MNI ASIA OPEN: Tsys Shrug at BOE, SNB, NOK Policy Annc's

US TSYS Climbing Off Lows, Inexplicable Post-Data Reversal

• Treasuries look to finish Thursday's session weaker but well off morning lows, recovering ground after inexplicably reversing post-data strength (Treasuries blowing past overnight highs after the SNB cut rates by 25bps to 1.25%).
• Treasury futures gapped higher, extend past early overnight highs after lower than expected housing data: Housing Starts (1.277M vs. 1.37M est), MoM (-5.5% vs. 0.7% est), Building Permits (1.386M vs. 1.45M est), MoM (-3.8% vs. 0.7% est).
• Weekly Claims a little higher than expected at 238k vs. 235k est, continuing claims 1.828M vs. 1.810M est.
• Rates quickly reversed support and extended session lows by midmorning (TYU4 marking 110-08.5 low). No obvious headline driver for the reversal, some desks suggested it was related to spec acct selling ahead of potential intervention by the BOJ as the US$/Yen climbed to new high of 158.88.
• Others tied selling to incoming supply (multi-tranche jumbo issuance from Apple has been rumored), or to get ahead of selling from Norinchukin Bank after Nikkei reported last Friday they would unwind appr $63B in Tsy and EU longs by March 2025.
• Whatever the reason, futures have been see-sawing off lows ever since, TYU near late overnight range at 110-17.5; 10Y yield +.0271 at 4.2497%.
• Look ahead to Friday's data: S&P Flash PMIs, Leading Index, Home Sales.

NEWS

BOE (MNI): Guidance and Vote Split Unchanged As Rates Held at 5.25%
The MPC voted 7-2 to maintain Bank Rate at 5.25%, with the guidance language materially unchanged on the May MPS. Dhingra and Ramsden continued to vote for a 25bp cut in rates, in line with our expectations coming into the decision. A small change was made in one sentence of the guidance, with monetary policy needing "to remain restrictive for sufficiently long to return inflation to the 2% target" (rather than "sufficiently restrictive").

FRANCE (MNI): Candidates Speak On Economic Plans In Front Of Business Leaders:
The Movement of the Enterprises of France, the Confederation of Small and Medium Enterprises, and the Union of Local Businesses are holding a conference quizzing senior officials from the various political parties and alliances ahead of the 30 June legislative elections.

EU-RUSSIA (MNI): EU Agrees On 14th Sanctions Package, Hits LNG For First Time:
The Belgian presidency of the Council of the EU posts on X: "EU Ambassadors just agreed on a powerful and substantial 14th package of sanctions in reaction to the Russian aggression against Ukraine. This package provides new targeted measures and maximises the impact of existing sanctions by closing loopholes."

UKRAINE (MNI): FT-US: All Patriot Orders To Ukraine; SK Reconsiders Arms Supply:
The FT is reporting that the "US government is set to halt all open orders for Patriot air defence systems and interceptor missiles until Ukraine has enough to defend itself from Russia’s air attacks." Increased Russian missile and drone attacks on key Ukrainian infrastructure, notably power plants, has seen the Zelenskyy administration plead for increased supplies.

SECURITY (MNI): Iran Could Be Significantly Expanding Nuclear Programme
The Washington Post reportingthat Iran is undertaking a "major expansion" of its Fordow nuclear facility that could "soon triple the site’s production of enriched uranium and give Tehran new options for quickly assembling a nuclear arsenal if it chooses to."

OVERNIGHT DATA

US DATA (MNI): Jobless Claims Extend Recent Cooling Trend
Initial jobless claims were a little higher than expected at a seasonally adjusted 238k (cons 235k) in the week to Jun 15, covering a payrolls reference period. It follows an upward revised 243k (initial 242k). It sees the four-week average climb further to 233k (+6k) for the highest since Sep’23. It’s up from 210k in late April and the recent low of 201k in January, and compares with an average 218k in 2019.

• NSA initial claims are below the 2023 figure for the time of year but otherwise higher than recent ‘typical’ years – see chart.
• Continuing claims meanwhile extended their recent climb, rising to a seasonally adjusted 1828k (cons 1810k) in the week to Jun 8 after a downward revised 1813k (initial 1820k).
• It leaves continuing claims only just below the recent high of 1829k from late Jan.
• Combined, the data point to a continuation of the cooling in labor conditions seen in recent weeks.

US DATA (MNI): Homebuilding Set To Keep Softening As Pullback In Permits Continues
May's New Residential Construction report came in weaker than expected, with Housing Starts missing survey expectations by nearly 100k at 1,277k (1,370k expected, 1,352k prior rev), a fall of 5.5% M/M /19.3% Y/Y. Permits likewise disappointed, at 1,386k (1,450k expected, 1,440k prior rev), down 3.8% M/M and 9.5% Y/Y. Completions were down 8.4%M/M but up 1.0% Y/Y.

• The ongoing theme of nascent homebuilding weakness is evident in the report, most notably the pullback in multifamily residential construction activity, which represents around one-third of overall activity.
• Multi-unit permits fell to the lowest since April 2020, and at 437k have fallen substantially since the 813k peak of February 2023. Starts have actually bounced slightly from near-decade lows in March, but at 329k in both April and May, remain below pre-pandemic levels.
• Single family activity, which has help keep overall homebuilding buoyant over the past year, has sagged after an impressive bounce between 1Q 2023 and 1Q 2024: permits/starts fell in May to 949k/982k from 977l/1036k prior, well off the recent highs above 1M.
• Units under construction remain robust (1593k) but have almost certainly peaked, with permits and starts suggesting weaker activity in the quarters ahead.

US DATA (MNI): Philly Fed Mfg Prices Received Jump (Especially Expectations)
The Philly Fed manufacturing index surprisingly fell to 1.3 (cons 5.0) in June from 4.5, for its lowest level since January. It’s in contrast to Monday’s beat for the volatile Empire survey as it increased to -6.0 (cons -10.0) from -15.6 for its highest since Feb’24.

• Within the Philly Fed components, shipments slipped from -1.2 to -7.2 (lowest since Dec’23) whilst new orders improved but remained negative, rising from -7.9 to -2.2.
• Price components offered one of the few hawkish aspects across the broader sweep of 0830ET data. Current period prices paid increased from 18.7 to 22.5 (close to 23.0 in Apr which was highest since Dec’23).
• More notably from a passthrough angle after months of no sequential change, prices received increased from 6.6 to 13.7 for its highest since Jul’23.
• There was a particularly notable increase in prices received expectations over the next 6 months, jumping from 31.4 to 58.8 for the highest since Apr’22. This series peaked at 69.9 at the peak of post-pandemic inflationary pressures in Jun'21.

MARKETS SNAPSHOT

• Key market levels of markets in late NY trade:
• DJIA up 312.83 points (0.81%) at 39147.25
• S&P E-Mini Future down 16.5 points (-0.3%) at 5543.25
• Nasdaq down 152.5 points (-0.9%) at 17710.3
• US 10-Yr yield is up 2.7 bps at 4.2497%
• US Sep 10-Yr futures are down 7.5/32 at 110-18
• EURUSD down 0.0038 (-0.35%) at 1.0706
• USDJPY up 0.8 (0.51%) at 158.89
• WTI Crude Oil (front-month) up $0.6 (0.74%) at $82.17
• Gold is up $31 (1.33%) at $2359.19
• European bourses closing levels:
• EuroStoxx 50 up 62.28 points (1.27%) at 4947.73
• FTSE 100 up 67.35 points (0.82%) at 8272.46
• German DAX up 186.27 points (1.03%) at 18254.18
• French CAC 40 up 101.14 points (1.34%) at 7671.34

US TREASURY FUTURES CLOSE

• 3M10Y +3.046, -113.356 (L: -118.038 / H: -108.823)
• 2Y10Y +1.884, -47.685 (L: -49.662 / H: -46.156)
• 2Y30Y +2.467, -33.858 (L: -36.839 / H: -32.204)
• 5Y30Y +1.369, 12.392 (L: 9.988 / H: 12.849)
• Current futures levels:
• Sep 2-Yr futures down 1.625/32 at 102-6.5 (L: 102-04.625 / H: 102-08)
• Sep 5-Yr futures down 4.5/32 at 106-28 (L: 106-22.5 / H: 107-00.75)
• Sep 10-Yr futures down 8/32 at 110-17.5 (L: 110-08.5 / H: 110-26.5)
• Sep 30-Yr futures down 20/32 at 119-26 (L: 119-08 / H: 120-18)
• Sep Ultra futures down 27/32 at 127-27 (L: 127-01 / H: 128-29)

US 10YR FUTURE TECHS: (U4) Bullish Theme

• RES 4: 111-31 1.382 proj of the Apr 25 - May 16 - 29 price swing
• RES 3: 111-17+ 1.236 proj of the Apr 25 - May 16 - 29 price swing
• RES 2: 111-09 High Apr 1
• RES 1: 111-01 High Jun 14
• PRICE: 110-14 @ 1400 ET Jun 20
• SUP 1: 109-21+/109-00+ 50-day EMA / Low Jun 10 and key support
• SUP 2: 108-27+ Low Jun 3
• SUP 3: 108-11 Trendline drawn from the Apr low
• SUP 4: 107-31 Low May 29 and a key support

A bull cycle in Treasuries remains in play despite modest weakness posted Thursday and the contract continues to trade just below its recent highs. The recent breach of resistance at 110-21, the Jun 7 high, confirmed a resumption of the bull cycle that started Apr 25, and has paved the way for an extension towards 111-17+, a Fibonacci projection. On the downside, key support to watch lies at 109-00+, the Jun 10 low. Clearance of this level is required to reinstate a bearish theme.

SOFR FUTURES CLOSE

• Jun 24 -0.003 at 94.640
• Sep 24 -0.005 at 94.845
• Dec 24 -0.020 at 95.160
• Mar 25 -0.035 at 95.460
• Red Pack (Jun 25-Mar 26) -0.045 to -0.035
• Green Pack (Jun 26-Mar 27) -0.045 to -0.04
• Blue Pack (Jun 27-Mar 28) -0.04 to -0.035
• Gold Pack (Jun 28-Mar 29) -0.04 to -0.035

SOFR FIXES AND PRIOR SESSION REFERENCE RATES

SOFR Benchmark Settlements:

• 1M +0.00139 to 5.34364 (+0.01172/wk)
• 3M +0.00005 to 5.34746 (+0.00343/wk)
• 6M -0.00559 to 5.27772 (+0.00170/wk)
• 12M -0.01769 to 5.04675 (-0.00297/wk)

• Secured Overnight Financing Rate (SOFR): 5.33% (+0.00), volume: $2.021T
• Broad General Collateral Rate (BGCR): 5.32% (+0.00), volume: $763B
• Tri-Party General Collateral Rate (TGCR): 5.32% (+0.00), volume: $746B
• (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: $259B

FED Reverse Repo Operation

• Well off Monday's $333.429B low, RRP usage inches up to $388.841B from $375.542B on Tuesday; number of counterparties rises to 74 from 68 prior. Today's usage compares to $327.066B on Monday, April 15 -- the lowest level since mid-May 2021.

PIPELINE $2B Brazil +7Y Bond Launched

• Date $MM Issuer (Priced *, Launch #)
• 6/20 $2B #Federative Republic of Brazil +7Y 6.375%

EGBs-GILTS CASH CLOSE: Dovish BoE Hold Boosts Gilts

Gilts outperformed global peers Thursday as the BoE decision was seen as a "dovish hold", but yields closed off session lows.

• European bonds started the session weakly, but rallied at midday London time led by Gilts after the minutes of the BoE meeting noted the decision to hold rates was "finely balanced" for some policymakers - putting the next meeting in August more firmly in focus for a cut (now better than 50/50 implied).
• Yields extended to session lows after soft US economic data in the early afternoon (including jobless claims and housing activity).
• But global core FI soon pulled back alongside Treasuries amid some apparent reconsideration of the underlying data (strong Philly Fed prices received), and EGB/Gilt yields closed near the middle of their daily trading ranges.
• The UK curve twist steepened on the day; Germany's bear steepened. Periphery EGB spreads tightened for their 3rd day in 4, following last week's sharp widening.
• Friday morning brings UK retail sales data, followed by June flash PMIs.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 2bps at 2.828%, 5-Yr is up 2.7bps at 2.447%, 10-Yr is up 2.7bps at 2.431%, and 30-Yr is up 3.9bps at 2.594%.
• UK: The 2-Yr yield is down 3bps at 4.156%, 5-Yr is down 3bps at 3.904%, 10-Yr is down 1bps at 4.057%, and 30-Yr is up 1.4bps at 4.565%.
• Italian BTP spread down 2bps at 151.7bps / Spanish down 2.5bps at 86.6bps

FOREX USD Index Rises to Week’s Best Levels, CHF Maintains Post-SNB Weakness

• US yields have risen on Thursday and despite broadly weak data in the US, the price components of the Philadelphia Fed Activity release offered one of the few hawkish aspects across the broader sweep data. Current period prices paid increased from 18.7 to 22.5 (close to 23.0 in Apr which was highest since Dec’23) and this may have assisted the stubborn bid for the greenback across the US session.
• The yield move has underpinned a persistent move higher for USDJPY, which is closing back in on the 159.00 handle. An important resistance at 157.71, the May 29 high, has been breached and this confirms a resumption of the short-term bull cycle. Price has also pierced 158.21, 76.4% of the Apr 29 - May 3 sell-off and the clear break signals scope for a move towards 160.17, the Apr 29 high and a key resistance.
• The key underperformer in G10 on Thursday has been the Swiss Franc following a moderately surprising quarter point rate cut from the SNB. EURCHF holds around 30 pips off the 0.9573 highs as we approach the APAC crossover.
• While we pointed out this morning that EURCHF remains in a downtrend, we did note the short-term condition was oversold. A continuation of this technical correction might signal scope for an extension towards 0.9664, the 20-day EMA.
• On the other end of the spectrum, NOK leads FX gains on the back of a hawkish Norges Bank decision. While the bank kept rates unchanged, the policy statement and accompanying rate path pointed to unchanged policy through to the end of 2024 - leaning against outside expectations for a rate cut as soon as September. EUR/NOK corrected lower in response, hitting the lowest levels since late January to expose next support at 11.2517 in the short-term, and the December/cycle low of 11.1760 further out.
• UK retail sales on Friday precedes the plethora of flash European PMI data releases. Canada retail sales data also crosses, before US flash PMIs and existing home sales round off the week’s docket.

FRIDAY DATA CALENDAR

Date	GMT/Local	Impact	Flag	Country	Event
21/06/2024	2300/0900	***		AU	Judo Bank Flash Australia PMI
21/06/2024	2301/0001	**		UK	Gfk Monthly Consumer Confidence
21/06/2024	2330/0830	***		JP	CPI
21/06/2024	0030/0930	**		JP	Jibun Bank Flash Japan PMI
20/06/2024	0215/2215			US	San Francisco Fed's Mary Daly
21/06/2024	0600/0700	***		UK	Retail Sales
21/06/2024	0600/0700	***		UK	Public Sector Finances
21/06/2024	0645/0845	**		FR	Manufacturing Sentiment
21/06/2024	0700/0900			EU	ECB's De Guindos participates in ECONFIN meeting
21/06/2024	0715/0915	**		FR	S&P Global Services PMI (p)
21/06/2024	0715/0915	**		FR	S&P Global Manufacturing PMI (p)
21/06/2024	0730/0930	**		DE	S&P Global Services PMI (p)
21/06/2024	0730/0930	**		DE	S&P Global Manufacturing PMI (p)
21/06/2024	0800/1000	**		EU	S&P Global Services PMI (p)
21/06/2024	0800/1000	**		EU	S&P Global Manufacturing PMI (p)
21/06/2024	0800/1000	**		EU	S&P Global Composite PMI (p)
21/06/2024	0830/0930	***		UK	S&P Global Manufacturing PMI flash
21/06/2024	0830/0930	***		UK	S&P Global Services PMI flash
21/06/2024	0830/0930	***		UK	S&P Global Composite PMI flash
21/06/2024	1230/0830	*		CA	Industrial Product and Raw Material Price Index
21/06/2024	1230/0830	**		CA	Retail Trade
21/06/2024	1230/0830	**		US	WASDE Weekly Import/Export
21/06/2024	1345/0945	***		US	S&P Global Manufacturing Index (Flash)
21/06/2024	1345/0945	***		US	S&P Global Services Index (flash)
21/06/2024	1400/1000	***		US	NAR existing home sales
21/06/2024	1530/1630			UK	BoE APF Sales Schedule for Q3
21/06/2024	1700/1300	**		US	Baker Hughes Rig Count Overview - Weekly