MNI ASIA OPEN: US President Biden Exits Race, Endorses Harris

US

US (MNI): US President Biden Drops Out of 2024 Presidential Race, Endorses Harris
US President Biden announced his exit from the 2024 presidential race Sunday afternoon.

• Posted on X: President Biden said "It has been the greatest honor of my life to serve as your President. And while it has been my intention to seek reelection, I believe it is in the best interest of my party and the country for me to stand down and to focus solely on fulfilling my duties as President for the remainder of my term. I will speak to the Nation later this week in more detail about my decision."
• President Biden separately announced his endorsement of VP Kamala Harris as President.

FED BRIEF (MNI): Williams - Fed Owns Responsibility Of 2% Inflation
Federal Reserve Bank of New York President John Williams on Friday said the central bank remains committed to its 2% inflation target, adding that the longer run trends affecting a low neutral rate in the U.S. are still in place.

• "Central Banks must own the responsibility to deliver price stability and have the independence to act to achieve it. Today, regardless of the economic shocks that we face, whether changes in fiscal policy or globalization and de-globalization swings, central banks recognize that attaining and maintaining price stability is their job to do and the experience of the past few years demonstrate that," Williams said at an event in Cusco, Peru.

NEWS

US: Biden Drops Out of Race, Scrambling the Campaign for the White House, NY TIMES
President Biden’s withdrawal under pressure after a disastrous debate cleared the way for a new nominee to take on Donald Trump in the fall.

US (MNI): Democrat Committee To Meet On 'Virtual Roll Call' Today:
Reuters reporting that a committee of the Democratic party will meet later today in order to discuss the 'virtual roll call' to officially nominate President Joe Biden as the party's nominee ahead of the Democratic National Convention starting 19 August. As Reuters reports "An online or virtual vote also means no chance of a live convention floor battle among delegates in Chicago that could embarrass Biden." A second meeting is set to take place early next week to officially set the rules of any online roll call.

ISRAEL (MNI): Drone Strike On Tel Aviv Raises Prospect Of Retaliation:
A drone strike by Iran-backed Houthi rebels in Yemen on the Israeli city of Tel Aviv on the morning of 19 July raises the prospect of the gov't of PM Benjamin Netanyahu launching retaliatory, and potentially escalatory, attacks.

ASIA (MNI): China Vice Foreign Min To Visit Japan & SK For High-Level Talks:
The Chinese Foreign Ministry has confirmed that Vice Foreign Minister Ma Zhaoxu will travel to Japan and South Korea from 21-25 July for 'high-level strategic dialogue'. FM spox Lin Jian confirmed that Ma will hold the 16th China-Japan strategic dialogue in Tokyo with his Japanese counterpart, Masataka Okano, and the 10th high-level foreign ministries strategic dialogue with South Korea's First Vice-Foreign Minister, Kim Hong-kyun, in Seoul.

US TSYS Back Near Lows of Week as Fed Enters Policy Blackout

• Treasury futures remain weaker after the bell, near lows for the week. No data or obvious headline driver for the break lower, while NY Fed Williams monetary policy panel discussion didn't break any new ground ahead tonight's policy blackout that runs through August 1.
• Williams said the central bank remains committed to its 2% inflation target, adding that the longer run trends affecting a low neutral rate in the U.S. are still in place.
• Tsy Sep'24 10Y futures currently -13 at 110-26 vs. 110-25 low. Initial technical support at 110-15+ (20-day EMA) followed by 110-03 (50-day EMA) values.
• While market depth may be thin, net volumes were strong for summer markets: TYU4 over 1.4M after the bell. Volumes surged on the back of news that cloud software provider CrowdStrike was having outages that affect Microsoft systems around the globe overnight. Headlines of workaround solutions having been filtering through the last couple hours.
• Speculation over whether President Biden will pull out of his run for a second term continue. Opinions vary over how FI markets will react if Biden pulls out, from no reaction at all to a surge in yields depending on who fills the void. Debate over price action and curve moves were ongoing as markets game out rate cuts, taxes, tariffs, mass deportations, etc.

OVERNIGHT DATA

US DATA (MNI): Share Of States Triggering Sahm Rule Falls In June
Released at 1000ET today, the state unemployment data for June showed a pullback in the share of states that have seen a triggering of the Sahm rule, from an upward revised 42% to 34%.

• We feel it’s a move that further warrants caution in using this approach on state-wide data.
• The nationwide unemployment rate surprisingly lifted further to 4.05% in the June payrolls report two weeks ago.
• This was notable as it nudged above the 4.0% the median FOMC participant forecast for end-2024. It also translated to a 0.4pt climb in the Sahm calculation in a step closer to the 0.5pt historically indicative of recession.
• This trend increase has seen some analysts watch the share of states as an early warning indicator but with particularly strong immigration growth at present, it’s likely less reliable than ahead of prior recessions. Claudia Sahm herself has cautioned using the approach owing to differing immigration flows in each state which can steadily be re-distributed over time.
• The bottom right chart lends support to this criticism, with the share of starts initially pushing sharply higher but since plateauing and most recently declining with the 34% its lowest since October.

Canada DATA (MNI): May Retails Post Biggest Fall In A Yr, Jun Flash Down Too
May retail sales -0.8% with declines in every major category except autos, StatsCan says Friday. Food/beverage led decline at -1.9%.

• June flash sales -0.3%, no detail on the drivers of that move.
• YOY sales +1.0% and overall sales trend has been flat for the last two years, perhaps reflecting drag of BOC rate increases. Further weakness expected as mortgage holders refinance at higher rates and lose discretionary income, even as BOC has begun cutting its overnight benchmark.
• Separate StatsCan report on monthly credit aggregates shows YOY mortgage credit growth remains around the slowest pace in decades, and non-mortgage loan debt fell CAD1.3 billion (-0.2%) in May, the first decline since March 2023.
• "Non-mortgage loans with chartered banks declined $6.7 billion (-1.0%), the largest decrease since July 2020. Bankers' acceptances dropped $32.2 billion (-24.4%) to $100.0 billion in May 2024, representing 49.7% of the peak level from September 2023, ahead of the cessation of the Canadian Dollar Offered Rate's publication in June 2024."

MARKETS SNAPSHOT

• Key market levels of markets in late NY trade:
• DJIA down 307.7 points (-0.76%) at 40357.09
• S&P E-Mini Future down 30.25 points (-0.54%) at 5563.75
• Nasdaq down 91.9 points (-0.5%) at 17777.89
• US 10-Yr yield is up 3.7 bps at 4.2389%
• US Sep 10-Yr futures are down 13/32 at 110-26
• EURUSD down 0.0017 (-0.16%) at 1.088
• USDJPY up 0.14 (0.09%) at 157.51
• WTI Crude Oil (front-month) down $2.55 (-3.08%) at $80.27
• Gold is down $46.38 (-1.9%) at $2398.69
• European bourses closing levels:
• EuroStoxx 50 down 42.88 points (-0.88%) at 4827.24
• FTSE 100 down 49.17 points (-0.6%) at 8155.72
• German DAX down 182.83 points (-1%) at 18171.93
• French CAC 40 down 52.03 points (-0.69%) at 7534.52

US TREASURY FUTURES CLOSE

• 3M10Y +4.18, -110.301 (L: -118.048 / H: -109.52)
• 2Y10Y +0.37, -26.985 (L: -28.622 / H: -25.712)
• 2Y30Y -0.438, -5.825 (L: -7.38 / H: -4.086)
• 5Y30Y -1.673, 28.404 (L: 28.187 / H: 30.473)
• Current futures levels:
• Sep 2-Yr futures down 3/32 at 102-15.125 (L: 102-14.5 / H: 102-18.125)
• Sep 5-Yr futures down 8.5/32 at 107-8.5 (L: 107-07.75 / H: 107-17)
• Sep 10-Yr futures down 13/32 at 110-26 (L: 110-25 / H: 111-07.5)
• Sep 30-Yr futures down 23/32 at 119-3 (L: 118-31 / H: 119-29)
• Sep Ultra futures down 31/32 at 126-3 (L: 125-29 / H: 127-06)

US 10YR FUTURE TECHS: (U4) Pullback Persists, But Bullish Backdrop Remains

• 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: 111-13+/17+ High Jul 16 / 1.382 of Apr 25-May 16-29 swing
• PRICE: 110-29+ @ 1105 ET Jul 19
• SUP 1: 110-15+/110-03 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: 108-25+ Trendline drawn from the Apr 25 low

A bullish theme in Treasuries remains intact despite a fade in prices through Friday morning. Short-term pullbacks are proving to be corrective at this stage. The contract has traded through resistance at 111-10+, the Jul 8 high. This confirms a resumption of the bull cycle and has opened 111-17+ and 111-31, the 1.236 and 1.382 projection of the Apr 25 - May 16 - 29 price swing. Initial support is 110-15+, the 20-day EMA.

SOFR FUTURES CLOSE

• Sep 24 -0.010 at 94.930
• Dec 24 -0.025 at 95.320
• Mar 25 -0.045 at 95.680
• Jun 25 -0.060 at 95.960
• Red Pack (Sep 25-Jun 26) -0.08 to -0.065
• Green Pack (Sep 26-Jun 27) -0.08 to -0.07
• Blue Pack (Sep 27-Jun 28) -0.06 to -0.055
• Gold Pack (Sep 28-Jun 29) -0.055 to -0.05

SOFR FIXES AND PRIOR SESSION REFERENCE RATES

SOFR Benchmark Settlements:

• 1M +0.00162 to 5.34675 (+0.01895/wk)
• 3M +0.00098 to 5.28299 (-0.00508/wk)
• 6M -0.00107 to 5.13468 (-0.03012/wk)
• 12M -0.00530 to 4.80026 (-0.06528/wk)

• Secured Overnight Financing Rate (SOFR): 5.34% (-0.01), volume: $2.014T
• Broad General Collateral Rate (BGCR): 5.32% (-0.01), volume: $799B
• Tri-Party General Collateral Rate (TGCR): 5.32% (-0.01), volume: $778B
• (rate, volume levels reflect prior session)

• Daily Effective Fed Funds Rate: 5.33% (+0.00), volume: $80B
• Daily Overnight Bank Funding Rate: 5.32% (+0.00), volume: $235B

FED Reverse Repo Operation

RRP usage recedes up to $379.801B from $391.652B on Thursday. Number of counterparties at 67 from 66 prior. Today's usage compares to $327.066B on Monday, April 15 -- the lowest level since mid-May 2021.

FOREX: Antipodeans Falter with Equities Remaining on Back Foot

• Major equity indices remained on the back foot on Friday, having come under significant pressure in the latter half of the week. Despite this, the USD index only rose 0.15%, with most major currencies respecting relatively narrow ranges ahead of the weekend.
• Risk sensitive AUD and NZD were the biggest losers on Friday, with NZDUSD (-0.56%) extending on some early weakness as the NZ-US 2yr spread fell back below 0bps.
• We highlight the most recent AUDNZD outperformance has been driven by a narrowing in the NZ-AU 3-month swap rate 1-year forward (1Y3M) spread, which has narrowed more than 190bps since its cyclical high in mid-2023.
• For AUDUSD itself, price action sees the pair slip back below the prior breakout level at 0.6715, a potentially bearish development if we were to see a weekly close below this mark. A deeper retracement lower would place the focus on 0.6666, the 50-day EMA and then 0.6576, the Jun 10 low and a key support.
• Despite the impressive 350 pip range for USDJPY this week, the pair sits just moderately lower as markets digest the most recent intervention from the MOF/BOJ and the upcoming central bank meeting at the end of July.
• The underlying softening of US data prompted an extension lower for USDJPY, exacerbated by a yen positioning squeeze as analysts scrutinised the attractiveness of carry trade strategies. USDJPY printed as low as 155.38 on Thursday, however, safe haven dollar demand has provoked a strong recovery off these lows to around 157.50 at typing.
• Overall, the most recent selloff highlights a potential reversal and signals scope for a deeper retracement, towards 154.55 next, the Jun 4 low. Initial firm resistance is seen at 159.16, the 20-day EMA.
• With a quiet start to next week’s data schedule, emphasis will be placed on European flash PMIs, the Bank of Canada decision and US GDP.

MONDAY-TUESDAY DATA CALENDAR

Date	GMT/Local	Impact	Flag	Country	Event
22/07/2024	1530/1130	*		US	US Treasury Auction Result for 26 Week Bill
22/07/2024	1530/1130	*		US	US Treasury Auction Result for 13 Week Bill
23/07/2024	0700/0900			EU	ECB's Lane at ECB/IMF conference in Frankfurt
23/07/2024	0900/1000	*		UK	Index Linked Gilt Outright Auction Result
23/07/2024	1100/0700	***		TR	Turkey Benchmark Rate
23/07/2024	1230/0830	**		US	Philadelphia Fed Nonmanufacturing Index
23/07/2024	1255/0855	**		US	Redbook Retail Sales Index
23/07/2024	1400/1600	**		EU	Consumer Confidence Indicator (p)
23/07/2024	1400/1000	***		US	NAR existing home sales
23/07/2024	1400/1000	**		US	Richmond Fed Survey
23/07/2024	1530/1130	*		US	US Treasury Auction Result for Cash Management Bill
23/07/2024	1700/1300	*		US	US Treasury Auction Result for 2 Year Note
24/07/2024	2300/0900	***		AU	Judo Bank Flash Australia PMI