MNI ASIA OPEN: More Data Like June Underpins Fed Confidence
- MNI FED BRIEF: Fed Chairman Powell: Getting More Confident On Rate Cuts
- MNI FED: Chairman Powell: June Inflation Data Adds To FOMC "Confidence"
- MNI US DATA: Empire Manufacturing Survey Sees Rare Stability
US
FED BRIEF (MNI): Fed Chairman Powell: Getting More Confident On Rate Cuts
Federal Reserve Chair Jerome Powell said Monday the FOMC is getting more confident inflation is on its way to 2%, paving the way for lowering interest rates. Futures traders are placing nearly 90% odds on a rate cut in September.
- "We've been very clear that you wouldn't wait for inflation to get all the way down to 2%. Our test has been for the past quite some time that we wanted to be have greater confidence that inflation was moving sustainably down toward our 2% target, and what increases that confidence in that is more good inflation data. And lately, we have been getting some of that," he told the Economic Club of Washington, D.C.
FED (MNI): Chairman Powell: June Inflation Data Adds To FOMC "Confidence"
Fed Chair Powell at a Q&A with the Economic Club of Washington, D.C. strikes a predictably dovish-leaning message in light of recent data, repeating previous comments that the labor market is back to roughly where it was pre-pandemic; for inflation, in Q2 we had "3 better readings" following June's reports. "We've been very clear that you wouldn't wait for inflation to get all the way down to 2%."
NEWS
US (MNI): Biden's Gradual Post-Debate Polling Slide Continues
A new survey from the New York Times/Siena College, conducted prior to the assassination attempt on former President Donald Trump, has found that the presidential race remains competitive in Pennsylvania with Trump leading by 48-45. Notably, Trump leads by 48-44, beyond the polling margin of error, when "leaners" are included in the data.
US (MNI): Attempt On Trump's Life Could Galvanize Support Amongst Soft Support Base
A new survey from ABC News/Washington Post/Ipsos has found that former President Donald Trump has stronger support than President Biden amongst his core base. The survey is notable as it shows that both Biden and Trump have large blocs of soft support who have "reservations" about their candidacy - a dynamic which could swing towards Trump in the wake of the attempt on his life.
US: Former President Trump chose Ohio Senator JD Vance as his running mate.
US (MNI): Judge Dismisses Classified Docs Case In Another Boost To Trump Campaign:
A federal judge has dismissed the indictement against former President Donald Trump in his classified documents case, with US District Judge Aileen Cannon ruling that special counsel Jack Smith was improperly appointed. Coming just days after Trump narrowly avoided assassination, the ruling is a significant boost to the former president's campaign.
CHINA-EU (MNI): Germany Appears Set To Abstain From EU Vote On Imposing China Tariffs
Wires carrying comments from German Minister for Economic Affairs and Climate Action, Robert Habeck, ahead of a Monday midnight deadline for all 27 EU members states to declare their position on imposing EU tariffs on Chinese electric vehicles.
US TSYS Curves Twist Steeper, Near Highs After Dovish Leaning Powell Interview
- Treasuries look to finish near session lows after gapping mildly higher at the start of Fed Chairman Powell's cordial interview with David Rubenstein at the Economic Club of DC earlier.
- While expressly stating he would not comment on markets, Treasury futures pare losses as Chairman Powell discusses the labor market where the Fed could react to an unexpected labor market weakening.
- Fed Chair Powell at a Q&A with the Economic Club of Washington, D.C. strikes a predictably dovish-leaning message in light of recent data, repeating previous comments that the labor market is back to roughly where it was pre-pandemic; for inflation, in Q2 we had "3 better readings" following June's reports.
- Sep'24 10Y futures extending top end of the session range to 111-06.5 (+0.5) but have scaled back to pre-interview levels at 110-30.5 (-7.5). Curves folding broadly steeper: 2s10s +4.052 at -23.017, 5s30s +3.158 at 32.372.
- Projected rate cut pricing into year end have gained vs. this morning's levels (*): July'24 at -6.5% w/ cumulative at -1.6bp at 5.313%, Sep'24 cumulative -27.5bp (-24.8bp), Nov'24 cumulative -44.1bp (-41.6bp), Dec'24 -65.8bp (-63.3bp).
- Focus turns to Tuesday's Retail Sales, Import/Export Prices, upcoming earnings from Bank of America, Charles Schwab, State Street and Morgan Stanley.
OVERNIGHT DATA
US DATA (MNI): Empire Manufacturing Survey Sees Rare Stability
The Empire Fed manufacturing survey fared a little better than expected in July, essentially holding steady at -6.6 (cons -8.0) after -6.0, a rare lack of volatility for the survey.
- It consolidates a relative improvement after three months between -14 and -21, and with a similar story in the new orders component (-0.6 after -1.0 following three months between -16 and -17).
- Continuing the similarities with the June report, the six-month outlook softened but remains far more optimistic than current conditions at +25.8 after June’s +30.1 was the highest since Mar 2022.
- On prices, there’s no sign of the spike in prices received in last month’s Philly survey. Empire current period prices received were +6.1 after +7.1, the lowest since Jul 2023 and before that Dec 2020.
Manufacturing sales increased 0.4% M/M (advance 0.2%) in May after an upward revised 1.4% (initial 1.1%) in April.
- Volumes increased a reasonable 0.4% M/M after 0.7% in April, but they still have a way to go to claw back the heavy -1.6% from March. It leaves sales -4.3 annualized on a 3M/3M basis.
- Wholesale sales ex petroleum were -0.8% M/M (advance -0.9%) although with the small beat offset by a downward revised 2.0% (initial 2.4%) in April.
- Volumes were -0.8% M/M after 1.4%, with the 3M/3M down a heavy -3.7% annualized.
- It comes ahead of retail sales on Friday, seen slipping -0.5% M/M (advance -0.6%) in May after 0.7% in April.
- Combined, the three monthly indicators point to a tepid May, although we have to wait until Jul 31 for May GDP.
MARKETS SNAPSHOT
- Key market levels of markets in late NY trade:
- DJIA up 298.21 points (0.75%) at 40300.1
- S&P E-Mini Future up 26 points (0.46%) at 5690.75
- Nasdaq up 97.2 points (0.5%) at 18495.53
- US 10-Yr yield is up 4.5 bps at 4.2274%
- US Sep 10-Yr futures are down 7/32 at 110-31
- EURUSD down 0.0009 (-0.08%) at 1.0898
- USDJPY up 0.11 (0.07%) at 157.94
- WTI Crude Oil (front-month) down $0.19 (-0.23%) at $82.01
- Gold is up $10.38 (0.43%) at $2421.83
- European bourses closing levels:
- EuroStoxx 50 down 59.91 points (-1.19%) at 4983.11
- FTSE 100 down 69.95 points (-0.85%) at 8182.96
- German DAX down 157.29 points (-0.84%) at 18590.89
- French CAC 40 down 91.61 points (-1.19%) at 7632.71
US TREASURY FUTURES CLOSE
- 3M10Y +4.798, -111.369 (L: -115.194 / H: -110.202)
- 2Y10Y +4.488, -22.581 (L: -24.846 / H: -21.919)
- 2Y30Y +6.146, 0.385 (L: -7.625 / H: 1.273)
- 5Y30Y +3.322, 32.536 (L: 25.541 / H: 33.67)
- Current futures levels:
- Sep 2-Yr futures up 0.5/32 at 102-19.125 (L: 102-16.375 / H: 102-21.25)
- Sep 5-Yr futures down 2/32 at 107-14.25 (L: 107-09.25 / H: 107-19.25)
- Sep 10-Yr futures down 6.5/32 at 110-31.5 (L: 110-24.5 / H: 111-06.5)
- Sep 30-Yr futures down 25/32 at 119-5 (L: 118-23 / H: 119-18)
- Sep Ultra futures down 1-10/32 at 126-2 (L: 125-20 / H: 126-25)
US 10Y FUTURE TECHS: (U4) Bullish Structure
- RES 4: 112-25 High Mar 8
- RES 3: 111-31 1.382 proj of the Apr 25 - May 16 - 29 price swing
- RES 2: 111-13 High Mar 25
- RES 1: 111-10+ High Jul 8
- PRICE: 111-01+ @ 11:20 BST Jul 15
- SUP 1: 110-10+/110-00+ 20- and 50-day EMA values
- SUP 2: 109-02+/109-00+ Low Jul 1 / Low Jun 10 and key support
- SUP 3: 108-27+ Low Jun 3
- SUP 4: 108-24 Trendline drawn from the Apr 25 low
Treasuries are trading closer to their recent highs. Last week’s gains confirmed an extension of the bull cycle that started Jul 1. The move higher has resulted in a breach of 111-01, Jun 14 high. This cancels a recent bearish threat and instead signals scope for an extension near-term with the focus on 111-13 next, the Mar 25 high. Clearance of this hurdle would open 111-31, a Fibonacci projection. Initial firm support is at 110-10+, the 20-day EMA.
SOFR FUTURES CLOSE
- Sep 24 +0.020 at 94.965
- Dec 24 +0.040 at 95.375
- Mar 25 +0.040 at 95.750
- Jun 25 +0.035 at 96.045
- Red Pack (Sep 25-Jun 26) -0.01 to +0.020
- Green Pack (Sep 26-Jun 27) -0.035 to -0.02
- Blue Pack (Sep 27-Jun 28) -0.05 to -0.04
- Gold Pack (Sep 28-Jun 29) -0.055 to -0.05
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M +0.00679 to 5.33459 (+0.00037 total last wk)
- 3M -0.00034 to 5.28577 (-0.02078 total last wk)
- 6M -0.01422 to 5.15058 (-0.06167 total last wk)
- 12M -0.02977 to 4.83577 (-0.13995 total last wk)
- Secured Overnight Financing Rate (SOFR): 5.34% (+0.00), volume: $1.900T
- Broad General Collateral Rate (BGCR): 5.32% (+0.00), volume: $774B
- Tri-Party General Collateral Rate (TGCR): 5.32% (+0.00), volume: $756B
- (rate, volume levels reflect prior session)
- Daily Effective Fed Funds Rate: 5.33% (+0.00), volume: $90B
- Daily Overnight Bank Funding Rate: 5.32% (+0.00), volume: $263B
FED Reverse Repo Operation
![](https://marketnews.com/media-library/image.png?id=52683040&width=980)
NY Federal Reserve/MNI
RRP usage inches up to $413.280B from $406.590B on Friday. Number of counterparties drops to 65 from 73 prior. Today's usage compares to $327.066B on Monday, April 15 -- the lowest level since mid-May 2021.
PIPELINE $9B JP Morgan 4Pt Launched
- Date $MM Issuer (Priced *, Launch #)
- 7/15 $9B #JP Morgan $2B 4NC3 +75, $750M 4NC3 SOFR+93, $2.75B 6NC5 +87, $3.5B 11NC10 +107
- 7/15 $3.25B #RBC $1.25B 3NC2 +63, $700M 3NC2 SOFR+79, $1.3B 6NC5 +85
- 7/15 $2.5B #Bank of NY Mellon $600M 4NC3 +65, $300M 4NC3 SOFR+83, $1.1B 8NC7 +90, $500M 15NC10 +138
- 7/15 $2.25B #PepsiCo $850M 5Y +40, $650M 10Y +60, $750M 30Y +80
- 7/15 $600M *NongHyup Bank $300M 3Y SOFR+80, $300M 5Y +68
- 7/15 $500M #Aircastle 7Y +165
EGBs-GILTS CASH CLOSE: Constructive Start To ECB Week
European government bonds strengthened across the board Monday.
- Core FI started on the front foot, faltering in late morning led by Bunds amid some confusion over news reports over increased funding in the 2024 German budget (which turned out not to be a new development).
- Overall though there was little in the way of European macro news flow/headlines to drive, with the general tone remaining positive following last Thursday's soft US inflation report.
- The UK curve bull steepened, with Germany's shifting in a similar direction but with outperformance in the 5Y segment.
- Periphery / semi-core EGB spreads tightened on the day despite weakness in equities, led by BTPs and OATS (-2bp on the day vs 10Y Bund).
- With a limited calendar of scheduled events Tuesday (including German ZEW), focus this week is on Wednesday's UK CPI release and Thursday's ECB decision.
Closing Yields / 10-Yr Periphery EGB Spreads To Germany
- Germany: The 2-Yr yield is down 2.4bps at 2.799%, 5-Yr is down 3bps at 2.445%, 10-Yr is down 2.4bps at 2.472%, and 30-Yr is down 2.3bps at 2.66%.
- UK: The 2-Yr yield is down 2.1bps at 4.065%, 5-Yr is down 0.9bps at 3.939%, 10-Yr is down 0.8bps at 4.101%, and 30-Yr is down 0.9bps at 4.606%.
- Italian BTP spread down 2.2bps at 127.5bps / Spanish down 0.3bps at 76.1bps
FOREX USDJPY Completes Round Trip Post-Powell, NZD Weakness Persists
- USDJPY has unsurprisingly posted the largest range across the majors on Monday, as volatility remains high in the aftermath of last week’s US data and supposed BOJ intervention. Chair Powell described the latest data as adding to the FOMC’s confidence, which prompted a momentary blip lower for the greenback.
- USDJPY trades close to unchanged around 157.90. The pair reached as low as 157.19 following Powell’s remarks, having printed an overnight high of 158.42 during the APAC session. Most notable support remains at 156.83, a Fibonacci retracement.
- NZD underperforms across G10, falling 0.57% against the dollar as weaker-than-expected China GDP weighs at the margin. The AU-NZ 2yr swap continues to tick higher, now back at November 2020 levels which continues to bolster the AUD/NZD rally, rising to a fresh cycle high of 1.1136.
- EURUSD tracks close to 1.0900 and 1.30 continues to cap the topside in GBPUSD, a level that would place cable at the highest level since July last year.
- Scandinavian FX underperforms, with USDNOK trading 0.95% higher on Monday. In similar vein, there were some notable laggards in the EM space such as MXN, dropping over 1% given its beta to Trump election odds and ZAR falling 1.5%.
- Eurozone Trade and German ZEW data crosses on Tuesday, before US retail sales and Canadian CPI highlight the economic calendar.
TUESDAY DATA CALENDAR
Date | GMT/Local | Impact | Flag | Country | Event |
16/07/2024 | 0700/0900 | ![]() | EU | ECB's De Guindos in ECONFIN meeting | |
16/07/2024 | 0800/1000 | ** | ![]() | EU | ECB Bank Lending Survey |
16/07/2024 | 0800/1000 | ** | ![]() | IT | Italy Final HICP |
16/07/2024 | 0900/1100 | *** | ![]() | DE | ZEW Current Conditions Index |
16/07/2024 | 0900/1100 | *** | ![]() | DE | ZEW Current Expectations Index |
16/07/2024 | 0900/1100 | * | ![]() | EU | Trade Balance |
16/07/2024 | 0900/1000 | ** | ![]() | UK | Gilt Outright Auction Result |
16/07/2024 | 1215/0815 | ** | ![]() | CA | CMHC Housing Starts |
16/07/2024 | 1230/0830 | ** | ![]() | US | Import/Export Price Index |
16/07/2024 | 1230/0830 | *** | ![]() | CA | CPI |
16/07/2024 | 1230/0830 | *** | ![]() | US | Retail Sales |
16/07/2024 | 1255/0855 | ** | ![]() | US | Redbook Retail Sales Index |
16/07/2024 | 1400/1000 | * | ![]() | US | Business Inventories |
16/07/2024 | 1400/1000 | ** | ![]() | US | NAHB Home Builder Index |
16/07/2024 | 1530/1130 | * | ![]() | US | US Treasury Auction Result for Cash Management Bill |
16/07/2024 | 1845/1445 | ![]() | US | Fed Governor Adriana Kugler | |
17/07/2024 | 2245/1045 | *** | ![]() | NZ | CPI inflation quarterly |