) at 11077.06
• US 10-Yr yield is down 24 bps at 3.7052%
• US Dec 10Y are up 62/32 at 112-26.5
• EURUSD up 0.0133 (1.39%) at 0.9727
• USDJPY down 0.66 (-0.46%) at 144.14
• WTI Crude Oil (front-month) up $3.63 (4.62%) at $82.14
• Gold is up $31.06 (1.91%) at $1659.76

• EuroStoxx 50 up 6.65 points (0.2%) at 3335.3
• FTSE 100 up 20.8 points (0.3%) at 7005.39
• German DAX up 43.6 points (0.36%) at 12183.28
• French CAC 40 up 11.19 points (0.19%) at 5765.01

US TSY FUTURES CLOSE

• 3M10Y -27.565, 33.897 (L: 32.642 / H: 66.376)
• 2Y10Y -4.055, -38.458 (L: -40.092 / H: -23.612)
• 2Y30Y +5.208, -41.164 (L: -48.029 / H: -29.153)
• 5Y30Y +11.904, -24.375 (L: -38.427 / H: -23.088)
• Current futures levels:
• Dec 2Y up 14.125/32 at 102-29.25 (L: 102-14.625 / H: 102-30)
• Dec 5Y up 1-12/32 at 108-1.75 (L: 106-17.25 / H: 108-03.25)
• Dec 10Y up 1-30.5/32 at 112-27 (L: 110-19 / H: 112-30)
• Dec 30Y up 2-26/32 at 127-20 (L: 123-30 / H: 127-28)
• Dec Ultra 30Y up 3-08/32 at 138-26 (L: 133-27 / H: 139-11)

‌‌‌‌‌‌US 10YR FUTURE TECHS: (Z2)‌‌ Trend Signals Remain Bearish

• RES 4: 116-11+ 50 day EMA values
• RES 3: 115-06+ High Sep 14
• RES 2: 114-14+ 20-day EMA
• RES 1: 112-30+/114-00 High Sep 23 / 22
• PRICE: 112-11 @ 1230ET Sep 28
• SUP 1: 110-19 Intraday low
• SUP 2: 110-01 3.0% 10-dma envelope
• SUP 3: 110-00 Psychological Support
• SUP 4: 109-23+ Low Nov 30 20074 (cont)

Treasuries remain soft following last week’s extension of its downtrend and this week’s move lower has reinforced current conditions. A bearish price sequence of lower lows and lower highs and bearish moving average studies clearly highlight the market's current bearish sentiment. The focus is on 110-01 a lower moving average band value. Initial resistance is Friday’s high of 112-30+.

US EURODOLLAR FUTURES CLOSE

• Dec 22 +0.035 at 95.340
• Mar 23 +0.145 at 95.350
• Jun 23 +0.185 at 95.385
• Sep 23 +0.235 at 95.50
• Red Pack (Dec 23-Sep 24) +0.260 to +0.295
• Green Pack (Dec 24-Sep 25) +0.265 to +0.290
• Blue Pack (Dec 25-Sep 26) +0.245 to +0.260
• Gold Pack (Dec 26-Sep 27) +0.195 to +0.230

SHORT TERM RATES

US DOLLAR LIBOR: Latest settlements:

• O/N +0.00000 to 3.06400% (-0.00543/wk)
• 1M -0.00528 to 3.11529% (+0.02500/wk)
• 3M +0.03228 to 3.67414% (+0.04571/wk) * / **
• 6M -0.03828 to 4.16986% (-0.03143wk)
• 12M -0.07571 to 4.77600% (-0.05886/wk)
• * Record Low 0.11413% on 9/12/21; ** New 14Y high: 3.64186% on 9/27/22

• Daily Effective Fed Funds Rate: 3.08% volume: $111B
• Daily Overnight Bank Funding Rate: 3.07% volume: $279B

• Secured Overnight Financing Rate (SOFR): 2.98%, $949B
• Broad General Collateral Rate (BGCR): 2.98%, $376B
• Tri-Party General Collateral Rate (TGCR): 2.98%, $352B
• (rate, volume levels reflect prior session)

FED Reverse Repo Operation: New Record High

NY Fed reverse repo usage climbs to new record high of $2,366.798B w/ 101 counterparties vs. $2,327.111B in the prior session. Surpasses last week's record high of $2,359.227B marked Thursday, September 22.

PIPELINE: $500M JBIC 5Y SOFR Sole Issuance

Continued market volatility keeps issuer base sidelined. May see surge Thursday if markets remain calm following this morning's BoE surprise bond buying commitment.

• Date $MM Issuer (Priced *, Launch #)
• 09/28 $500M *JBIC WNG 5Y Green SOFR+71
• $1.3B Priced Tuesday
• 09/27 $800M #Atmos Energy$300M 10Y +152, $500M 30Y +195
• 09/27 $500M *IADB 5Y SOFR+35
• 09/27 $Benchmark Komatsu Finance investor calls
• TBA: Saudi wealth fund looks Green bond sale debut

EGBs-GILTS CASH CLOSE: 30Y UK Yield Falls 100bp As BoE Steps In

Gilts had a historic rally Wednesday after the BoE stepped in to the ongoing sell-off and re-launched bond purchases (if only temporarily) in order to quell market volatility.

• While yields across the UK curve fell, the 30Y dropped 106bp on the session, trading in a range of 3.874% - 5.142% (the latter a post-1998 high).
• The BoE emergency purchase operation itself was rather underwhelming, with the Bank accepting just over GBP1bln of the GBP5bln potential size - operations continue Thursday, to Oct 14.
• But overall, bond markets calmed down considerably, helping German yields fall across the curve as well, with the short-end strongest despite a parade of ECB speakers discussing a 75bp hike in October and eyeing getting to neutral by end-year.
• The relief rally helped BTPs turn it around today as well: 10Y spreads came off a post-Apr 2020 wide of 258bp to trade just below 241bp at the close.

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

• Germany: The 2-Yr yield is down 12.7bps at 1.856%, 5-Yr is down 14.2bps at 2.028%, 10-Yr is down 11.1bps at 2.12%, and 30-Yr is down 7.5bps at 2.017%.
• UK: The 2-Yr yield is down 35.4bps at 4.293%, 5-Yr is down 40.7bps at 4.292%, 10-Yr is down 49.4bps at 4.012%, and 30-Yr is down 105.6bps at 3.932%.
• Italian BTP spread down 11.7bps at 240.9bps / Spanish down 2.4bps at 118bps

Thursday Data Calendar

Date	GMT/Local	Impact	Flag	Country	Event
29/09/2022	0700/0900			EU	ECB Panetta Intro at ECOFIN Hearing
29/09/2022	0700/0900	***		ES	HICP (p)
29/09/2022	0800/1000	***		DE	Bavaria CPI
29/09/2022	0800/1000			EU	ECB de Guindos Speech at BIS/Bank of Lithuania
29/09/2022	0800/1000			IT	PPI
29/09/2022	0815/1015			EU	ECB Elderson Speech at Nederlandsche Bank & OMFIF
29/09/2022	0830/0930	**		UK	BOE Lending to Individuals
29/09/2022	0830/0930	**		UK	BOE M4
29/09/2022	0900/1100	**		EU	Economic Sentiment Indicator
29/09/2022	0900/1100	*		EU	Consumer Confidence, Industrial Sentiment
29/09/2022	0900/1100	*		EU	Business Climate Indicator
29/09/2022	0900/1100	***		DE	Saxony CPI
29/09/2022	0930/1130			EU	ECB de Guindos Opens ECB Research Workshop
29/09/2022	1130/1230			UK	BOE Ramsden Panels Lithuania CB/BIS Conference
29/09/2022	1200/1400	***		DE	HICP (p)
29/09/2022	1230/0830	***		CA	Gross Domestic Product by Industry
29/09/2022	1230/0830	*		CA	Payroll employment
29/09/2022	1230/0830	**		US	Jobless Claims
29/09/2022	1230/0830	***		US	GDP (3rd)
29/09/2022	1330/0930			US	St. Louis Fed's James Bullard
29/09/2022	1400/1000	**		US	WASDE Weekly Import/Export
29/09/2022	1430/1030	**		US	Natural Gas Stocks
29/09/2022	1500/1600			UK	BOE Tenreyro Panellist at Centre for Economic Policy Research
29/09/2022	1530/1130	**		US	US Bill 04 Week Treasury Auction Result
29/09/2022	1530/1130	*		US	US Bill 08 Week Treasury Auction Result
29/09/2022	1700/1300			US	Cleveland Fed's Loretta Mester
29/09/2022	1700/1900			EU	ECB Lane Panels ECB/Cleveland Fed Conference
29/09/2022	1800/1400	***		MX	Mexico Interest Rate
29/09/2022	2045/1645			US	San Francisco Fed's Mary Daly