MNI ASIA OPEN: Tsy 2s10s Curve Inverts Briefly, Ylds Climbing
- EXECUTIVE SUMMARY
- US: Trump Takes Lead In Betting Markets For First Time Since Early September
- MNI SECURITY: US Warns Israel Against Striking Certain Targets In Iran, KANN
- MNI CANADA: Liberals Fall Behind NDP In Federal Opinion Polls
US
MNI US TSYS/SUPPLY: MNI UST Issuance Deep Dive: October 2024
We've just published our latest UST Issuance Deep Dive (PDF link here)
- With the 2024 fiscal year at an end, attention will soon turn toward Treasury's guidance for future issuance, with coupon sizes expected by many to increase next year amid continued deficits.
- The Oct 30 quarterly Refunding announcement is likely to prove too early for any changes in guidance.
- Even with the federal debt pile rising at a $2T annual pace, Treasury coupon size adjustment announcement to wait until mid-2025 at least - current consensus is for the August 2025 refunding round.
- Auction Results: September’s nominal coupon auctions generally quite strong.
- Upcoming Supply: October is expected to see $315B in nominal Treasury coupon sales, in addition to $24B in 5Y TIPS and $30B FRN for a total of $369B – the most since October 2021.
NEWS
US: Trump Takes Lead In Betting Markets For First Time Since Early September
Former President Donald Trump has overtaken Vice President Kamala Harris in betting market probability of winning the White House for the first time since early September, according to ElectionBettingOdds - a website that aggregates real-time data from various betting and prediction markets. Betting markets now diverge from all the key election forecast models - The Economist, DDHQ, 538, Split-Ticket, and Silver Bulletin - which all forecast a slight Harris lead.
MNI SECURITY: US Warns Israel Against Striking Certain Targets In Iran, KANN
The Middle East is bracing for another escalatory cycle as headlines on newswires suggest that Israel may be preparing to launch a retaliatory attack on Iran. It is unclear if such an attack is imminent. Sky News Arabia reports in the last hour that a 'US defence official' said: "We have information that Israel's response to Iran is coming."
MNI CANADA: Liberals Fall Behind NDP In Federal Opinion Polls
For the first time since September 2015, the leftist New Democratic Party (NDP) have polled above the governing centre-left Liberal Party of Canada (LPC). In the two latest opinion polls, the NDP led the LPC by 21.6% to 21.5% and 20% to 19% respectively. While these polls are essentially dead-heats, both within the margin of error, they will nevertheless carry weight amid a sustained period of instability for the Trudeau gov't.
(X) According to Senior U.S. Officials; the Israeli Retaliatory Strike against Iran for last week’s Ballistic Missile Attack, is believed to be Imminent.
(X) Operations halted at Ben Gurion Airport in Tel Aviv following retaliatory missile attack from Yemen
(BBG) MILTON RAPIDLY INTENSIFIES INTO A CATEGORY 5 HURRICANE :NHC
US TSYS
MNI US TSYS: Tsy Curves Resume Bear Flattening, Rate Cut Cut Pricing Cools
- Treasuries look to finish the week opener near session lows, heavy carry-over selling after last Friday's larger than expected September jobs gain and dip in the unemployment rate to 4.1%.
- Curves dis-inverted briefly, 2s10s flattening to -1.248 before finishing around 3.273 (-.878) after the bell - compares to nearly +20.0 early last week. Note, 2Y yield climbed to 4.0223% high, 10Y yield tapped 4.0314% high.
- Meanwhile, projected rate cuts continue to recede -- November not fully pricing a 25bp cut now: Nov'24 cumulative -22bp (-26.6bp late Fri), Dec'24 -48.5bp (-57.2bp), Jan'25 -68.4bp (-80.9bp).
- Limited if any reaction to Fed speakers today, MN Fed President Kashkari said risks of higher inflation is waning as he defended his 50bp rate cut decision, sees neutral rate at around 3%
- Limited data today and tomorrow, focus on Wednesday's minutes for the September FOMC, CPI on Thursday and PPI Friday. Note, Friday also sees the start of the latest earnings cycle with Bank of NY Mellon, Wells Fargo, JP Morgan and Blackrock announcing.
OVERNIGHT DATA
MNI: US AUG CONSUMER CREDIT +$8.9B
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA down 398.51 points (-0.94%) at 41954.24
S&P E-Mini Future down 51.5 points (-0.89%) at 5748.5
Nasdaq down 213.9 points (-1.2%) at 17923.9
US 10-Yr yield is up 5.5 bps at 4.0217%
US Dec 10-Yr futures are down 10.5/32 at 112-16.5
EURUSD down 0.0001 (-0.01%) at 1.0973
USDJPY down 0.59 (-0.4%) at 148.11
WTI Crude Oil (front-month) up $2.91 (3.91%) at $77.31
Gold is down $10.37 (-0.39%) at $2643.20
European bourses closing levels:
EuroStoxx 50 up 14.77 points (0.3%) at 4969.71
FTSE 100 up 22.99 points (0.28%) at 8303.62
German DAX down 16.83 points (-0.09%) at 19104.1
French CAC 40 up 34.66 points (0.46%) at 7576.02
US TREASURY FUTURES CLOSE
3M10Y +3.11, -63.25 (L: -68.692 / H: -61.824)
2Y10Y -1.08, 3.051 (L: -1.248 / H: 4.176)
2Y30Y -1.395, 30.989 (L: 24.838 / H: 32.624)
5Y30Y -0.477, 43.768 (L: 39.375 / H: 44.691)
Current futures levels:
Dec 2-Yr futures down 4/32 at 103-13.125 (L: 103-11.125 / H: 103-16.875)
Dec 5-Yr futures down 7.5/32 at 108-17.25 (L: 108-14 / H: 108-24.5)
Dec 10-Yr futures down 10.5/32 at 112-16.5 (L: 112-13.5 / H: 112-28.5)
Dec 30-Yr futures down 20/32 at 121-11 (L: 121-07 / H: 122-08)
Dec Ultra futures down 27/32 at 129-10 (L: 129-05 / H: 130-19)
MNI US 10YR FUTURE TECHS: (Z4) Southbound
- RES 4: 115-00+ High Oct 1
- RES 3: 114-13 20-day EMA
- RES 2: 113-28 50-day EMA
- RES 1: 113-12 Low Sep 3 and a recent breakout level
- PRICE: 112-17+ @ 10:22 BST Oct 7
- SUP 1: 112-14+/13+ 38.2% retracement of the Apr - Sep bull cycle (cont)/ Low Oct 7
- SUP 2: 112-00 Round number support
- SUP 3: 111-14 50.0% retracement of the Apr - Sep bull cycle (cont)
- SUP 4: 11100 Low Jul 22
Treasuries traded sharply lower Friday and the contract is trading lower today as it extends the current bear cycle. The latest sell-off has resulted in a break of the 50-day EMA and this has been followed by a breach of 113-12, the Sep 3 low. The move undermines the recent bullish theme and instead highlights potential for a continuation lower. Sights are on 112-14+ next, a Fibonacci retracement on the continuation chart. 113-12 is the first resistance.
SOFR FUTURES CLOSE
Dec 24 -0.065 at 95.70
Mar 25 -0.055 at 96.075
Jun 25 -0.060 at 96.335
Sep 25 -0.070 at 96.495
Red Pack (Dec 25-Sep 26) -0.075 to -0.065
Green Pack (Dec 26-Sep 27) -0.055 to -0.04
Blue Pack (Dec 27-Sep 28) -0.04 to -0.035
Gold Pack (Dec 28-Sep 29) -0.035 to -0.035
SOFR Benchmark Settlements:
- 1M -0.02716 to 4.81842 (+0.00148 total last wk)
- 3M +0.05270 to 4.63668 (-0.0093 total last wk)
- 6M +0.11085 to 4.39184 (+0.01914 total last wk)
- 12M +0.18206 to 4.04788 (+0.08274 total last wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.83% (-0.02), volume: $2.377T
- Broad General Collateral Rate (BGCR): 4.82% (+0.00), volume: $812B
- Tri-Party General Collateral Rate (TGCR): 4.82% (+0.00), volume: $789B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.83% (+0.00), volume: $84B
- Daily Overnight Bank Funding Rate: 4.83% (+0.00), volume: $229B
FED Reverse Repo Operation
RRP usage slips to $322.948B this afternoon from $330.012B prior. Compares to $239.386B on Monday September 16 2024 -- the lowest level since early May 2021. Number of counterparties slips to 54 from 57.
MNI PIPELINE: $3B Toyota Motor Credit 3Pt Debt Launched
- Date $MM Issuer (Priced *, Launch #)
- 10/07 $3B #Toyota Motor Cr $1B 1.5Y SOFR+45, $1.25B 3Y +47, $750M 7Y +72
- 10/07 $1.25B *KBC Group 6NC5 +107
- 10/07 $900M *Eastern Energy Gas 30Y +135
- 10/07 $600M #Athene 30NC10 6.625%
- 10/07 $Benchmark Norinchukin Bank 5Y investor calls
- Expected Tuesday:
- 10/08 $1B KDB WNG 3Y SOFR+62a
- 10/08 $Benchmark World Bank 5Y +41a
- 10/08 $Benchmark NWB 2Y SOFR+34a
MNI BONDS: EGBs-GILTS CASH CLOSE: Bellies Underperform As Cuts Get Priced Out
European yields continued to rise Monday, with Gilts underperforming Bunds as curve bellies underperformed in both the UK and Germany.
- Multiple factors weighed on global FI, from higher oil prices to follow-through from Friday's surprisingly strong US employment data.
- Eurozone retail sales were largely in line, while German headline factory orders delivered a downside surprise.
- ECB's Kazaks told MNI that he supported an October rate cut. While that outcome remains over 90% priced, easing through mid-2025 pared back to ~125bp cumulative from ~130 prior and ~147bp at Thursday's close.
- Similarly while Nov BoE cut pricing remains >90%, cumulative priced cuts through June 2025 now stand at 94bp, vs ~100bp Friday and over 120bp end-Thursday.
- Gilt underperformance saw the widest 10Y spread to Bunds in over a year. Gilts appeared to be additionally pressured in the session by soft demand at the long-dated BoE APF sale, as well as media concern over government borrowing prospects.
- Periphery EGB spreads widened throughout the session on less dovish ECB pricing.
- Tuesday's agenda includes the German IP release along with multiple ECB speakers including Nagel and Centeno.
Closing Yields / 10-Yr Periphery EGB Spreads To Germany
- Germany: The 2-Yr yield is up 4.4bps at 2.247%, 5-Yr is up 5.2bps at 2.123%, 10-Yr is up 4.6bps at 2.256%, and 30-Yr is up 4.4bps at 2.536%.
- UK: The 2-Yr yield is up 8.4bps at 4.223%, 5-Yr is up 8.6bps at 4.102%, 10-Yr is up 7.8bps at 4.208%, and 30-Yr is up 5.4bps at 4.73%.
- Italian BTP spread up 1.7bps at 131.6bps / Spanish up 0.8bps at 76.6bps
TUESDAY DATA CALENDAR
Date | ET | Impact | Period | Release | Prior | Consensus | |
08/10/2024 | 0600 | ** | Sep | NFIB Small Business Index | 91.2 | 91.9 | |
08/10/2024 | 0830 | ** | Aug | Previous Trade Deficit Revised | -73.0 | -- | USD (b) |
08/10/2024 | 0830 | ** | Aug | Trade Balance | -78.8 | -71.0 | USD (b) |
08/10/2024 | 0855 | ** | 05-Oct | Redbook Retail Sales y/y (month) | 5.2 | -- | % |
08/10/2024 | 0855 | ** | 05-Oct | Redbook Retail Sales y/y (week) | 5.3 | -- | % |
08/10/2024 | 1130 | * | 11-Oct | Bid to Cover Ratio | -- | -- | |
08/10/2024 | 1300 | *** | Oct | Bid to Cover Ratio | -- | -- |