MNI ASIA OPEN: Tsys Quickly Reject Core PPI Outcomes

US

US/MACRO (MNI): Solid Private Sector Net Lending Amidst Dual Deficits, But Mixed Undercurrents
The full release of the U.S. national accounts for Q1 continue to lay bare the scale of private sector net lending that is occurring under large fiscal deficits and sizeable current account deficits.

• Coming out of the post-pandemic period, which saw historically large transfers from the government to the private sector (and specifically households), the private sector is currently a net lender to the tune of more than 4% GDP.
• With the exception to the build-up to the dotcom crisis and then the Great Financial Crisis, this is close to the long-term historical norm and on its own isn’t particularly problematic.

NEWS

US (MNI): Democrat Donors Freeze USD$90M In Pledges If Biden Becomes Dem Nominee
The New York Times reporting that some "major Democratic donors" have told the largest pro-Biden super PAC that around USD$90 million of campaign contributions are now "on hold" if President Biden secures the Democratic Party presidential nomination.

US (MNI): 18th House Rep Calls On Biden To Drop Out, Jeffries Sends Letter To Dems
First-term Colorado Democrat House Representative, Brittany Pettersen (D-CO), has become the 19th Democratic lawmaker to publicly call on President Biden to drop out of the presidential race. Pettersen writes in a statement: "Joe Biden saved our country once, and I'm joining the growing number of people in my district and across the country to ask him to do it again. Please pass the torch to one of our many capable Democratic leaders so we have the best chance to defeat Donald Trump..."

US/ISRAEL (MNI) Biden: Israel And Hamas Have Agreed To Gaza Ceasefire Framework
US President Joe Biden has issued a statement on social mediaclaiming that Israel and Hamas have both agreed to the three-phrase Gaza ceasefire-for-hostage framework that he outlined in a White House speech on May 31. Biden: "Six weeks ago I laid out a comprehensive framework for how to achieve a ceasefire and bring the hostages home. There is still work to do and these are complex issues, but that framework is now agreed to by both Israel and Hamas. My team is making progress and I'm determined to get this done."

WHITE HOUSE (MNI): Harris Overtakes Biden Again In Dem Nom Betting After Pres' Gaffes:
Vice President Kamala Harris has once again overtaken President Joe Biden in political betting markets with regards to who will be the Democratic party's presidential nominee come November.

FRANCE (MNI): Attal Seeks Renaissance Presidency, Would Be Unable To Continue As PM:
Prime Minister Gabriel Attal has confirmed that he will seek the presidency of the centrist Rennaisance party group in the National Assembly, a move that would be incompatible with his continuation in office as PM.

POLITICAL RISK (MNI): ESTONIA-Kallas To Resign As PM 15 July To Take Up EU Role:
Estonia's ERR reporting that PM Kaja Kallas is set to offer her resignation to President Alar Karis on Monday 15 July as she prepares to take up the role of European Commission High Representative for Foreign Affairs and Security Policy.

US Treasuries Near Late Highs, Discounting June PPI & Up-Revisions

• Reversing the initial negative reaction to this morning's PPI data, Treasury futures look to finish mildly higher, at or near late session highs Friday as as economists deemed the data as more mixed than the initial hawkish reaction warranted.
• The Sep'24 10Y contract currently trades +2.5 at 111-07.5 near initial technical resistance is at 111-10+ (High Jul 8) followed by 111-13 (High Mar 25). Clearance of this hurdle would open 111-31, a Fibonacci projection. Curves are bull steepened with 2s10s +3.251 at -27.456, 5s30s +1.557 at 29.122.
• In turn, projected rate cut pricing into year end look firmer vs. early Friday (*): July'24 at -6.5% w/ cumulative at -1.6bp at 5.313%, Sep'24 cumulative -25.2bp (-24.1bp), Nov'24 cumulative -41.4bp (-38.5bp), Dec'24 -62.9bp (-59.6bp).
• Treasuries gapped lower after higher than expected PPI Final Demand MoM (0.2% vs. 0.1% est, with prior PPI up-revised to 0.0% from -0.2%), YoY (2.6% vs. 2.3% est, 2.2% prior).
• The Sep'24 10Y contract traded down to 110-25.5 low (-11.5), well above initial technical support of 110-07+/109-31 (20- and 50-day EMA values) before consolidating and reversing course.
• Futures inched higher after the latest UofM data came out near steady to lower than expected (current Conditions 64.1 vs. 66.0 - the lowest since late 2022) while inflation expectations come out in-line to slightly lower than expected with both 1Y and 5-10Y at 2.9%.

OVERNIGHT DATA

US DATA (MNI): Mixed Core PPI Outcomes In June, But Upward Revisions Across The Board
PPI final demand: 0.22% M/M (cons 0.1) in June after -0.03 (revised up from initial -0.25). Net upward revisions worth 0.18pps.

• PPI ex food & energy: 0.44% M/M (cons 0.2) in June after 0.28 (revised up from initial 0.05). Net upward revisions worth 0.21pps.
• But PPI ex food, energy & trade: 0.04% M/M (cons 0.2) after 0.16% (revised up from initial 0.01). Net upward revisions worth 0.12pps.

US DATA (MNI): 5-10Y U.Mich Inflation Expectations Surprise Lower But Within Typical Range
U.Mich consumer sentiment was softer than expected in the July preliminary report, falling to 66.0 (cons 68.5) after 68.2, leaving it at its weakest since Nov’23.

• Inflation expectations were as expected for the short-term but more notably drifted lower 5-10Y out.
• 1Y: 2.9% (cons 2.9%) after 3.0%, lowest since March.
• 5-10Y: 2.9% (cons 3.0%) after 3.0%, lowest since the 2.8% in March which marked a rare break from the 2.9-3.1% that is has mostly held since mid-2021.
• Note that for the 5-10Y figures, three of the six months in the first half of the year saw a -0.1pp revision with the final release (Mar, May & Jun), two saw no change and one saw a 0.1pp upward revision (Jan).

MARKETS SNAPSHOT

• Key market levels of markets in late NY trade:
• DJIA up 289.44 points (0.73%) at 40039.83
• S&P E-Mini Future up 31.5 points (0.56%) at 5670.5
• Nasdaq up 127.2 points (0.7%) at 18408.64
• US 10-Yr yield is down 3.3 bps at 4.177%
• US Sep 10-Yr futures are up 3/32 at 111-8
• EURUSD up 0.0039 (0.36%) at 1.0906
• USDJPY down 1.02 (-0.64%) at 157.82
• WTI Crude Oil (front-month) down $0.38 (-0.46%) at $82.24
• Gold is down $2.87 (-0.12%) at $2412.59
• European bourses closing levels:
• EuroStoxx 50 up 66.89 points (1.34%) at 5043.02
• FTSE 100 up 29.57 points (0.36%) at 8252.91
• German DAX up 213.62 points (1.15%) at 18748.18
• French CAC 40 up 97.19 points (1.27%) at 7724.32

US TREASURY FUTURES CLOSE

• 3M10Y -2.812, -116.747 (L: -116.894 / H: -111.185)
• 2Y10Y +3.057, -27.65 (L: -31.203 / H: -26.807)
• 2Y30Y +3.594, -6.129 (L: -10.726 / H: -5.669)
• 5Y30Y +1.456, 29.021 (L: 26.394 / H: 29.804)
• Current futures levels:
• Sep 2-Yr futures up 2.875/32 at 102-19 (L: 102-13.75 / H: 102-19.125)
• Sep 5-Yr futures up 3.5/32 at 107-17.75 (L: 107-06.75 / H: 107-18)
• Sep 10-Yr futures up 3/32 at 111-8 (L: 110-25.5 / H: 111-08)
• Sep 30-Yr futures up 4/32 at 119-31 (L: 119-06 / H: 120-01)
• Sep Ultra futures up 7/32 at 127-16 (L: 126-11 / H: 127-16)

US‌‌ ‌‌10YR‌‌ ‌‌FUTURE‌‌ ‌‌TECHS:‌‌ US 10YR FUTURE TECHS: (U4) Bull Cycle Remains In Play

• 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: 111-04 @ 1230 ET Jul 12
• SUP 1: 110-07+/109-31 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: 108-22+ Trendline drawn from the Apr 25 low

Treasuries rallied Thursday and held the bulk of the upside into the Friday close. This confirms an extension of the bull cycle that started Jul 1. The move higher has resulted in a breach of 111-01, the Jun 14 high. This cancels a recent bearish threat and instead signals scope for an bullish continuation 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 110-07+, the 20-day EMA.

SOFR FUTURES CLOSE

• Sep 24 +0.010 at 94.945
• Dec 24 +0.030 at 95.340
• Mar 25 +0.040 at 95.715
• Jun 25 +0.050 at 96.020
• Red Pack (Sep 25-Jun 26) +0.040 to +0.050
• Green Pack (Sep 26-Jun 27) +0.015 to +0.035
• Blue Pack (Sep 27-Jun 28) -0.005 to +0.010
• Gold Pack (Sep 28-Jun 29) -0.015 to -0.005

SOFR FIXES AND PRIOR SESSION REFERENCE RATES

SOFR Benchmark Settlements:

• 1M -0.00100 to 5.32780 (+0.00037/wk)
• 3M -0.01526 to 5.28611 (-0.02078/wk)
• 6M -0.04028 to 5.16480 (-0.06167/wk)
• 12M -0.07906 to 4.86554 (-0.13995/wk)

• Secured Overnight Financing Rate (SOFR): 5.34% (+0.00), volume: $1.920T
• Broad General Collateral Rate (BGCR): 5.32% (-0.01), volume: $773B
• Tri-Party General Collateral Rate (TGCR): 5.32% (-0.01), volume: $755B
• (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: $270B

FED Reverse Repo Operation

RRP usage inches up to $406.590B from $403.708B on Thursday. Number of counterparties: 73 from 71 prior. Today's usage compares to $327.066B on Monday, April 15 -- the lowest level since mid-May 2021.

EGBs-GILTS CASH CLOSE: Yields Partially Rebound From Thursday's Drop

European yields partially rebounded Friday from the prior session's US CPI-induced drop.

• Yields rose in early trade, amid small upward revisions in French and Spanish final June inflation data, and an uptick in oil prices.
• Pressure peaked in early afternoon after US producer price indices came in stronger than expected.
• But the move faded after PPI details looked less worrying, with the effect later compounded by soft US consumer sentiment data (UMichigan), helping European yields close toward the lower end of the daily range and well below the week's highs.
• Periphery spreads tightened modestly, led by BTPs, with equities rising sharply (Eurostoxx futures +1.3%). 10Y OAT/Bund spread closed flat on both the day and the week (65.6bp).
• Next week's risk events include UK CPI Wednesday, with the ECB decision Thursday - while there are no expectations of a rate cut, communications will be eyed for the outlook for September's expected easing.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 3.1bps at 2.823%, 5-Yr is up 3.6bps at 2.475%, 10-Yr is up 3.3bps at 2.496%, and 30-Yr is up 2.5bps at 2.683%.
• UK: The 2-Yr yield is up 1.8bps at 4.086%, 5-Yr is up 2.6bps at 3.948%, 10-Yr is up 3.5bps at 4.109%, and 30-Yr is up 2.6bps at 4.615%.
• Italian BTP spread down 2.4bps at 129.7bps / Spanish down 0.5bps at 76.4bps

FOREX: Greenback Weakens Further, JPY & GBP Strength in Spotlight

• Higher-than-expected US PPI data did little to affect post-CPI sentiment in currency markets, and a subsequent bounce for major equity indices weighed on the greenback into the week’s close. The USD index sits 0.3%, set to post its lowest close in around five weeks.
• The Japanese Yen was once again in the spotlight, following the apparent confirmation that the BOJ intervened on Thursday, following the US inflation figures. Price action remained volatile in today’s session and another sudden jolt to the downside has prompted speculation that another round of intervention may have occurred.
• USDJPY resides 0.58% lower on the session around 157.90, having tested the pullback low at 157.38. This level has held well, suggesting decent support layered at the Thurs/Friday lows. The 50-dma has been pierced, but a close below the mark at 157.78 today would be the first since March of this year.
• For reference, according to a Bloomberg analysis of central bank accounts. Scale of intervention was probably around ¥3.5 trillion ($22 billion), based on a comparison of Bank of Japan accounts and money broker forecasts.
• GBP strength into the London close has helped GBPUSD (+0.56%) again print the best levels since mid-'23. On the weekly chart, a close at current levels would be the first above the 200-week moving average since the false break last year, and would open M/T targets at 1.3142 - the 76.4% retracement for the Jun'21 (post COVID high) - Sep'22 (Truss budget low) downleg.
• For EURGBP, weakness through the June low puts the cross at the lowest level since Aug'22. We note that this resumes the downtrend and places the immediate focus on 0.8366, the 2.236 projection of the Apr 23 - 30 - May 9 price swing.
• On Monday, Fed Chair Powell makes his final scheduled appearance ahead of the pre-July FOMC meeting communications blackout period. Elsewhere next week, CPI data from Canada, New Zealand and the UK is scheduled, with Thursday marking the ECB’s July decision.

MONDAY DATA CALENDAR

Date	GMT/Local	Impact	Flag	Country	Event
15/07/2024	0200/1000	***		CN	GDP
15/07/2024	0200/1000	***		CN	Fixed-Asset Investment
15/07/2024	0200/1000	***		CN	Retail Sales
15/07/2024	0200/1000	***		CN	Industrial Output
15/07/2024	0200/1000	**		CN	Surveyed Unemployment Rate M/M
15/07/2024	0700/0900			EU	ECB's Lagarde and Cipollone in Eurogroup meeting
15/07/2024	0900/1100	**		EU	Industrial Production
15/07/2024	1230/0830	**		CA	Monthly Survey of Manufacturing
15/07/2024	1230/0830	**		CA	Wholesale Trade
15/07/2024	1230/0830	**		US	Empire State Manufacturing Survey
15/07/2024	1430/1030	**		CA	BOC Business Outlook Survey
15/07/2024	1435/1035			US	San Francisco Fed's Mary Daly
15/07/2024	1530/1130	*		US	US Treasury Auction Result for 13 Week Bill
15/07/2024	1530/1130	*		US	US Treasury Auction Result for 26 Week Bill
15/07/2024	1630/1230			US	Fed Chair Jerome Powell