MNI ASIA OPEN: Tsy Ylds Recede Ahead Wed's FOMC

US FED

Fed Preview - July 2024: Analyst Outlook (MNI): We've published an update of our Jul 26 Fed preview which now includes sell-side analyst expectations. No sell-side analysts whose previews were seen by MNI expect the FOMC to cut rates at the July meeting, with an overwhelming consensus that the Committee will begin easing in September.

• We saw only one exception: BofA sees the first cut only in December (25bp). While – again with the exception of BofA - the majority of analysts see 50bp of cuts this year (mostly Sept and Dec), a handful see 75bp of reductions in 2024. For 2025, though, opinions differ widely.
• Some see September marking the start of a prolonged set of reductions reaching 225bp through end-2025.
• Others see cuts later this year as merely precautionary, with resurgent inflation / post-election policy risk set to curtail the easing cycle, potentially with a stop-start pace.

US

TSY BRIEF (MNI): US Treasury Lowers Q3 Borrowing Estimate By $106B
The U.S. Treasury Department said Monday it expects to borrow USD740 billion in the third quarter, USD106 billion less than previously announced in April. For the fourth quarter, Treasury expects to borrow USD565 billion, lower than market estimates.

• Treasury is assuming a cash balance of USD850 billion at the end of September, the same as assumed in April. Treasury assumes an end-December cash balance of USD700 billion. Treasury's cash balance sat at USD768 billion according to the most recent data.
• During the second quarter, the U.S. borrowed USD234 billion, USD9 billion lower than had been expected due to higher cash inflows and lower redemptions from the Fed. The Treasury's quarterly refunding will be released at 8:30 a.m. July 31.

NEWS

WHITE HOUSE (MNI): Biden Supports SCOTUS Term Limits & Amendment To End Pres. Immunity:
Writing in a Washington Post op-ed, President Joe Biden proposes a constitutional amendment called the 'No One Is Above the Law Amendment', that would remove the immunity for crimes a former president committed while in office. Comes after the Supreme Court ruled earlier in July that a president has broad immunity for crimes committed during their time in office as part of 'official acts'. The ruling resulted in a major backlash from liberals, arguing that it would give the presidency dictatorial powers.

ISRAEL (MNI): Official-Israel Wants To Hurt Hezbollah, But Does Not Seek All-Out War:
Wires carrying comments from an unnamed Israeli defence official. Says that 'Israel wants to hurt Hezbollah, but does not seek an all-out regional war'. Two officials claim that 'Israel is preparing for the possibility of a few days of fighting' following the rocket strike on the Druze community town of Majdal Shams in the Golan Heights on 27 July that killed 12 children and young people.

US Tsys Firmer, Inside Session Range After Tsy Lowers Borrow Estimates

• Treasuries are modestly higher after the bell, holding to a narrow session range, brief bounce after the Tsy borrow estimate decline from $847B to $740B announced.
• There were no major surprises in Treasury's Marketable Borrowing Estimates (link), as the Treasury Department appears to take a middle-of-the-road approach on cash building ahead of the reinstatement of the debt ceiling at the start of 2025.
• The TSY quarterly refunding annc is scheduled for Wednesday at 0830ET, along with ADP, PMI and the next FOMC policy annc. Friday sees the July nonfarm payrolls data.
• Tsy Sep'24 10Y futures trade +5.5 at 111-12 vs. 111-16.5 high -- initial technical resistance followed by 111-17.5 (1.382 of Apr 25-May 16-29 swing). Curves continue to scale back from last week's steepening, 2s10s -2.129 at -21.274.
• Projected rate cut pricing into year end look steady to mildly mixed vs. late Friday levels (*) -- Nov and Dec a touch: July'24 at -4% w/ cumulative at -1bp at 5.319%, Sep'24 cumulative -28.2bp (-28.4bp), Nov'24 cumulative -43.9bp (-45.1bp), Dec'24 -67bp (-67.9bp).

OVERNIGHT DATA

US DATA (MNI): Dallas Fed Sees Another Regional Fed Mfg Survey With Orders Under Pressure
The Dallas Fed manufacturing index offered another regional Fed report that suggests surprise strength in the Philly Fed equivalent looks isolated. The index fell to -17.5 (cons -15.5) in July after -15.1, with a more notable slip in new orders from -1.3 to -12.8 for its lowest since Nov’23.

• Summarizing the latest changes in new orders: Philly was the highest since Mar’22 and Empire was essentially unchanged on the month but technically the highest since Sep’23. However, Dallas saw the lowest since Nov’23, Richmond the lowest since May’23 but 1pt off being joint lowest since pandemic and Kansas the lowest since the pandemic and before that 2008-09.

MARKETS SNAPSHOT

• Key market levels of markets in late NY trade:
• DJIA up 37.72 points (0.09%) at 40625.35
• S&P E-Mini Future up 15.75 points (0.29%) at 5514.75
• Nasdaq up 59.2 points (0.3%) at 17416.84
• US 10-Yr yield is down 2.7 bps at 4.1666%
• US Sep 10-Yr futures are up 6/32 at 111-12.5
• EURUSD down 0.0031 (-0.29%) at 1.0825
• USDJPY up 0.24 (0.16%) at 154
• WTI Crude Oil (front-month) down $1.28 (-1.66%) at $75.88
• Gold is down $1.78 (-0.07%) at $2385.34
• European bourses closing levels:
• EuroStoxx 50 down 47.11 points (-0.97%) at 4815.39
• FTSE 100 up 6.64 points (0.08%) at 8292.35
• German DAX down 96.88 points (-0.53%) at 18320.67
• French CAC 40 down 73.84 points (-0.98%) at 7443.84

US TREASURY FUTURES CLOSE

• 3M10Y -1.867, -112.514 (L: -115.431 / H: -110.896)
• 2Y10Y -2.93, -22.075 (L: -22.426 / H: -18.444)
• 2Y30Y -3.367, 3.333 (L: 2.529 / H: 7.849)
• 5Y30Y -1.765, 35.797 (L: 34.618 / H: 38.631)
• Current futures levels:
• Sep 2-Yr futures down 0.125/32 at 102-19 (L: 102-18.375 / H: 102-21)
• Sep 5-Yr futures up 2/32 at 107-20.25 (L: 107-17.5 / H: 107-24)
• Sep 10-Yr futures up 6/32 at 111-12.5 (L: 111-06.5 / H: 111-16.5)
• Sep 30-Yr futures up 15/32 at 119-26 (L: 119-10 / H: 120-05)
• Sep Ultra futures up 24/32 at 126-25 (L: 126-00 / H: 127-08)

US 10Y FUTURE TECHS: (U4) Bullish Trend Structure

• RES 4: 112-25 High Mar 8
• RES 3: 112-10 1.50 proj of the Apr 25 - May 16 - 29 price swing
• RES 2: 111-31 1.382 proj of the Apr 25 - May 16 - 29 price swing
• RES 1: 111-16+/17+ High Jul 29 / 1.382 of Apr 25-May 16-29 swing
• PRICE: 111-11 @ 1530 ET Jul 26
• SUP 1: 110-23+/110-10+ 20- and 50-day EMA values
• SUP 2: 109-17+ Low Jul 5
• SUP 3: 109-02+/109-00+ Low Jul 1 / Low Jun 10 and key support
• SUP 4: 109-00 Trendline drawn from the Apr 25 low

A bull theme in Treasuries remains intact and the contract is trading higher today. Recent weakness appears to have been a correction. Moving average studies are in a bull-mode position and the recent breach of 111-01, the Jun 14 high, confirmed a resumption of the uptrend that started Apr 25. The bull trigger is 111-15, the Jul 17 high. Clearance of this level would open 111-31, a Fibonacci projection. Support lies at 110-23+, the 20-day EMA.

SOFR FUTURES CLOSE

• Sep 24 -0.010 at 94.950
• Dec 24 -0.015 at 95.355
• Mar 25 -0.010 at 95.740
• Jun 25 -0.005 at 96.035
• Red Pack (Sep 25-Jun 26) +0.005 to +0.015
• Green Pack (Sep 26-Jun 27) +0.020 to +0.025
• Blue Pack (Sep 27-Jun 28) +0.025 to +0.030
• Gold Pack (Sep 28-Jun 29) +0.035 to +0.040

SOFR FIXES AND PRIOR SESSION REFERENCE RATES

SOFR Benchmark Settlements:

• 1M -0.00299 to 5.34371 (+0.00027 total last wk)
• 3M -0.00326 to 5.25211 (-0.02762 total last wk)
• 6M -0.00376 to 5.08769 (-0.04323 total last wk)
• 12M -0.00248 to 4.75042 (-0.04736 total last wk)

• Secured Overnight Financing Rate (SOFR): 5.35% (+0.00), volume: $2.027T
• Broad General Collateral Rate (BGCR): 5.34% (+0.00), volume: $806B
• Tri-Party General Collateral Rate (TGCR): 5.34% (+0.00), volume: $779B
• (rate, volume levels reflect prior session)

• Daily Effective Fed Funds Rate: 5.33% (+0.00), volume: $85B
• Daily Overnight Bank Funding Rate: 5.32% (+0.00), volume: $223B

FED Reverse Repo Operation

RRP usage inches up to $385.281B from $381.257B on Friday. Number of counterparties at 68 from 70 prior. Today's usage compares to $327.066B on Monday, April 15 -- the lowest level since mid-May 2021.

PIPELINE $3.5B Mercedes Benz, $3.5B Honeywell Multi-Tranche Debt Launched

• Date $MM Issuer (Priced *, Launch #)
• 7/29 $3.5B #Mercedes Benz $750M 2Y +50, $750M 2Y SOFR+63, $700M 3Y +60, $850M 5Y +77, $450M 10Y +100
• 7/29 $3.5B #Honeywell $1.15B 3Y +45, $1B +5Y +65, $650M +7Y +70, $700M Tap 03/01/35 +80
• 7/29 $1.5B #Santander PerpNC10 8%
• 7/29 $1.3B #Chubb $700M 5Y +60, $600M 10Y +78
• 7/29 $1.2B #DTE Energy 3Y +80
• 7/29 $700M #Consumers Energy +5Y +68
• 7/29 $600M *L3Harris 30Y +115
• 7/29 $500M #Moody's Corp 10Y +92
• 7/29 $500M *Eastman Chemical 5Y +100
• 7/29 $1.5B Royal Caribbean 8.5NC3
• 7/29 $Benchmark Guatemala 7Y 6.375%a, 12.5Y 6.875%a
• 7/29 $Benchmark Netflix investor calls

FOREX: EURUSD Falls to Three-Week Low Amid Weakness for European Equities

• Currency markets have adopted a moderate risk-off tone on Monday, despite a distinct lack of major external developments or datapoints. Weakness for European equity indices has prompted the USD index to rise 0.25%, and in tandem assisting EURUSD to reach a fresh three-week low.
• The pair has now broken below last week’s low of 1.0826 and pierced support around the 50-day EMA, at 1.0818. A clear break of the average would signal scope for a deeper retracement and open 1.0774, a Fibonacci retracement. For bulls, a reversal higher would highlight the end of the current corrective cycle and open the key resistance at 1.0948, the Jul 17 high.
• There was notable volatility for sterling ahead of comments made by Chancellor Reeves. Some early relative weakness briefly saw GBPUSD test as low as 1.2807, although the bulk of this move has now reversed. Price action saw EURGBP have a notable test of the 50-dma of 0.8461, however the cross now trades close to 50 pips below the morning high. 
• Another volatile session for the Japanese Yen, in which after trading down as low as 153.02, USDJPY hovers nearer to the 154.00 handle as we approach the APAC crossover.
• German and Spanish CPI will be in focus Tuesday, ahead of US consumer confidence and JOLTS data. The data precedes a very busy economic calendar this week, including decisions from the Fed and BOE, as well as the US employment report Friday.

TUESDAY DATA CALENDAR

Date	GMT/Local	Impact	Flag	Country	Event
30/07/2024	2301/0001	*		UK	BRC Monthly Shop Price Index
30/07/2024	2330/0830	*		JP	Labor Force Survey
30/07/2024	0130/1130	*		AU	Building Approvals
30/07/2024	0530/0730	***		FR	GDP (p)
30/07/2024	0530/0730	**		FR	Consumer Spending
30/07/2024	0600/0800	***		DE	GDP (p)
30/07/2024	-			US	FOMC Meeting
30/07/2024	0700/0900	***		ES	HICP (p)
30/07/2024	0700/0900	***		ES	GDP (p)
30/07/2024	0700/0900	**		CH	KOF Economic Barometer
30/07/2024	0800/1000	***		IT	GDP (p)
30/07/2024	0800/1000	***		DE	North Rhine Westphalia CPI
30/07/2024	0800/1000	***		DE	Bavaria CPI
30/07/2024	0900/1100	***		EU	EMU Preliminary Flash GDP Q/Q
30/07/2024	0900/1100	***		EU	EMU Preliminary Flash GDP Y/Y
30/07/2024	0900/1100	**		EU	EZ Economic Sentiment Indicator
30/07/2024	0900/1100	*		EU	Consumer Confidence, Industrial Sentiment
30/07/2024	0900/1000	**		UK	Gilt Outright Auction Result
30/07/2024	1200/1400	***		DE	HICP (p)
30/07/2024	1255/0855	**		US	Redbook Retail Sales Index
30/07/2024	1300/0900	**		US	S&P Case-Shiller Home Price Index
30/07/2024	1300/0900	**		US	FHFA Home Price Index
30/07/2024	1300/0900	**		US	FHFA Home Price Index
30/07/2024	1400/1000	***		US	Conference Board Consumer Confidence
30/07/2024	1400/1000	**		US	housing vacancies
30/07/2024	1400/1000	***		US	JOLTS jobs opening level
30/07/2024	1400/1000	***		US	JOLTS quits Rate
30/07/2024	1430/1030	**		US	Dallas Fed Services Survey
30/07/2024	1530/1130	*		US	US Treasury Auction Result for Cash Management Bill