MNI ASIA OPEN: Tsys Yields Rebound, Pre-NFP Repositioning

MNI BRIEF: NY Fed MCT Inflation Measure Lowest In Nearly 3 Yrs

The Federal Reserve's inflation fight is moving in the right direction as one measure of underlying trend price pressures decreased to the lowest level since January of 2021.

The October Multivariate Core Trend (MCT) reading stood at 2.60%, down from September’s 2.88%. That compares with a PCE price index year-over-year reading of 3.0% in October, and core PCE reading of 3.5%. The Fed’s inflation target is 2%. (See: MNI POLICY: Fed Sees Trend Inflation Edging Closer To 2% Goal)

"The increase in the MCT estimate relative to its pre-pandemic average is in large part due to the sector-specific trends in housing and services ex-housing, while the common trend component across the three sector aggregates accounts for 0.33 ppt," New York Fed economists wrote.

NEWS

US INTERVIEW (MNI): Fed Should Mandate Readiness Of Discount Window
The Federal Reserve needs to do more to modernize the discount window and ensure banks' operational readiness in times of crisis, including mandating testing of the facility at regular intervals, an ex-Federal Reserve staffer and former head of the discount window told MNI.

US INTERVIEW (MNI): Fed Could Cut Rates As Early As Q1 - Weinberg
The Federal Reserve could start reducing interest rates as early as the first quarter of 2024 if the recent steady decline in inflation continues, former Richmond Fed research director John Weinberg told MNI.

US (MNI): House Republicans May Hold Biden Impeachment Inquiry Vote This Week
House Republicans are expected to press ahead with a vote to authorize impeachment inquiries into President Biden and Homeland Security Secretary Alejandro Mayorkas as soon as this week.

BOC WATCH (MNI): Staying The Course In Cooling Economy
The Bank of Canada will maintain a cautious tone Wednesday as it holds official interest rates at their highest levels since 2001 for a third straight meeting, likely retaining some language about lingering inflation risks but also nodding to softer economic growth.

EUROPEAN UNION (MNI): Talks Turn Tough Ahead Of Dec 8 EU Fiscal Rules Meeting
Talks aimed at securing agreement on new European Union fiscal rules are getting tougher in the countdown to Friday’s crunch meeting of finance ministers, officials told MNI, with one saying the chances of a deal were just 50-50.

US (MNI): Ukraine Funding In Jeopardy As Progress On US-Mexico Border Talks Stalls
Senator Chris Murphy (D-CT), a member of the Senate group negotiating US-Mexico border reforms which could unlock Republican support for President Biden's USD$106 billion national security supplemental funding request, has told Politico that talks have collapsed amid Republican demands considered too strict for Democrat support.

RUSSIA (MNI): Putin Could Visit UAE And Saudi Arabia This Week
Reuters reporting that Russian President Vladimir Putin will visit Saudi Arabia and the United Arab Emirates this week, according to, "Russian news outlet Shot... citing Putin's aide Yury Ushakov."

US Tsys Tempering 2024 Rate Cut Projections

• Tsy futures finishing weaker, near second half lows on moderate volumes (TYH4 over 1.4M). Mar'24 10Y futures currently trading 110-08.5 last, -13 vs. 110-03.5 low -- well above technical support of 109-02.5 (20-day EMA), the trend direction still bullish with today's pullback considered corrective. Curves mostly flatter (3M10Y +8.192 at -111.818; 2Y10Y -2.461 at -36.949).
• Tsys had pared early losses, marked session highs after Factory Orders receded more than expected (-3.6% vs. -3.0 est, prior down-revised to 2.3% from 2.8%), Durables in line at -5.4%.
• Futures reversed course soon after, unwinding a portion of Friday's rally as markets tempered 2024 rate cut projections ahead of Friday's headline employment data: December at -.3bp at 5.333%, January 2024 cumulative -3.3bp at 5.302%, March 2024 pricing in -54.2% chance of a rate cut with cumulative at -16.8bp at 5.167%, May 2024 pricing in -66.0% (-71.2% this morning) with cumulative -33.3bp at 5.002%.
• Tuesday Data Calendar includes S&P PMIs, JOLTS and ISMs. Fed speakers in Blackout through December 14, day after the final COMC rate annc for 2023.

OVERNIGHT DATA

US OCT FACTORY ORDERS -3.6%; EX-TRANSPORT NEW ORDERS -1.2%
US OCT DURABLE ORDERS -5.4%
US OCT NONDEFENSE CAP GOODS ORDERS EX AIRCRAFT -0.3%

MARKET SNAPSHOT 

• Key market levels of markets in late NY trade:
• DJIA down 56.84 points (-0.16%) at 36188.21
• S&P E-Mini Future down 29.25 points (-0.64%) at 4571.25
• Nasdaq down 151.9 points (-1.1%) at 14152.9
• US 10-Yr yield is up 9 bps at 4.2856%
• US Mar 10-Yr futures are down 15.5/32 at 110-6
• EURUSD down 0.0053 (-0.49%) at 1.0831
• USDJPY up 0.47 (0.32%) at 147.29
• WTI Crude Oil (front-month) down $0.89 (-1.2%) at $73.17
• Gold is down $41.05 (-1.98%) at $2031.08
• European bourses closing levels:
• EuroStoxx 50 down 3.56 points (-0.08%) at 4414.95
• FTSE 100 down 16.39 points (-0.22%) at 7512.96
• German DAX up 7.24 points (0.04%) at 16404.76
• French CAC 40 down 13.56 points (-0.18%) at 7332.59

US TREASURY FUTURES CLOSE

• 3M10Y +9.347, -110.663 (L: -118.284 / H: -109.246)
• 2Y10Y -2.552, -37.04 (L: -37.819 / H: -34.885)
• 2Y30Y -6.925, -22.086 (L: -22.202 / H: -17.61)
• 5Y30Y -6.509, 19.717 (L: 19.542 / H: 24.03)
• Current futures levels:
• Mar 2-Yr futures down 5.875/32 at 102-11 (L: 102-10.25 / H: 102-18.375)
• Dec 5-Yr futures down 12/32 at 107-3.25 (L: 107-01.75 / H: 107-18.75)
• Mar 10-Yr futures down 16/32 at 110-5.5 (L: 110-03.5 / H: 110-27)
• Mar 30-Yr futures down 20/32 at 117-17 (L: 117-09 / H: 118-16)
• Mar Ultra futures down 15/32 at 124-16 (L: 124-02 / H: 125-17)

US 10Y FUTURE TECHS: (H4) Bull Cycle Still In Play

• RES 4: 112-03 1.382 proj of the Oct 19 - Nov 3 - Nov 13 price swing
• RES 3: 111-19 1.236 proj of the Oct 19 - Nov 3 - Nov 13 price swing
• RES 2: 111-00 Round number resistance
• RES 1: 110-28 High Dec 1
• PRICE: 110-04 @ 18:37 GMT Dec 4
• SUP 1: 109-02+ 20-day EMA
• SUP 2: 108-18+ Low Nov 27 and a key short-term support
• SUP 3: 107-22 Low Nov 14
• SUP 4: 107-11+ Low Nov 13 and a reversal trigger

The trend direction in Treasuries remains up and today’s pullback is considered corrective. Price has pierced 110-25, the 1.00 projection of the Oct 19 - Nov 3 - Nov 13 price swing. A resumption of gains would open the 111-00 handle. Last week’s rally confirmed an extension of the positive price sequence of higher highs and higher lows - the definition of an uptrend. Initial key support is at 108-18+, the Nov 27 low.

SOFR FUTURES CLOSE

• Current White pack (Dec 23-Sep 24):
• Dec 23 -0.018 at 94.623
• Mar 24 -0.050 at 94.860
• Jun 24 -0.075 at 95.215
• Sep 24 -0.090 at 95.585
• Red Pack (Dec 24-Sep 25) -0.10 to -0.075
• Green Pack (Dec 25-Sep 26) -0.065 to -0.06
• Blue Pack (Dec 26-Sep 27) -0.055 to -0.055
• Gold Pack (Dec 27-Sep 28) -0.055 to -0.045

FIXES AND PRIOR SESSION REFERENCE RATES

SOFR Benchmark Settlements:

• 1M -0.00079 to 5.34587 (-0.00569 total last wk)
• 3M -0.01226 to 5.36297 (-0.01798 total last wk)
• 6M -0.03832 to 5.30258 (-0.06000 total last wk)
• 12M -0.07928 to 5.03913 (-0.15505 total last wk)

• Secured Overnight Financing Rate (SOFR): 5.39% (+0.06), volume: $1.650T
• Broad General Collateral Rate (BGCR): 5.31% (+0.00), volume: $607B
• Tri-Party General Collateral Rate (TGCR): 5.31% (+0.00), volume: $594B
• (rate, volume levels reflect prior session)

• Daily Effective Fed Funds Rate: 5.33% (+0.00), volume: $107B
• Daily Overnight Bank Funding Rate: 5.32% (+0.00), volume: $262B

FED Reverse Repo Operation

The NY Fed Reverse Repo operation usage rebounds to $815.847B vs. last Friday's $768.543B (lowest since early July 2021) w/84 counterparties today. Usage fell below $1T for the first time since August 2021 last on November 9 ($993.314B).

PIPELINE: GM, Wells Fargo Launched, IADB Debt issuance Expected Tuesday

• Date $MM Issuer (Priced *, Launch #)
• 12/04 $3B #GM $1.5B 5Y +160, $1.5B 5Y SOFR, 10Y +185
• 12/04 $2.75B #Wells Fargo $2.25B 3Y +85, $500M 3Y SOFR+107
• 12/04 $1.5B #Crown Castle $750M +5Y +1143, $750M +10Y +153
• 12/04 $750M NextEra Energy 5NC
• 12/04 $500M #TD Bank WNG 3Y +85
• 12/04 $500M Univision Comm 5Y tap
• Later in the week:
• 12/05 $Benchmark IADB 3Y SOFR+30a
• 12/?? $750M Alliant Holdings 7NC3

EGBs-GILTS CASH CLOSE: Greece Outperforms, Bunds And Gilts Mixed

Gilts underperformed Bunds to start the week, with European curves flattening.

• In a day of few catalysts, early trade saw fairly rangebound yields, leaning higher after the rally late last week.
• Yields fell back to session lows (and testing last Fridays' lowest levels) in seemingly risk-off mid-afternoon trade, as the USD strengthened, equities faded, and periphery spreads widened.
• Greece outperformed across the space, following Fitch's upgrade to BBB- (outlook stable) after hours on Friday.
• The day's central bank speakers (ECB's Lagarde, BoE's Dhingra) had little to say on current monetary policy and didn't move rates markets specifically.
• Even so, ECB rate cut pricing did deepen slightly on the day, though BoE implied cuts reversed somewhat. The UK curve closed bear flatter, with Germany's twist flattening.
• Tuesday's early highlight will be final Nov services PMIs.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 1.3bps at 2.695%, 5-Yr is up 1.1bps at 2.275%, 10-Yr is down 0.8bps at 2.354%, and 30-Yr is down 4.4bps at 2.59%.
• UK: The 2-Yr yield is up 8bps at 4.618%, 5-Yr is up 8bps at 4.186%, 10-Yr is up 5.4bps at 4.194%, and 30-Yr is up 5bps at 4.724%.
• Italian BTP spread up 3.3bps at 177.2bps /Greek down 2.3bps at 120bps

FOREX Higher US Yields Provoke Broad Greenback Strength, EMFX Underperforms

• The 0.45% move higher for the USD index on Monday has broadly been a function of yield differentials, with Fed ’24 pricing moving away from Friday’s dovish extremes as participants continue to assess the viability/speed of the Fed easing priced into markets. The associated extension of post-inflation Euro weakness and heavy price action for equities are also assisting the greenback recovery.
• As such EURUSD (-0.50%) continues its short-term grind lower and traded within four pips of the 1.0800 handle during today’s session. The move lower appears to be a technical correction with support to watch at 1.0770, the 50-day EMA.
• With a less optimistic risk backdrop the likes of AUD and NZD are underperforming, with the Norwegian Krone the weakest in G10. Furthermore, the higher US yields have had a notable impact on some emerging market currencies, with the Mexican peso briefly extending losses to 2.00% and USDMXN trading above its firm initial resistance of 17.4888, the 50-day EMA.
• The re-widening of yield differentials also underpinned a recovery for USDJPY which had a 120pip bounce from the 146.23 lows printed during APAC hours. The recent move lower for the pair highlights a resumption of the bear cycle that started Nov 13. Attention is on a key support at 146.76, a trendline drawn from the Mar 24 low. With today’s breach, a clear break would signal a stronger reversal and open 145.91, the Sep 11 low. Key short-term resistance to watch is 148.51, the Nov 30 high.
• The focus in PAAC on Tuesday will be the RBA decision, where It is widely expected that the central bank will leave rates at 4.35%. In the US, the ISM Services PMI and JOLTS data headline the docket.

Tuesday Data Calendar

Date	GMT/Local	Impact	Flag	Country	Event
05/12/2023	0001/0001	*		UK	BRC-KPMG Shop Sales Monitor
05/12/2023	0030/0930	**		JP	IHS Markit Final Japan Services PMI
05/12/2023	0145/0945	**		CN	IHS Markit Final China Services PMI
05/12/2023	0330/1430	***		AU	RBA Rate Decision
05/12/2023	0745/0845	*		FR	Industrial Production
05/12/2023	0800/0900	**		ES	Industrial Production
05/12/2023	0815/0915	**		ES	S&P Global Services PMI (f)
05/12/2023	0845/0945	**		IT	S&P Global Services PMI (f)
05/12/2023	0850/0950	**		FR	IHS Markit Services PMI (f)
05/12/2023	0855/0955	**		DE	IHS Markit Services PMI (f)
05/12/2023	0900/1000	**		EU	IHS Markit Services PMI (f)
05/12/2023	0900/1000	**		EU	ECB Consumer Expectations Survey
05/12/2023	0930/0930	**		UK	S&P Global Services PMI (Final)
05/12/2023	1000/1100	**		EU	PPI
05/12/2023	1000/1000	*		UK	Index Linked Gilt Outright Auction Result
05/12/2023	1355/0855	**		US	Redbook Retail Sales Index
05/12/2023	1445/0945	***		US	IHS Markit Services Index (final)
05/12/2023	1500/1000	**		US	IBD/TIPP Optimism Index
05/12/2023	1500/1000	***		US	ISM Non-Manufacturing Index
05/12/2023	1500/1000	***		US	JOLTS jobs opening level
05/12/2023	1500/1000	***		US	JOLTS quits Rate
05/12/2023	1630/1130	*		US	US Treasury Auction Result for Cash Management Bill