EXECUTIVE SUMMARY
- MNI US TSYS/SUPPLY: Treasury Borrowing Estimates Confirm Jump Seen In Q125
- MNI US: Democrats See Pathway To Retaining Senate Through Texas
- MNI JAPAN: Ishiba Vows To Stay On After Election Disaster, But PM On Thin Ice
- MNI US DATA: Regional Fed Manufacturing Surveys Point To ISM Upside Risk
US
MNI US TSYS/SUPPLY: Treasury Borrowing Estimates Confirm Jump Seen In Q125
Treasury's latest financing estimates - conveyed by their "Sources and Uses" table - is here (PDF).
- For Q4, the marketable borrowing requirement has fallen to $546B (MNI had pencilled in $525B) from August's estimate of $565B, with Q125's marketable borrowing requirement of $823B a little above MNI's $800B estimate. See table below.
- These are roughly in line with pre-announcement expectations, though the Q1 expected range among analysts had been $750B to $950B.
- This probably won't move the needle much for Wednesday's Refunding Announcement - with Q4's lower estimate for borrowing there's little evidence that they are worried about ongoing deficit dynamics necessitating an increase in coupon sizes in the near future.
- As such the expectation will still be that "forward guidance" on auction sizes is likely to remain unchanged Wednesday.
NEWS
MNI US: Democrats See Pathway To Retaining Senate Through Texas
A new survey of the Texas Senate race, conducted by Democrat candidate Rep Colin Allred (D-TX), shows a tied race with Senator Ted Cruz (R-TX). A recent NYT/Siena poll shows Cruz ahead, 50-46. Another poll from Emerson College last week, had Cruz ahead by one point.
MNI JAPAN: Ishiba Vows To Stay On After Election Disaster, But PM On Thin Ice
Japan entered an unfamiliar period of political instability following the 27 October general election that delivered a stinging rebuke to PM Shigeru Ishiba and his governing conservative Liberal Democratic Party (LDP). As we noted earlier (see 'JAPAN: JPY Weaker, With Political Uncertainty Just Beginning', 0752GMT) the vote marks the first time since the 2009 general election that the party has lost its majority in the House of Representatives.
MNI MIDEAST: Israeli Strikes On Tehran Seen As Lower Risk, Eyes Now On Iran Response
Israeli missile strikes on Iranian military targets in and around Tehran on the night of 26 October are seen as being on the less-escalatory end of the spectrum of potential responses to Iran's ballistic missile barrage launched against Israel on 1 October. Given the prospect of strikes on oil facilities or even nuclear sites, the striking of military targets - including a plant that manufactures parts of Iran's long-range ballistic missiles - has been viewed as an attack that may not draw a substantial response from Iran despite the deaths of a number of military personnel and civilians.
BBG: CHINA CENTRAL GOVT TO BOOST ELECTRIC VEHICLE PURCHASES: XINHUA
MNI US TSYS: Yields Inch Higher Ahead Heavy Data Docket, Corporate Earnings
- Treasuries tested the wide early overnight range Monday, Treasury futures extended session highs by midmorning: Dec'24 10Y trading 111-02 (0.0), 10Y yield -.0119 at 4.2280%, 30Y +3 at 118-12. Muted market reaction to Israel's limited strike against Iran (note crude prices have fallen sharply, however: WTI -4.76 to 67.22 low).
- Support evaporates as Tsys swung lower by noon, extending lows after both Treasury note auctions tailed Monday:
- Weak $69B 2Y note auction (91282CLS8) tailed 0.8bp: 4.130% high yield vs. 4.122% WI;
- Weak $70B 5Y note auction (91282CLR0) tails 1.6bp: drawing 4.138% high yield vs. 4.122% WI. Tsy 10Y futures fell to 110-18.5 low, 10Y yield climbing to 4.2982% high.
- Market turns focus on this Friday's headline employment report for October, ADP Wednesday, not to mention a heavy corporate earning's docket this week and month end extension. Next week Tuesday's presidential election likely keeping some trading accounts on the sidelines as well.
OVERNIGHT DATA
MNI US DATA: Regional Fed Manufacturing Surveys Point To ISM Upside Risk
The Dallas Fed manufacturing index surprisingly increased to -3.0 (cons -9.2) in October after -9.0 in Sept. It completes the set of the main regional Fed indicators for October where only the volatile Empire survey deteriorated vs September with -11.9 after 11.5.
- Sequential improvements were seen in Philly (10.3 after 1.7), Richmond (-14 after a particularly weak -21), Kansas (-4 after -8) although as the levels indicate most remain in contractionary territory.
- Whilst still negative, the unweighted average is improving at least, with the -4.5 inching up from -5.0 in September for technically its highest since Feb’24.
- Combined, they continue to point to upside risk for Friday’s ISM mfg index (expected 47.6 after 47.2), having seen a level adjustment in the last two months – see chart. Before that ISM release though, the MNI Chicago PMI on Thursday.
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA up 283.25 points (0.67%) at 42396.6
S&P E-Mini Future up 15.5 points (0.27%) at 5861.25
Nasdaq up 51.6 points (0.3%) at 18567.98
US 10-Yr yield is up 2.6 bps at 4.266%
US Dec 10-Yr futures are down 9.5/32 at 110-24.5
EURUSD up 0.002 (0.19%) at 1.0816
USDJPY up 0.91 (0.6%) at 153.22
WTI Crude Oil (front-month) down $3.97 (-5.53%) at $67.79
Gold is down $4.84 (-0.18%) at $2742.73
European bourses closing levels:
EuroStoxx 50 up 26.74 points (0.54%) at 4969.83
FTSE 100 up 36.78 points (0.45%) at 8285.62
German DAX up 68.03 points (0.35%) at 19531.62
French CAC 40 up 59.4 points (0.79%) at 7556.94
US TREASURY FUTURES CLOSE
3M10Y +6.507, -34.628 (L: -40.968 / H: -32.596)
2Y10Y +0.365, 13.47 (L: 12.349 / H: 15.491)
2Y30Y -0.47, 38.592 (L: 37.366 / H: 41.805)
5Y30Y -1.56, 41.717 (L: 40.83 / H: 44.479)
Current futures levels:
Dec 2-Yr futures down 2.125/32 at 103-2 (L: 103-00.5 / H: 103-04.25)
Dec 5-Yr futures down 6.25/32 at 107-15.25 (L: 107-11.5 / H: 107-21.5)
Dec 10-Yr futures down 10/32 at 110-24 (L: 110-18.5 / H: 111-02)
Dec 30-Yr futures down 16/32 at 117-25 (L: 117-00 / H: 118-12)
Dec Ultra futures down 13/32 at 124-23 (L: 123-17 / H: 125-11)
MNI US 10YR FUTURE TECHS: (Z4) Bear Trend Extends
- RES 4: 113-12 Low Sep 3 and a recent breakout point
- RES 3: 112-31 50-day EMA
- RES 2: 112-22 High Oct 16 and a key short-term resistance
- RES 1: 111-14/112-10+ High Oct 25 / 20-day EMA
- PRICE: 110-27 @ 10:28 GMT Oct 28
- SUP 1: 110-18+ Intraday low
- SUP 2: 110-13 61.8% retracement of the Apr - Sep bull cycle (cont)
- SUP 3: 110-00 Round number support
- SUP 4: 109-16 2.0% 10-dma envelope
The trend condition in Treasuries is unchanged and remains bearish. Today’s move lower reinforces this theme. The move down maintains a bearish price sequence of higher highs and higher lows and note that moving average studies are in a bear-mode position. Sights are on 110-13, a Fibonacci retracement, ahead of the 110-00 handle. Initial key resistance has been defined at 112-22, the Oct 16 high.
SOFR FUTURES CLOSE
Dec 24 -0.020 at 95.605
Mar 25 -0.015 at 95.950
Jun 25 -0.020 at 96.185
Sep 25 -0.035 at 96.320
Red Pack (Dec 25-Sep 26) -0.055 to -0.045
Green Pack (Dec 26-Sep 27) -0.05 to -0.04
Blue Pack (Dec 27-Sep 28) -0.04 to -0.03
Gold Pack (Dec 28-Sep 29) -0.035 to -0.03
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.01081 to 4.69649 (-0.05176 total last wk)
- 3M -0.01547 to 4.58917 (-0.02699 total last wk)
- 6M -0.01802 to 4.41270 (-0.01299 total last wk)
- 12M -0.00823 to 4.14467 (+0.02059 total last wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.83% (+0.00), volume: $2.188T
- Broad General Collateral Rate (BGCR): 4.82% (-0.01), volume: $799B
- Tri-Party General Collateral Rate (TGCR): 4.82% (-0.01), volume: $765B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.83% (+0.00), volume: $104B
- Daily Overnight Bank Funding Rate: 4.83% (+0.00), volume: $267B
FED Reverse Repo Operation:
RRP usage rebounds to $251.032B from $227.000B last Friday, compares to new multi year low of $202.798B from Thursday, October 24, '24. Number of counterparties climbs to 67 from 62 prior.
MNI PIPELINE: $3.64B Columbia 2Pt Launched
$8.24B Corporate debt to price Monday:
- Date $MM Issuer (Priced *, Launch #)
- 10/28 $3.64B #Colombia $2B 12Y 7.8%, $1.64B 30Y 8.5%
- 10/28 $1.5B #Amphenol $250M Tap 2027 +45, $750M +10Y +78, $500M 30Y +95
- 10/28 $1.5B #DNB Bank $1.15 6NC5 +75, $350M 6NC5 SOFR+106
- 10/28 $1.1B #Aeromexico $500M 5NC2 8.375%, $610M 7NC3 8.75%
- 10/28 $500M #CIBC 60.25NC5.25 6.95%
- 10/28 $Benchmark Synovus investor calls
- 10/28 $Benchmark Liberty Mutual investor calls
- 10/28 $Benchmark Trans-Oil Group 5NC2 investor calls
MNI BONDS: EGBs-GILTS CASH CLOSE: Gilts Underperform Pre-UK Budget
Gilts underperformed EGBs Monday, with continued focus on the UK budget release this week.
- Global core FI sold off overnight on easing geopolitical risk, after an Israeli attack on Iran proved more restrained than expected. Oil prices fell sharply and safe haven assets retreated.
- Bunds and Gilts recovered strongly in morning trade, but gains were capped in early afternoon as oil recovered. Poor US auctions toward the European cash close also weighed.
- The short-end outperformed on the German curve and underperformed on the UK's. ECB Dec 50bp rate cut probability extended to 45% from 40% prior, assisting the German bull steepening move.
- The UK curve bear flattened, in contrast. While there was no overt driver for Gilt underperformance on the day, the UK budget release Wednesday remains a concern - MNI's Preview is here (link). Our overall expectation is that the impact on BoE policy will likely be more subdued than the market currently fears; BoE cut estimates retreated slightly on the day.
- Periphery/semi-core spreads tightened modestly. OATs outperformed overall (10Y -2.8bp to Bunds) after France avoided a Moody's downgrade Friday.
- The key highlights this week remain the UK budget and Eurozone flash October inflation (beginning Wednesday)/Eurozone GDP, though Tuesday's schedule is more limited.
Closing Yields / 10-Yr Periphery EGB Spreads To Germany
- Germany: The 2-Yr yield is down 1.6bps at 2.1%, 5-Yr is down 1.4bps at 2.102%, 10-Yr is down 0.5bps at 2.286%, and 30-Yr is down 0.3bps at 2.596%.
- UK: The 2-Yr yield is up 4.3bps at 4.208%, 5-Yr is up 3.1bps at 4.133%, 10-Yr is up 2.1bps at 4.254%, and 30-Yr is up 1.7bps at 4.752%.
- Italian BTP spread down 1.3bps at 120.6bps / Spanish down 1.1bps at 69.5bps
MNI FOREX: Renewed JPY Pressure as US Yields Revisit the Highs
- The renewed upward pressure on treasury yields throughout the US session has weighed on the FI sensitive Japanese yen, and the latest auction tails have helped USDJPY consolidate back above 153.20 in late session trade.
- As noted earlier, initial JPY pressure this week came following surprise weekend election results in Japan, in which Ishiba's LDP-led coalition lost their majority in parliament for the first time in 15 years - a result that's brought considerable uncertainty to Japanese politics.
- While USDJPY (+0.64%) remains a way off the session highs of 153.88, the latest bounce is supportive of the underlying bullish trend. A daily close above 153.40, (61.8% retracement of the downleg posted off the July 3rd high) will be monitored and current price action sets the scene for an extension towards 155.27, the 2.00 projection of the Sep 16 - 27 - 30 price swing.
- Single currency strength also sees EURJPY edging back closer to 166.00, currently up 0.84% on the day. The first resistance point currently resides at 166.53 (July 31 high) and above here, markets will focus on 168.01 (July 26 high).
- Elsewhere, fx markets have been contained ahead of the very busy data calendar this week, which includes Eurozone inflation and US employment. The Bank of Japan will also meet this week ahead of next week's US election.
- AUD is a notable underpeformer, down 0.38% as we approach the APAC crossover, potentially owing to oil prices, which have slumped around 5% on Monday, as the market takes some comfort from Israel striking military targets in Iran over the weekend, rather than oil or nuclear facilities, and some geopolitical risk premium is trimmed.
TUESDAY DATA CALENDAR
| Date | ET | Impact | Period | Release | Prior | Consensus | |
| 29/10/2024 | 0855 | ** | 26-Oct | Redbook Retail Sales y/y (month) | 5.1 | -- | % |
| 29/10/2024 | 0855 | ** | 26-Oct | Redbook Retail Sales y/y (week) | 4.6 | -- | % |
| 29/10/2024 | 0900 | ** | Aug | Case-Shiller Home Price Index | -- | -- | |
| 29/10/2024 | 0900 | ** | Aug | FHFA Home Price Index m/m | 0.1 | -- | % |
| 29/10/2024 | 0900 | ** | Aug | Prior Revised HPI % Chge mm SA | -- | -- | % |
| 29/10/2024 | 0900 | ** | Aug | FHFA Home Price Index m/m | 0.1 | -- | % |
| 29/10/2024 | 0900 | ** | Aug | Prior Revised HPI % Chge mm SA | -- | -- | % |
| 29/10/2024 | 1000 | *** | Oct | Conference Board Confidence | 98.7 | 99.0 | |
| 29/10/2024 | 1000 | *** | Oct | Previous Consumer Confidence Index Revised | -- | -- | |
| 29/10/2024 | 1000 | ** | Q3 | housing vacancies rate | 0.9 | -- | % |
| 29/10/2024 | 1000 | *** | Sep | JOLTS job openings level | 8040 | 7900 | (k) |
| 29/10/2024 | 1000 | *** | Sep | JOLTS quits rate | 1.9 | -- | % |
| 29/10/2024 | 1030 | ** | Oct | Dallas Fed services index | -2.6 | -- | |
| 29/10/2024 | 1130 | * | 01-Nov | Bid to Cover Ratio | -- | -- | |
| 29/10/2024 | 1130 | ** | Sep | Bid to Cover Ratio | -- | -- | |
| 29/10/2024 | 1300 | ** | Oct | Bid to Cover Ratio | -- | -- | |
| 29/10/2024 | 1300 | ** | Oct | Bid to Cover Ratio | -- | -- |