EXECUTIVE SUMMARY
- (AXIOS) "Israel launches retaliatory attack against Iran"
- (BBG) Israel’s Limited Attack on Iran May Help Spur Regional Deal
- MNI US DATA: Core Goods Orders Outpace Shipments Again But Trend Still Tepid
- MNI US DATA: U.Mich 1Y Inflation Expectations Revised Back To Recent Lows
- After a firmer start, Treasuries have retreated to lows for the week late Friday, no obvious headline or flow related driver with the Federal Reserve entering their self imposed media blackout regarding policy at midnight.
- The Dec'24 10Y contract is has fallen to 110-30.5 - matching the midweek low as it traded through 200-dma technical support of 111-04. The next significant support is at 110-13 (61.8% retracement of the Apr - Sep bull cycle (cont)). 10Y yield has climbed to 4.2419 +.0302. Curves modestly steeper: 2s10s +.639 at 13.520, 5s30s +.403 at 44.246.
- Current projected rate cuts into early 2025 look steady to mildly lower vs. late Thursday levels (*): Nov'24 cumulative steady at -23.6bp, Dec'24 -43.7bp (-42.9bp), Jan'25 -60.6bp (-60.1bp), Mar'25 -79.2bp (-81.0bp).
- Mixed data included better than expected Durable goods orders, with both headline and core orders beating expectations in the preliminary September release and a downward revision to Aug being confined to volatile items. Overall durable goods orders -0.8% M/M (cons -1.0%) after a downward revised -0.8% (initial 0.0%).
- U.Mich consumer sentiment was stronger than expected in October as it was revised up to 70.5 (prelim 68.9) for a small increase from 70.1 in September. Both current conditions and expectations were revised higher. 1Y inflation expectations: 2.7% (cons & prelim 2.9) in Oct after 2.7% in Sep, surprisingly remaining at what was the lowest since Dec 2020.
- Slow start to the week ahead, focus is on next Friday's October employment report.
NEWS
(AXIOS) "Israel launches retaliatory attack against Iran: Israel began its attack against Iran early Saturday morning local time in
retaliation for its massive ballistic missile attack on Oct. 1, two sources with knowledge told Axios."
(BBG) "Israel’s Limited Attack on Iran May Help Spur Regional Deal: Israel’s assault on Iran early Saturday, coordinated with Washington and limited to missile and air defense sites, was more restrained than many expected and may help diplomatic efforts to return hostages and limit the combat in both Lebanon and Gaza."
(BBG) Hedge Funds Sold 80% China Stock Bought Since Sept. 24: Goldman: Hedge funds have unwound nearly 80% of net
buying in Chinese equities since Sept. 24, Goldman Sachs strategists led by Sunil Koul and Timothy Moe say in a note.
MNI ISRAEL: US Shifts Jets To Middle East Amid Possibility Of Israeli Strike On Iran
US Central Command (CENTCOM), responsible for US military operations in the Middle East, has confirmed that F-16 fighter jets from the Spangdahlem Air Base in Germany have arrived in its area of operations. Comes amid increasing expectations in the region that Israel is close to launching strikes on Iranian sites in retaliation to the 1 October ballistic missile barrage launched against Israel by Tehran in retaliation to the killing of Hezbollah leader Hassan Nasrallah.
MNI EUROPEAN FISCAL: Deputies Reject Social Sec. Budget In Legislative Standoff
Deputies on the National Assembly's Social Affairs committee have unanimously rejected the draft Social Security Financing Bill (PLFSS) in another blow to the minority gov't of PM Michel Barnier. The PLFSS is separate to the draft financing law (PLF) that is currently being debated on the floor of the National Assembly. While the PLF concerns most public services such as defence, infrastructure, and education, the PLFSS concerns all social security obligations of the state such as pensions, welfare spending and healthcare.
BBG: ECB'S LAGARDE: DISINFLATION PROCESS IS WELL ON TRACK
OVERNIGHT DATA
MNI US DATA: U.Mich 1Y Inflation Expectations Revised Back To Recent Lows
U.Mich consumer sentiment was stronger than expected in October as it was revised up to 70.5 (prelim 68.9) for a small increase from 70.1 in September. Both current conditions and expectations were revised higher.
- 1Y inflation expectations: 2.7% (cons & prelim 2.9) in Oct after 2.7% in Sep, surprisingly remaining at what was the lowest since Dec 2020.
- 5-10Y inflation expectations: 3.0% (cons & prelim 3.0) in Oct after 3.1% in Sep, confirming a return to more comfortably within its steady 2.9-3.1% range.
MNI US DATA: Core Goods Orders Outpace Shipments Again But Trend Still Tepid
Durable goods orders fared better than expected, with both headline and core orders beating expectations in the preliminary September release and a downward revision to Aug being confined to volatile items.
- Overall durable goods orders -0.8% M/M (cons -1.0%) after a downward revised -0.8% (initial 0.0%).
- Core orders 0.5% M/M (cons 0.1) in Sept after an unrevised 0.3% M/M.
- Core shipments -0.3% M/M (cons 0.0) in Sept after an unrevised -0.1% M/M.
- Core shipments last increased in June and have declined in six of the past eight months, which sees trend growth of -2.8% annualized on a 3M/3M basis.
- Core orders are however pointing to some upside ahead, having firmed to 0.5% annualized on the same 3M/3M basis having bottomed at -2.1% annualized as of July.
- As has been the case for some time, the industrial trend remains at best tepid but isn’t as bad as ISM manufacturing firmly in contraction territory would ordinarily imply.
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA down 236.17 points (-0.56%) at 42137.97
S&P E-Mini Future down 0 points (0%) at 5849
Nasdaq up 116.8 points (0.6%) at 18531.8
US 10-Yr yield is up 3.2 bps at 4.2439%
US Dec 10-Yr futures are down 11/32 at 110-30
EURUSD down 0.0031 (-0.29%) at 1.0797
USDJPY up 0.53 (0.35%) at 152.36
WTI Crude Oil (front-month) up $1.64 (2.34%) at $71.83
Gold is up $5.12 (0.19%) at $2741.30
European bourses closing levels:
EuroStoxx 50 up 7.64 points (0.15%) at 4943.09
FTSE 100 down 20.54 points (-0.25%) at 8248.84
German DAX up 20.59 points (0.11%) at 19463.59
French CAC 40 down 5.74 points (-0.08%) at 7497.54
US TRASURY FUTURES CLOSE
3M10Y +0.795, -40.475 (L: -45.833 / H: -40.275)
2Y10Y +0.624, 13.505 (L: 11.466 / H: 15.401)
2Y30Y +1.052, 40.148 (L: 37.736 / H: 42.983)
5Y30Y +0.341, 44.184 (L: 43.268 / H: 46.659)
Current futures levels:
Dec 2-Yr futures down 3/32 at 103-3.375 (L: 103-03 / H: 103-08.25)
Dec 5-Yr futures down 6.75/32 at 107-19.5 (L: 107-19 / H: 107-29.75)
Dec 10-Yr futures down 11/32 at 110-30 (L: 110-29.5 / H: 111-14)
Dec 30-Yr futures down 21/32 at 118-3 (L: 118-01 / H: 119-05)
Dec Ultra futures down 31/32 at 124-27 (L: 124-26 / H: 126-13)
MNI US 10YR FUTURE TECHS: (Z4) Bearish Trend Condition
- RES 4: 113-12 Low Sep 3 and a recent breakout point
- RES 3: 113-01+ 50-day EMA
- RES 2: 112-22 High Oct 16 and a key short-term resistance
- RES 1: 112-14+ 20-day EMA
- PRICE: 111-09+ @ 11:06 BST Oct 25
- SUP 1: 111-04/110-30+ 200-dma / Low Oct 23
- SUP 2: 110-13 61.8% retracement of the Apr - Sep bull cycle (cont)
- SUP 3: 110-00 Round number support
- SUP 4: 109-22 2.0% 10-dma envelope
The trend condition in Treasuries is unchanged and remains bearish with price trading just above its recent lows. The contract traded to a fresh cycle low this week, resulting in a breach of 111-22, the Oct 10 low. Note too that the 200-dma at 111-04 has been pierced - a bearish development. A continuation lower would open 110-13, a Fibonacci retracement. Initial firm resistance has been defined at 112-22, the Oct 16 high.
SOFR FUTURES CLOSE
Dec 24 +0.005 at 95.620
Mar 25 -0.025 at 95.960
Jun 25 -0.050 at 96.195
Sep 25 -0.065 at 96.340
Red Pack (Dec 25-Sep 26) -0.065 to -0.055
Green Pack (Dec 26-Sep 27) -0.045 to -0.045
Blue Pack (Dec 27-Sep 28) -0.04 to -0.04
Gold Pack (Dec 28-Sep 29) -0.04 to -0.035
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.01037 to 4.70730 (-0.05176/wk)
- 3M -0.01257 to 4.60464 (-0.02699/wk)
- 6M -0.01716 to 4.43072 (-0.01299/wk)
- 12M -0.02503 to 4.15290 (+0.02059/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.83% (+0.00), volume: $2.246T
- Broad General Collateral Rate (BGCR): 4.83% (+0.01), volume: $816B
- Tri-Party General Collateral Rate (TGCR): 4.83% (+0.01), volume: $785B
- (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: $264B
FED Reverse Repo Operation:
RRP usage rebounds to $227.000B from yesterday's new multi year low of $202.798B. This after usage fell to $237.760B Tuesday. Number of counterparties climb to 62 from 53 yesterday.
PIPELINE
10/24-25 No new US$ corporate issuance Thursday/Friday, $13.45B total priced on week
MNI FOREX: USD Index Advances 0.7% This Week as Presidential Election Looms
- The greenback is finishing the week on a firm footing, as late weakness for treasury futures on Friday gradually permeates through to a subdued session for currencies. Overall, the USD index looks set to post a 0.7% advance this week, as the latest greenback recovery continues to gather momentum ahead of a week filled with significant event risk.
- USDJPY has risen back towards session highs in sympathy, and the pair is consolidating a strong 1.8% rally on the week. The pair traded to a fresh cycle high on Wednesday, confirming a resumption of the current uptrend. Topside focus remains on 153.40, the 61.8% retracement of the downleg posted off the July 3rd high, and then 155.22, the Jul 30 high.
- Yen volatility is likely to remain the clear focus for currency markets as the primary driver for sentiment remains core yields. Next week’s busy calendar includes snap legislative elections in Japan, the BOJ decision and key growth & employment data prints in the US.
- Additionally, the UK budget will be announced, keeping high attention on GBP. Cable edged back towards 1.3000 before fading back towards 1.2970 into the close. While the GBPUSD move has been largely dollar driven, EURGBP’s close proximity to multi-year support at 0.8300 should keep sterling a must watch as fiscal developments unfold.
- The USDCAD trend outlook remains bullish, and the pair traded to a fresh short-term cycle high this week following the BOC’s well telegraphed 50bp cut. Spot has narrowed the gap to 1.3946, the Aug 5 high and the next key resistance, before the psychological 1.400 mark comes into play.
- In emerging markets, USDMXN had a late rally back towards 20.00 amid the greenback strength but also owing to a domestic senate vote renewed concerns surrounding the government’s reform trajectory. The peso is expected to remain vulnerable to risks surrounding the election and the year’s highs above 20.20 will remain a key level for the pair.
MONDAY DATA CALENDAR
| Date | ET | Impact | Period | Release | Prior | Consensus | |
| 28/10/2024 | 1030 | ** | Oct | Dallas Fed manufacturing index | -- | -- | |
| 28/10/2024 | 1130 | * | 01-Nov | Bid to Cover Ratio | -- | -- | |
| 28/10/2024 | 1130 | * | Oct | Bid to Cover Ratio | -- | -- | |
| 28/10/2024 | 1300 | * | Oct | Bid to Cover Ratio | -- | -- | |
| 28/10/2024 | 1300 | * | 01-Nov | Bid to Cover Ratio | -- | -- |