Source: The Hill/DDHQ
US
MNI Fed's Logan: Reserves More Than Ample, QT Can Continue
U.S. balance sheet normalization can run on as the Federal Reserve lowers rates toward a more neutral level, and reserve balances are more than ample to ensure rate control, Dallas Fed President Lorie Logan said Monday. Temporary money market rate pressures such as those seen at the end of the third quarter are to be expected as liquidity declines, she added.
- "At present, liquidity appears to be more than ample. Reserve balances are around USD3.2 trillion, compared with around USD1.7 trillion in early 2020. The economy and financial system have grown, and the dash for cash at the start of the pandemic as well as the banking stresses in March 2023 may have led banks to increase their demand for liquidity. Still, I think it’s unlikely banks’ liquidity demand has nearly doubled in half a decade," she said in remarks prepared for Securities Industry and Financial Markets Association's annual meeting in New York.
MNI FED BRIEF: Fed's Kashkari Sees Modest Cuts In Coming Quarters
Minneapolis Fed President Neel Kashkari on Monday said he expects a "modest" decrease in the central bank's policy rate in coming quarters, but added that if the labor market surprisingly weakens then he could see a quicker fall in interest rates. "Right now, I'm forecasting some more modest cuts over the next several coming quarters to get to something around neutral, but it's going to depend on the data," he said in Q&A in Chippewa Falls, Wisconsin. "Even after the 50 basis point cut, I still think my monetary policy is still putting our feet on the brakes of the economy."
NEWS
MNI US: Trump Takes Lead Across Most Major Election Forecast Models
Former President Donald Trump has now overtaken Vice President Kamala Harris on most of the major presidential election forecast models, including 538, Silver Bulletin, The Economist, and DDHQ. While the race remains a toss-up, the probability shift comes after a strong two-week polling period for Trump in two of the northern swing states: Michigan and Wisconsin and a hardening of his slight edge in Arizona, Georgia, and North Carolina.
MNI CANADA: Provincial Elections Come As Precursor To Liberal Caucus Showdown w/PM
Prime Minister Justin Trudeau faces a pivotal week. On 23 October a caucus meeting of MPs from Trudeau's centre-left Liberal Party of Canada (LPC) will take place. There is significant speculation that a large number of members will call on the PM to stand down. This is spurred by plummeting opinion polling ratings and legislative paralysis following the collapse of the confidence and supply agreement with the leftist New Democratic Party (NDP) in September.
MNI IRAN: Spox-Gov't Has Warned IAEA About Israeli Threats To Nuclear Sites
Wires carrying comments from Iranian Foreign Ministry spox Esmaeil Baghaei. Says that Tehran has warned the UN's nuclear watchdog, the International Atomic Energy Agency (IAEA), about Israeli threats against its nuclear sites. The two countries and the wider region have been in a state of 'wait and see' following Iran's ballistic missile barrage on 1 October, with some form of Israeli retaliation seen as all but inevitable, but the nature of such response having very different implications for regional security.
MNI US TSYS: Tsys Drift Near Session Lows, Bonds Underperforming
- Treasuries trade sideways near session lows after the bell - holding to a narrow range through the second half. Rates initially took cues from lower EGBs as sovereign debt and higher crude prices (WTI +1.37 at 70.59) weighed.
- The Dec'24 10Y futures contract trades -22 at 111-17 after the bell, nearing technical support at 111-14 (50.0% retracement of the Apr - Sep bull cycle (cont)). Curves steepened: 2s10s +2.605 at 15.849, while 5s30s held near steady: +.021 at 51.270.
- No meaningful economic data, focus on home sales flash PMIs, weekly claims, durables and UofM sentiment later this week.
- No reaction to MN Fed Kashkari townhall event, says rates will surge if the U.S. deficit "goes to the moon", said tariffs are hard to analyze if they fall into a "vicious cycle".
- U.S. balance sheet normalization can run on as the Federal Reserve lowers rates toward a more neutral level, and reserve balances are more than ample to ensure rate control, Dallas Fed President Lorie Logan said Monday.
- Projected rate cuts recede vs. this morning's levels (*): Nov'24 cumulative -22.3bp (-23.0bp), Dec'24 -40.1bp (-42.7bp), Jan'25 -57.6bp (-60.1bp).
OVERNIGHT DATA
US SEPT. LEADING INDICATOR FALLS 0.5% M/M; EST. -0.3%
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA down 364.94 points (-0.84%) at 42910.52
S&P E-Mini Future down 18.25 points (-0.31%) at 5888
Nasdaq up 11.5 points (0.1%) at 18501.24
US 10-Yr yield is up 10.1 bps at 4.1837%
US Dec 10-Yr futures are down 22/32 at 111-17
EURUSD down 0.0054 (-0.5%) at 1.0813
USDJPY up 1.26 (0.84%) at 150.79
WTI Crude Oil (front-month) up $1.32 (1.91%) at $70.54
Gold is down $1.75 (-0.06%) at $2719.65
European bourses closing levels:
EuroStoxx 50 down 45.05 points (-0.9%) at 4941.22
FTSE 100 down 40.01 points (-0.48%) at 8318.24
German DAX down 196.18 points (-1%) at 19461.19
French CAC 40 down 76.82 points (-1.01%) at 7536.23
US TREASURY FUTURES CLOSE
3M10Y +10.404, -45.688 (L: -59.914 / H: -45.49)
2Y10Y +2.591, 15.835 (L: 11.704 / H: 16.047)
2Y30Y +2.228, 46.425 (L: 42.365 / H: 46.539)
5Y30Y +0.12, 51.369 (L: 49.581 / H: 51.845)
Current futures levels:
Dec 2-Yr futures down 5/32 at 103-9.25 (L: 103-08.75 / H: 103-14.375)
Dec 5-Yr futures down 13.25/32 at 108-1.5 (L: 108-00.75 / H: 108-14.75)
Dec 10-Yr futures down 22.5/32 at 111-16.5 (L: 111-16 / H: 112-07)
Dec 30-Yr futures down 52/32 at 118-20 (L: 118-18 / H: 120-06) Dec Ultra futures down
72/32 at 125-16 (L: 125-14 / H: 127-21)
MNI US 10YR FUTURE TECHS: (Z4) Cracks Bear Trigger
- RES 4: 114-14+ High Oct 3
- RES 3: 114-01+ High Oct 4
- RES 2: 113-12 Low Sep 3 and a key short-term resistance
- RES 1: 112-22/113-01 High Oct 16 / 20-day EMA
- PRICE: 111-18 @ 17:31 BST Oct 21
- SUP 1: 111-16 Low Oct 21
- SUP 2: 111-14 50.0% retracement of the Apr - Sep bull cycle (cont)
- SUP 3: 111-00 Low Jul 22
- SUP 4: 110-08 2.0% 10-dma envelope
The trend condition in Treasuries remains bearish, with price showing below last week’s lows and triggering the bear trigger in the process. The recent breach of the 50-day EMA and the 112-00 handle, strengthened a bearish theme and highlighted potential for a continuation lower. Sights are on 111-14, the 50% retracement for the Apr - Sep bull leg. 113-12, the Sep 3 low, is the first key resistance. A stronger recovery would allow a short-term oversold condition to unwind.
SOFR FUTURES CLOSE
Dec 24 -0.040 at 95.595
Mar 25 -0.065 at 95.985
Jun 25 -0.080 at 96.275
Sep 25 -0.085 at 96.445
Red Pack (Dec 25-Sep 26) -0.105 to -0.085
Green Pack (Dec 26-Sep 27) -0.115 to -0.11
Blue Pack (Dec 27-Sep 28) -0.115 to -0.115
Gold Pack (Dec 28-Sep 29) -0.12 to -0.12
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.01445 to 4.74461
- 3M -0.00537 to 4.62626
- 6M -0.00615 to 4.43756
- 12M -0.01206 to 4.12025
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.84% (-0.01), volume: $2.168T
- Broad General Collateral Rate (BGCR): 4.82% (-0.02), volume: $824B
- Tri-Party General Collateral Rate (TGCR): 4.82% (-0.02), 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: $254B
FED Reverse Repo Operation
RRP usage inches up to $261.044B this afternoon from $259.892B prior. Compares to $239.386B on Monday September 16 2024 -- the lowest level since early May 2021. Number of counterparties at 59, up from 52 on Friday.
MNI PIPELINE: $1B P&G 2Pt Debt Launched
- Date $MM Issuer (Priced *, Launch #)
- 10/21 $1.75B #American Honda $750M 3Y +53, $300M 3Y SOFR+72, $700M 7Y +80
- 10/21 $1B #P&G $500M 5Y +22, $500M 10Y +37
FOREX
MNI USDJPY Extends Rally Above 150.50 Amid Higher Core Yields
- With the moves in currency markets being driven by higher core yields on Monday, it is unsurprising to see both the US dollar outperforming and consistent pressure on the Japanese Yen. USDJPY (+0.80%) has extended through last week’s recovery high, and has reached an initial target of 150.76 (50% of the Jul 3 - Sep 16 bear leg) as we approach the APAC crossover.
- The pair maintains a firmer tone and bullish signals remain intact with price trading above the 50-day EMA. The recent break of this average marked a bullish development highlighting a stronger reversal. Sights are now on 151.94, the Jul 25 low.
- As a result of the USD strength, EURUSD has failed in it's 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. Spot has narrowed the gap substantially to the cycle lows at 1.0811.
- The move down has exposed 1.0778, the Aug 1 low and the next key support. Clearance of this level would strengthen a bearish theme.
- GBP has been among the poorer performers in G10 Monday, alongside the firmer dollar. GBPUSD (-0.50%) has slipped back below the 1.3000 handle, narrowing the gap to last week’s low at 1.2974.
- Last Wednesday’s break lower confirmed a resumption of the current bear cycle and an important support at 1.3002, the Sep 11 low, has been breached, reinforcing the current theme. Price action initially targets 1.2959, a Fibonacci retracement point, and below here markets will turn their focus to 1.2890, the Aug 18 low.
- A quiet Tuesday calendar will keep the focus on any comments from BOE Governor Bailey and Wednesday’s Bank of Canada decision.
TUESDAY DATA CALENDAR
| Date | ET | Impact | Period | Release | Prior | Consensus | |
| 22/10/2024 | 0830 | ** | Oct | Philadelphia Fed Nonmfg Index | -6.1 | -- | |
| 22/10/2024 | 0855 | ** | 19-Oct | Redbook Retail Sales y/y (month) | 5.6 | -- | % |
| 22/10/2024 | 0855 | ** | 19-Oct | Redbook Retail Sales y/y (week) | 5.6 | -- | % |
| 22/10/2024 | 1000 | ** | Oct | Richmond Fed Mfg Index | -21 | -- | |
| 22/10/2024 | 1130 | * | 25-Oct | Bid to Cover Ratio | -- | -- |