EXECUTIVE SUMMARY
- MNI US: 2025 Congress Expected To Be Crypto Friendly Regardless Of Election Result
- MNI BRIEF: ECB Villeroy: Higher Rates Not Needed If Infl At 2%
- MNI BOC: Comfortable Majority Looks for 50bps Cut This Week
- MNI SECURITY: US/Israel Reach Agreement Not To Strike Iran's Oil/Nuclear Facilities
- MNI US DATA: Soft Richmond Fed May Underplay Nationwide Manufacturing Steadiness
- Treasuries are running weaker but off midday lows after the bell amid ongoing speculation over forward ECB rate cut speculation. Rates traded weaker overnight after ECB officials saw market pricing of appr six consecutive cuts as overly aggressive.
- Bonds bounced briefly after Bank of Portugal Governor Centeno suggested a 50bp ECB cut was possible at upcoming meetings.
- Treasuries rebounded with Euribor after Bank of France Governor Francoise Villeroy said Tuesday that ECB rates should not be restrictive next year if the growth outlook remains sluggish and inflation is sustainably at the bank's target of 2%.
- "On our terminal rate, it’s obviously too early to tell. However if we are next year sustainably at 2% inflation, and with still a sluggish growth outlook in Europe, there won’t be any reasons for our monetary policy to remain restrictive, and for our rates to be above the neutral rate of interest", he said in New York.
- The Richmond Fed Manufacturing Survey composite manufacturing index rose to -14 in October, still indicating "slow" activity (per the survey) albeit up from -21 in September and a little stronger than the -14 expected, with shipments, new orders and employment all improving on the month.
- Current projected cuts recede vs. late Monday levels (*): Nov'24 cumulative -23.0bp (-22.0bp), Dec'24 -41.4bp (-40.5bp), Jan'25 -58.6bp (-58.1bp).
NEWS
MNI US: 2025 Congress Expected To Be Crypto Friendly Regardless Of Election Result
The 2025 Congress is likely to crypto-friendly, regardless of who controls the gavels and occupies the White House, according to a new report from Politico detailing a $160 million political spending spree by cryptocurrency firms and executives. Politico notes: “As many as 13 new pro-crypto candidates could ascend to seats in the House next year with backing from the industry’s network of super PACs, which have spent big to promote allies and block critics in races across the country. The potential House members range from progressive Democrats who tout digital assets as a tool for financial inclusion to Republicans who bash the Biden administration’s crypto policy and say the technology can create “economic freedom.””
MNI BRIEF: ECB Villeroy: Higher Rates Not Needed If Infl At 2%
MNI BOC: Comfortable Majority Looks for 50bps Cut This Week
The comfortable majority of analysts look for a 50bps rate cut from the Bank of Canada at this week's decision, however a not insignificant minority see a smaller step of 25bps on Wednesday. The BoC is mostly priced to ramp up its easing pace with a 50bp cut on Wednesday after three consecutive 25bp cuts having started cutting in June
- We think it’s a closer call with another 25bp cut than the 45bp priced implies, but narrowly go with a 50bp cut this month with the market presenting an opportunity to step rates closer to higher estimates of neutral and trim elevated real rates
- If the Governing Council does opt for a 50bp cut, we expect an attempt at downplaying odds of a second 50bp cut in December to avoid an overly large FI rally and CAD depreciation.
Our full preview including exclusive policy analysis and summary of sell-side views here: https://mni.marketnews.com/3BTzNPh
MNI SECURITY: US/Israel Reach Agreement Not To Strike Iran's Oil/Nuclear Facilities
Al-Monitor reporting that the US and Israel have come to a 'quiet understanding' that Israel will refrain from striking Iran's oil industry and nuclear facilities in return for Washington accelerating arms shipments. However, the agreement is not formalised and Israeli Prime Minister Benjamin Netayanhu may opt for a more punitive strik due to pressure from the far right of his base.
MNI AUSTRIA: Far-Right Fail To Find Coalition Partners, ÖVP Called To Start Talks
President Alexander van der Bellen has asked the conservative Austrian People's Party (ÖVP) to start coalition talks, stating that the far-right Freedom Party of Austria (FPÖ) that won a plurality of seats in the 29 Sep federal election failed to find a willing coalition partner. Van der Bellen says that the ÖVP, which came in second in the election, should hold talks with the third-placed centre-left Social Democrats (SPÖ).
MNI RUSSIA: INDIA-Modi Calls For Resolution To Ukraine War In BRICS Meeting w/Putin
Russian President Vladimir Putin is meeting with Indian PM Narendra Modi on the sidelines of the BRICS summit in Kazan, Russia. Modi says that the two have "been in constant thought with regards to the Russia-Ukraine conflict", and tells Putin that India "believes conflicts should be resolved peacefully". Modi says that "India stands ready to play whatever role is required for peace", and that "We have got another opportunity to discuss these issues today". Putin calls Russia-India relations a "strategic partnership".
OVERNIGHT DATA
MNI US DATA: Soft Richmond Fed May Underplay Nationwide Manufacturing Steadiness
The Richmond Fed Manufacturing Survey composite manufacturing index rose to -14 in October, still indicating "slow" activity (per the survey) albeit up from -21 in September and a little stronger than the -14 expected, with shipments, new orders and employment all improving on the month.
MNI: US OCT PHILADELPHIA FED NONMFG INDEX 6
MNI: US REDBOOK: OCT STORE SALES +5.1% V YR AGO MO
MNI: CANADA SEP INDUSTRIAL PRICES -0.6% MOM; EX-ENERGY +0.2%
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA up 56.85 points (0.13%) at 42987.86
S&P E-Mini Future up 1.25 points (0.02%) at 5897.75
Nasdaq up 41.3 points (0.2%) at 18583.42
US 10-Yr yield is up 0.2 bps at 4.1977%
US Dec 10-Yr futures are down 5/32 at 111-11.5
EURUSD down 0.0019 (-0.18%) at 1.0796
USDJPY up 0.27 (0.18%) at 151.11
WTI Crude Oil (front-month) up $1.53 (2.17%) at $72.09
Gold is up $27.05 (0.99%) at $2746.88
European bourses closing levels:
EuroStoxx 50 down 1.91 points (-0.04%) at 4939.31
FTSE 100 down 11.7 points (-0.14%) at 8306.54
German DAX down 39.28 points (-0.2%) at 19421.91
French CAC 40 down 1.13 points (-0.02%) at 7535.1
US TREASURY FUTURES CLOSE
3M10Y +0.4, -44.096 (L: -49.298 / H: -41.463)
2Y10Y +0.562, 16.739 (L: 14.197 / H: 17.769)
2Y30Y -0.529, 46.03 (L: 43.523 / H: 48.451)
5Y30Y -1.978, 49.129 (L: 48.318 / H: 52.19)
Current futures levels:
Dec 2-Yr futures down 1/32 at 103-8 (L: 103-06.5 / H: 103-09.625)
Dec 5-Yr futures down 3.25/32 at 107-30 (L: 107-27.5 / H: 108-03)
Dec 10-Yr futures down 5/32 at 111-11.5 (L: 111-09 / H: 111-20.5)
Dec 30-Yr futures down 5/32 at 118-17 (L: 118-02 / H: 118-31)
Dec Ultra futures down 4/32 at 125-14 (L: 124-23 / H: 126-00)
MNI US 10YR FUTURE TECHS: (Z4) Cracks Bear Trigger
- RES 4: 114-01+ High Oct 4
- RES 3: 113-12 Low Sep 3 and a key short-term resistance
- RES 2: 112-22/28+ High Oct 16 / 20-day EMA
- RES 1: 112-07 High Oct 21
- PRICE: 111-11 @ 1510 ET Oct 22
- SUP 1: 111-09 Intraday low
- SUP 2: 111-00 Low Jul 22
- SUP 3: 110-13 61.8% retracement of the Apr - Sep bull cycle (cont)
- SUP 4: 109-29+ 2.0% 10-dma envelope
The trend condition in Treasuries remains bearish and this week’s move lower reinforces this theme. The bear trigger at 111-22, the Oct 10 low, has been cleared, confirming a resumption of the trend. Sights are on the 111-00 handle next. 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 95.605
Mar 25 steady00 at 95.980
Jun 25 -0.015 at 96.255
Sep 25 -0.020 at 96.425
Red Pack (Dec 25-Sep 26) -0.03 to -0.02
Green Pack (Dec 26-Sep 27) -0.035 to -0.025
Blue Pack (Dec 27-Sep 28) -0.03 to -0.02
Gold Pack (Dec 28-Sep 29) -0.025 to -0.02
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.00128 to 4.74333 (-0.01573/wk)
- 3M +0.00850 to 4.63476 (+0.00313/wk)
- 6M +0.02024 to 4.45780 (+0.01409/wk)
- 12M +0.03617 to 4.15642 (+0.02411/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.82% (-0.02), volume: $2.322T
- Broad General Collateral Rate (BGCR): 4.81% (-0.01), volume: $818B
- Tri-Party General Collateral Rate (TGCR): 4.81% (-0.01), volume: $783B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.83% (+0.00), volume: $96B
- Daily Overnight Bank Funding Rate: 4.83% (+0.00), volume: $258B
FED Reverse Repo Operation
RRP usage fell to new multi-year low (early May 2021) of $237.760B this afternoon from $261.044B prior. Compares to prior low of $239.386B on Monday September 16 2024. Number of counterparties at 60 from 59 prior.
MNI PIPELINE: $3.5B Bank of America, $5.2B Elevance Corporate Debt Launched
- Date $MM Issuer (Priced *, Launch #)
- 10/22 $3.5B #Bank of America 11NC10 +132
- 10/22 $5.2B #Elevance Health $350M 2Y +48, $750M +5Y +80, $750M 7Y +90, $1.2B +10Y +105, $1.35B +30Y +125, $800M 40Y +138
MNI EGBS: Bund and Gilt Futures Scale Away From Highs
Bund and Gilt futures have pulled away from intraday highs, pressured by a renewed uptick in crude oil futures and the continued recovery in European/UK equities from lows.
- Bund futures are -33 ticks at 132.83. Highs of 133.14 were reached when Bank of Portugal Governor Centeno suggested a 50bp ECB cut was possible at upcoming meetings.
- However, the bid lacked follow-through, with the comments aligning with Centeno’s traditionally dovish leanings.
- ECB President Lagarde largely stuck to the October press conference script, and did not speculate on what it would take to cut by 50bps.
- The BTP/Bund spread is a little wider today at 123.5bps. Today’s 7/30-year syndication has priced, seeing strong demand across both lines.
- Gilt futures are -37 at 96.85. BoE Governor Bailey did not comment on monetary policy in his speech, while Greene’s rhetoric was in line with previous comments.
- The 10-year Gilt/Bund spread is little changed today at 185bps.
- Tomorrow’s EU and UK data calendar is light, leaving focus on Central Bank speakers once again.
MNI FOREX: USD Index Consolidates at Elevated Levels, EURUSD Testing 1.0800
- While the USD index operated within a relatively contained range on Tuesday, the consolidation at lofty levels is keeping the renewed greenback optimism a prominent dynamic across the fx space.
- There were mixed performances across the G10 currencies, and notably both the AUD (+0.38%) and NZD (+0.28%) have outperformed. An overnight bid for the antipodeans has been consolidated by a late bounce for major equity benchmarks.
- However, this has not been the case for either the Euro or the Japanese Yen, which have once again underperformed. The consolidation of greenback strength continues to pressure EURUSD, which is currently testing its most recent lows around the 1.08 handle.
- Yesterday, the pair failed in its attempt to retake the 200-dma resistance, which held well at 1.0872 in not just Asia-Pac trade - but also on intraday rallies across Thursday and Friday last week. The move down exposes 1.0778, the Aug 1 low and the next key support. Clearance of this level would strengthen a bearish theme and open 1.0746 (Fibonacci retracement) and 1.0710, the Jul 2 low.
- USDJPY maintains a bullish technical tone having extended the rally above the 50-day EMA to reach as high as 151.20 today. Price action highlights a stronger reversal and sights are now on 151.94, the Jul 25 low. The move higher also sets the scene for an extension towards 153.40, the 61.8% retracement point of the downleg posted off the July 3rd high. Initial firm support to watch moves up to 147.42, the 50-day EMA.
- The Bank of Canada rate decision and press conference highlights the Wednesday calendar, while US Existing Home Sales will also cross. Speeches from the annual IMF meetings will also continue to be monitored.
WEDNESDAY DATA CALENDAR
| Date | ET | Impact | Period | Release | Prior | Consensus | |
| 23/10/2024 | 0700 | ** | 18-Oct | MBA Mortgage Applications w/w | -17.0 | -- | % |
| 23/10/2024 | 1000 | *** | Sep | Existing Home Sales | 3.86 | 3.90 | (m) |
| 23/10/2024 | 1030 | ** | 18-Oct | Crude Oil Stocks ex. SPR w/w | -- | -- | bbl (m) |
| 23/10/2024 | 1030 | ** | 18-Oct | Distillate Stocks w/w change | -- | -- | bbl (m) |
| 23/10/2024 | 1030 | ** | 18-Oct | Gasoline Stocks w/w change | -- | -- | bbl (m) |
| 23/10/2024 | 1300 | ** | Oct | Bid to Cover Ratio | -- | -- |