EXECUTIVE SUMMARY
- MNI US TSYS/SUPPLY: MNI UST Refunding Preview - Nov 2024
- MNI BRIEF: Economic Activity 'Little Changed' - Fed Beige Book
- MNI US: Nate Silver Says His 'Gut' Favours Trump Despite Polling Dead Heat
- MNI BOC: BOC Cuts Rates 50BPs, More Reductions Could Be Expected
- MNI US DATA: Mortgage Rate-Constrained Existing Home Sales Sag To Fresh 14-Year Low
US
MNI BRIEF: Economic Activity 'Little Changed' - Fed Beige Book
U.S. economic growth appeared lackluster since early September while prices pressures continued to ease and employment increased slightly, according to the latest Federal Reserve Beige Book report Wednesday. "On balance, economic activity was little changed in nearly all Districts since early September, though two Districts reported modest growth," the report said. "Inflation continued to moderate with selling prices reportedly increasing at a slight or modest pace in most districts." The Fed said employment "increased slightly" over the reporting period, with more than half Fed districts reporting slight or modest growth. "Many Districts reported low worker turnover, and layoffs reportedly remained limited," the Fed said.
NEWS
MNI US: Nate Silver Says His 'Gut' Favours Trump Despite Polling Dead Heat
Elections Analyst Nate Silver wrote in a NYT op-ed that: “In an election where the seven battleground states are all polling within a percentage point or two, 50-50 is the only responsible forecast,” but conceded that his “gut says Donald Trump” will win.
- Silver added: “…you should resign yourself to the fact that a 50-50 forecast really does mean 50-50. And you should be open to the possibility that those forecasts are wrong, and that could be the case equally in the direction of Mr. Trump or Ms. Harris.”
- Silver's comments come as the public discourse around the election appears to showing momentum towards a Trump victory.
- In response to the sentiment shift, Harris has made a campaign pivot to health care, a policy area where she has a strong advantage over Trump with Democrats and independents.
- On Friday, Harris will travel to Texas to deliver a speech warning of Republican efforts to restrict women’s rights related to abortion and healthcare. Texas isn’t widely considered a competitive state in the presidential election, but Democrats have been eying Senator Ted Cruz’ (R-TX) seat as a potential second route to retaining the Senate.
Figure 1: Election Forecast Model
Source: Silver Bulletin
MNI BOC: BOC Cuts Rates 50BPs, More Reductions Could Be Expected
Bank of Canada cut interest rates for a fourth time in a row, by 50bps to 3.75% in line with economist and market expectations. Prior three cuts were 25bps and BoC says it took a bigger step as inflation is now back to the 2% target and it wants to keep it close to target. "Now our focus is to maintain low, stable inflation. We need to stick the landing," Macklem says in press conference statement.
MNI BOC: 50bps Cut Leaves Little to Surprise Markets
50bps cut and guidance around rates ahead leaves little to surprise markets here - USD/CAD inside the day's range and nearer the top-end of the range, with very minimal reaction in the front-end of the CAD curve.
MNI EUROZONE DATA: Gradual Improvement In Consumer Confidence Continues
Eurozone flash consumer confidence was in line with expectations at -12.5, slightly above September’s -12.9. Sentiment continues to recover from 2022 lows, but remains below the 2010-2019 average of -11.0. The ECB's September projections note that a "consumption-led recovery remains the central scenario", underpinned by rising disposable incomes and "gradually increasing confidence".
MNI TURKEY: Kremlin Spox Says NATO Membership 'Not An Obstacle' To BRICS Accession
Russia's state-run TASS reports Kremlin spox Dmitry Peskov stating that NATO membership is 'not an obstacle' to joining the BRICS group. Peskov was commenting in regard to speculation that Turkey could join the group. In early September the Turkish gov't confirmed that it had submitted an official application to join the BRICS group. Turkey's stalled process of seeking to join the EU, in the deep freeze since a crackdown on the opposition following a failed military coup in 2016, is said to have spurred President Recep Tayyip Erdogan to seek out other geopolitical alliances.
US TSYS
MNI US TSYS: Tsy Ylds Resume Climb; Fed Beige Book: Little Change Economic Activity
- Treasuries remained weaker but off second half lows after the bell, curves flatter as projected rate cuts retreated slightly from this morning's levels (*): Nov'24 cumulative -22.3bp (-23.0bp), Dec'24 -41.0bp (-41.4bp), Jan'25 -57.1bp (-57.6bp).
- The Dec'24 10Y contract breached round number support of 111-00 earlier to 110-30.5 low, currently trades 111-02.5 (-8.5), 2s10s curve -1.538 at 15.770 while the 5s30s curve sits 2.849 flatter at 45.980. Next support at 110-13 61.8% retracement of the Apr - Sep bull cycle (cont).
- Muted reaction to the $13B 20Y bond auction reopen (912810UD8) tailing again: 4.590% high yield vs. 4.574% WI; 2.59x bid-to-cover vs. prior month's 2.51x (lowest since May).
- The Federal Reserve's Beige Book showed little change in economic activity, "inflation continued to moderate with selling prices reportedly increasing at a slight or modest pace in most districts."
- Treasury's quarterly Refunding process begins next Monday Oct 28 with the release of the financing estimates for the current quarter (we refer to this as the November refunding round). Broad consensus is that the next upsizing will not come until late 2025 or even early 2026 though of course much will depend on the fiscal path taken in the next administration/Congress.
- Focus turns to Thursday's weekly jobless claims, flash PMIs, New Home Sales, regional Fed data from Chicago and Kansas City.
MNI US TSYS/SUPPLY: MNI UST Refunding Preview - Nov 2024
Refunding Preview- Bigger Auctions Unlikely For Several Qs, But Debt Limit Return Clouds Outlook
- Treasury's quarterly Refunding process begins next Monday Oct 28 with the release of the financing estimates for the current quarter (we refer to this as the November refunding round). Wednesday Oct 30 brings Treasury's announcement of coupon auction sizes, as well as its guidance for future issuance.
- MNI usually produces a Deep Dive ahead of the Refunding announcement, but in this case Treasury auctions continue through Tuesday - so unusually, for this round, we will publish a smaller preview for financing/coupon sizes, with our Deep Dive covering the Refunding results after their release.
- See preview in PDF link: refunding-Nov2024.pdf
OVERNIGHT DATA
US DATA: Mortgage Rate-Constrained Existing Home Sales Sag To Fresh 14-Year Low
Existing home sales continue to slump, falling 1.0% M/M in September to 3.84M SA annualized (vs 3.88M expected). That's down 3.5% from a year earlier, at the lowest rate since October 2010 and well off the torrid pace at the 2021 pandemic high (6.43M).
- The inventory of unsold homes (1.39M, NSA) has risen to 4.34 months' supply at the current pace of sales - a fresh post-2020 high and well off the 1.7 month low set in December 2021.
- The slow rise in existing home supply brings the ratio more firmly into the pre-pandemic range (4.2 months from 2015-19), even as sales activity continues to diminish as low locked-in fixed rate mortgages deter movement, and delinquencies remain low.
- That said, prices continue to hold up: the $404k in September represents a 3.0% Y/Y - so there is little evidence that sellers are blinking even as sales taper off.
- To sum up: existing home sales are unlikely to pick up unless long-end Treasury rates fall substantially.
US MBA: MARKET COMPOSITE -6.7% SA THRU OCT 18 WK
US MBA: 30-YR CONFORMING MORTGAGE RATE UNCHANGED AT 6.52%
US MBA: REFIS -8% SA; PURCH INDEX -5% SA THRU OCT 18 WK
US MBA: UNADJ PURCHASE INDEX +3% VS YEAR-EARLIER LEVEL
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA down 409.94 points (-0.96%) at 42514.95
S&P E-Mini Future down 48.75 points (-0.83%) at 5843.25
Nasdaq down 296.5 points (-1.6%) at 18276.65
US 10-Yr yield is up 3 bps at 4.2376%
US Dec 10-Yr futures are down 9/32 at 111-2
EURUSD down 0.0014 (-0.13%) at 1.0785
USDJPY up 1.57 (1.04%) at 152.65
Gold is down $33.64 (-1.22%) at $2715.42
European bourses closing levels:
EuroStoxx 50 down 16.76 points (-0.34%) at 4922.55
FTSE 100 down 47.9 points (-0.58%) at 8258.64
French CAC 40 down 37.62 points (-0.5%) at 7497.48
US TREASURY FUTURES CLOSE
3M10Y +3.058, -40.303 (L: -44.141 / H: -39.224)
2Y10Y -1.765, 15.543 (L: 14.587 / H: 19.157)
2Y30Y -2.987, 43.208 (L: 41.973 / H: 47.782)
5Y30Y -2.713, 46.116 (L: 45.561 / H: 49.193)
Current futures levels:
Dec 2-Yr futures down 2.875/32 at 103-4.875 (L: 103-04.5 / H: 103-08)
Dec 5-Yr futures down 7.25/32 at 107-22.25 (L: 107-20.5 / H: 107-29.75)
Dec 10-Yr futures down 9/32 at 111-2 (L: 110-30.5 / H: 111-11.5)
Dec 30-Yr futures down 13/32 at 118-2 (L: 117-25 / H: 118-15)
Dec Ultra futures down 17/32 at 124-28 (L: 124-16 / H: 125-14)
MNI US 10YR FUTURE TECHS: (Z4) Bear Trend Firms
- RES 4: 113-12 Low Sep 3 and a recent breakout point
- RES 3: 113-06+ 50-day EMA
- RES 2: 112-22 High Oct 16 and a key short-term resistance
- RES 1: 112-19 20-day EMA
- PRICE: 111-02+ @ 1500 ET Oct 23
- SUP 1: 111-04 200-dma
- SUP 2: 110-30+ Low Oct 23
- SUP 3: 110-13 61.8% retracement of the Apr - Sep bull cycle (cont)
- SUP 4: 109-26 2.0% 10-dma envelope
The trend condition in Treasuries remains bearish and the contract traded to a fresh cycle low Wednesday. The bear trigger at 111-22, the Oct 10 low, has been cleared, confirming a resumption of the trend. This has exposed the 200-dma at 111-04 and 110-13, a Fibonacci retracement. Moving average studies are in a bear-mode position, highlighting a dominant downtrend for now. Initial firm resistance has been defined at 112-22, the Oct 16 high.
SOFR FUTURES CLOSE
Dec 24 -0.010 at 95.595
Mar 25 -0.025 at 95.955
Jun 25 -0.040 at 96.215
Sep 25 -0.050 at 96.375
Red Pack (Dec 25-Sep 26) -0.065 to -0.055
Green Pack (Dec 26-Sep 27) -0.065 to -0.055
Blue Pack (Dec 27-Sep 28) -0.05 to -0.04
Gold Pack (Dec 28-Sep 29) -0.035 to -0.03
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.00574 to 4.73759 (-0.02147/wk)
- 3M -0.00889 to 4.62587 (-0.00576/wk)
- 6M -0.00294 to 4.45486 (+0.01115/wk)
- 12M +0.00919 to 4.16561 (+0.03330/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.83% (+0.01), volume: $2.226T
- Broad General Collateral Rate (BGCR): 4.82% (+0.01), volume: $811B
- Tri-Party General Collateral Rate (TGCR): 4.82% (+0.01), volume: $780B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.83% (+0.00), volume: $98B
- Daily Overnight Bank Funding Rate: 4.83% (+0.00), volume: $250B
FED Reverse Repo Operation
RRP usage rebounds to $270.839 after falling to new multi-year low (early May 2021) of $237.760B yesterday. Number of counterparties surges to 84 from 60 prior.
MNI PIPELINE: $1B Kommunivest, $1B IFFIm Corporate Issuance Priced
- Date $MM Issuer (Priced *, Launch #)
- 10/23 $1B *Kommunivest WNG 2026 SOFR+29
- 10/23 $1B *IFFIm 3Y SOFR+43
EGBS
MNI BONDS: EGBs-GILTS CASH CLOSE: Bunds Outperform Gilts On Easier ECB Outlook
EGB curves bull steepened sharply Wednesday in anticipation of increasingly aggressive ECB easing.
- Pricing for a 50bp ECB cut in December neared 50/50 implied probability (~45%), vs 20% Tuesday morning, though this faded to around 38% at the time of the bond cash close. The profile through March implied 9bp of additional cumulative cuts, to 91bp including 65bp through January.
- The additional pricing-in of cuts came following a Reuters sources story suggesting policymakers have begun to debate if weak economic growth warrants rates being cut below neutral levels.
- Bunds easily outperformed Gilts on the day, with yields higher across the UK curve, focused in the belly.
- EGB periphery spreads tightened on the lower ECB rate outlook, with BTPs outperforming.
- Thursday's European data highlight is the October flash PMI round, after September's soft readings.
Closing Yields / 10-Yr Periphery EGB Spreads To Germany
- Germany: The 2-Yr yield is down 7.4bps at 2.103%, 5-Yr is down 3.1bps at 2.113%, 10-Yr is down 1.4bps at 2.304%, and 30-Yr is down 0.3bps at 2.625%.
- UK: The 2-Yr yield is up 2.3bps at 4.094%, 5-Yr is up 4.3bps at 4.039%, 10-Yr is up 3.4bps at 4.2%, and 30-Yr is up 2.3bps at 4.731%.
- Italian BTP spread down 2.8bps at 121.6bps / Spanish down 1.9bps at 69.9bps
MNI FOREX: USDJPY Surges Above 153.00 as Yields Continue to Climb
- USDJPY has rallied substantially on Thursday, advancing 1.15% to trade just below the 153.00 mark as we approach the APAC crossover. Fresh cycle highs of 153.19 have been printed, and price action further affirms the resumption of the uptrend that started Sep 16, underpinned by rising core yields.
- Initial resistance is at 153.40, the 61.8% retracement of the downleg posted off the July 3rd high. Above here, the most notable level is 155.22, the Jul 30 high.
- The Bank of Canada lowered its policy rate 50bps for the first time since the pandemic slump and said further reductions are likely needed without committing to any particular pace. USDCAD spiked very briefly to 1.3863 as the press conference began, however we have since faded back to pre-announcement levels at 1.3840.
- Both the trend outlook and positioning indicators remain bullish for USDCAD, and it is noteworthy that spot has recently traded through 1.3822, 76.4% retracement of the Aug 5 - Sep 25 bear leg. Above here, markets will focus on 1.3946, the Aug 5 high and the next key resistance. Initial firm support to watch lies at 1.3702, the 20-day EMA. A pullback would be considered corrective and allow an overbought condition to unwind.
- EURUSD has continued to trade with a downward bias, sinking further below 1.0800 in the process. The latest sell-off reinforces the bearish theme for EURUSD and sights are now on 1.0746, a Fibonacci retracement point and 1.0710, the Jul 2 low.
- Eurozone flash PMIs will highlight the European session on Thursday, providing the latest barometer for the strength of the Eurozone economy. US initial jobless claims, flash PMI and new home sales will be the focus on the US docket.
THURSDAY DATA CALENDAR
| Date | ET | Impact | Period | Release | Prior | Consensus | |
| 24/10/2024 | 0830 | *** | 19-Oct | Continuing Claims | 1867 | -- | (k) |
| 24/10/2024 | 0830 | *** | 19-Oct | Initial Jobless Claims | 241 | -- | (k) |
| 24/10/2024 | 0830 | *** | 19-Oct | Prev Continuing Claims, Rev | -- | -- | (k) |
| 24/10/2024 | 0830 | *** | 19-Oct | Prev Initial Jobless Claims, Rev | -- | -- | (k) |
| 24/10/2024 | 0830 | ** | 17-Oct | Corn Net Sales | -- | -- | MT (k) |
| 24/10/2024 | 0830 | ** | 17-Oct | Corn Weekly Exports | -- | -- | MT (k) |
| 24/10/2024 | 0830 | ** | 17-Oct | Soy Net Sales | -- | -- | MT (k) |
| 24/10/2024 | 0830 | ** | 17-Oct | Soy Weekly Exports | -- | -- | MT (k) |
| 24/10/2024 | 0830 | ** | 17-Oct | Wheat Net Sales | -- | -- | MT (k) |
| 24/10/2024 | 0830 | ** | 17-Oct | Wheat Weekly Exports | -- | -- | MT (k) |
| 24/10/2024 | 0945 | *** | Oct | S&P Global Manufacturing PMI (p) | 47.3 | -- | |
| 24/10/2024 | 0945 | *** | Oct | S&P Global Services Index (p) | 55.2 | -- | |
| 24/10/2024 | 1000 | *** | Sep | New Home Sales | 0.716 | 0.713 | (m) |
| 24/10/2024 | 1000 | *** | Sep | Previous New Home Sales Revised (millions) | -- | -- | (m) |
| 24/10/2024 | 1030 | ** | 18-Oct | Natural Gas Stocks w/w | -- | -- | Bcf |
| 24/10/2024 | 1100 | ** | Oct | Kansas City Fed Mfg Index | -8 | -- | |
| 24/10/2024 | 1130 | ** | 25-Oct | Bid to Cover Ratio | -- | -- | |
| 24/10/2024 | 1130 | * | 25-Oct | Bid to Cover Ratio | -- | -- | |
| 24/10/2024 | 1300 | ** | Q4 | Bid to Cover Ratio | -- | -- |