MNI ASIA OPEN: Yields Rise Ahead KC Fed Event, Chairman Powell

US

FED BRIEF (MNI): Fed’s Schmid: Want To Be ‘Thoughtful’ On Sept Cut
The Federal Reserve could be approaching the time to reduce interest rates but it must make sure inflation is coming down sustainably to its 2% target, Kansas City Fed President Jeffrey Schmid said Thursday. “We’ve got some data sets to come in before September, I want to be thoughtful about it,” Schmid told CNBC in an interview. “I’m taking a harder look at, I’m going to let the data show where we lead.”

FED (MNI): Collins Downplays Payroll Revisions
Boston Fed’s Collins (’25 voter) tells Fox Business that the jobs market is healthy despite [yesterday’s downward preliminary benchmark] revisions. Inflation and employment have come into better balance and she still sees a gradual pace of cutting as likely being appropriate, with the pace guided by data.

NEWS

MIDEAST (MNI): US Envoy To UN-Gaza Ceasefire Deal 'Now In Sight':
Wires carrying comments from US Ambassador to the United Nations Linda Thomas-Greenfield. Says that a hostages-for-ceasefire in Gaza deal is 'now in sight'.

ISRAEL (MNI): WaPo-US Off. Believe Hamas Ldr Backs Deal, But Waiting For Iran Response:
In a Washington Post opinion column, David Ignatius writes that, according to unnamed US officials, "U.S. officials think Hamas leader Yehiya Sinwar,[...] favors the deal.[...]But Hamas seems to be playing a waiting game, probably in the hope that Iran or Hezbollah will attack Israel — and thereby transform the battlefield."

UKRAINE (MNI): Drones Hit Russia Base As Zelenskyy Visits Kursk-Adjacent Region:
Reuters reporting that according to a security source in Kyiv, "Ukraine conducted a drone attack on Russia's Marinovka military airfield in the southern Russian region of Volgograd, striking a storage site for fuel and glide bombs". Marinovka lies 275km east of the internationally-recognised Russo-Ukrainian border.

INDONESIA (MNI): Deputy Speaker-Gov't Pulls Plan For Electoral Law Change:
Sufmi Dasco Ahmad, one of the deputy speakers of the Indonesian parliament has confirmed that the legislature has dropped its plan to revise the regional election law after mass protests erupted in multiple cities opposed to the move.

SOUTH AFRICA (MNI): Zuma's MK Party Confirms Former EFF Dep Pres As National Organiser:
The main opposition far-left populist uMkhonto we Sizwe (MK) Party has confirmed the retention of former South African President Jacob Zuma as party leader, with former judge John Hlophe as deputy leader and official Leader of the Opposition. The party has also named Floyd Shivambu as 'national organiser'.

JAPAN (MNI): Koizumi Overtakes Ishiba In LDP Leadership Poll-Nikkei:
The latest Nikkei opinion poll for the governing Liberal Democratic Party (LDP) presidency shows former environment minister Shinjiro Koizumi overtaking former defence minister Shigeru Ishiba. The poll, carried out 21-22 Aug, shows Koizumi with 23% support with Ishiba behind at 18% while Minister of Economic Security Sanae Takaichi sits in third place at 11%.

US TSYS Yields Higher Ahead Jackson Hole Economic Summit, Chair Powell Friday

• Treasuries finished weaker/near lows Thursday after steady to mixed data and cautious comments from Fed’s Schmid. The Fed could be approaching the time to reduce interest rates but it must make sure inflation is coming down sustainably to its 2% target, Kansas City Fed President Jeffrey Schmid said Thursday.
• “We’ve got some data sets to come in before September, I want to be thoughtful about it,” Schmid told CNBC in an interview. “I’m taking a harder look at, I’m going to let the data show where we lead.”
• Fast two-way trade as Treasury futures initially rebound then extend lows after weekly claims data came out in line with expectations, continuing claims a little lower than anticipated with a modest down-revision to the prior.
• Treasury futures gap lower/extend lows after mixed flash PMI figures -- Mfg lower than expected vs. higher than expected Services and Composite. Manufacturing surprises lower at 48.0 (cons 49.5) after 49.6 whilst services surprised higher with a mild increase to 55.2 (cons 54.0) after 54.3. The beat for services, with its much larger weight, would ordinarily drive the market reaction but there was softness in some key areas within the report.
• Focus turns to the KC Fed hosted Jackson Hole economic symposium "Reassessing the Effectiveness and Transmission of Monetary Policy," will be held Aug. 22-24, Fed Chairman Powell speaking 1000ET Friday morning.

OVERNIGHT DATA

US DATA (MNI): No Sign Of Additional Labor Cooling In Weekly Claims
Weekly jobless claims data were about as in line with expectations as possible. Initial jobless claims were as expected with a seasonally adjusted 232k (cons 232k) in the week to Aug 17 – a payrolls reference period – after a marginally upward revised 228k (initial 227k).

• The four-week moving average stands at 236k and as we noted earlier that’s now no longer counting the peak boost from Hurricane Beryl. Considering it’ll still be biased slightly higher, it compares well with the 234k for the four-week average seen pre-hurricane, implying no sign of labor deterioration.
• NSA initial claims fell 9.3k on the week. Largest state drivers were familiar with Michigan (-2.8k) in potentially some of the last disruption from seasonal adjustment trying to capture different timing of summer auto plant shutdowns. Texas (-2.1k) to 16.4k is back close to the ~15k typically seen at this time of year after prior hurricane disruption.
• Continuing claims were slightly lower than expected at a seasonally adjusted 1863k (cons 1870k) in the week to Aug 10 after a downward revised 1859k (initial 1864k). Whilst a surprise lower, they continue to stand close to the 1871k from two weeks prior that marked the highest since Nov 2021.
• The NSA continuing claims data continue to paint a very similar picture to recent weeks, i.e. tracking right at the top of typical ranges in the three years prior to the pandemic but they haven’t shown a marked increase against that relative basis for more than a month now.

US DATA (MNI): Service PMI Flash Beats In Aug But Soft Jobs And Output Prices
The S&P Global preliminary PMIs were mixed in August. Manufacturing surprises lower at 48.0 (cons 49.5) after 49.6 whilst services surprised higher with a mild increase to 55.2 (cons 54.0) after 54.3. The beat for services, with its much larger weight, would ordinarily drive the market reaction but there was softness in some key areas within the report.

US DATA (MNI): No Surprises In Existing Home Sales, Still Near Post-Pandemic Lows
Existing home sales were as expected in July at 3.95m (cons 3.94m) after a marginally upward revised 3.90m (initial 3.89m). It saw sales increase a tepid 1.3% M/M after the -5.1% in June rounded off an 11% cumulative decline through Feb-Jun.

• Increases were primarily driven by the northeast (4.3%, smallest region) whilst the other three major regions were only 0-1.4% higher.
• There’s no real surprises on the supply side either: months of supply stood at 4.0, still close to the 4.2 average in July’s through 2017-19 as it consolidated the prior relative jump in June to 4.1 vs a pre-pandemic average of 4.2.
• Median price growth meanwhile was largely steady at 4.2% Y/Y after 4.1%.
• There is little sign of uplift from declining mortgage rates in the existing home sales data, which continue to hover close to post-pandemic lows. Latest mortgage applications suggest little change is imminent either with refis jumping but new purchase applications broadly trending sideways also near recent lows.

MARKETS SNAPSHOT

• Key market levels of markets in late NY trade:
• DJIA down 204.49 points (-0.5%) at 40684.33
• S&P E-Mini Future down 52.5 points (-0.93%) at 5588
• Nasdaq down 307.8 points (-1.7%) at 17606.08
• US 10-Yr yield is up 5.7 bps at 3.8578%
• US Sep 10-Yr futures are down 19/32 at 113-9.5
• EURUSD down 0.0044 (-0.39%) at 1.1106
• USDJPY up 1.09 (0.75%) at 146.3
• Gold is down $30.34 (-1.21%) at $2482.19
• European bourses closing levels:
• EuroStoxx 50 down 0.28 points (-0.01%) at 4885
• FTSE 100 up 4.57 points (0.06%) at 8288
• German DAX up 44.44 points (0.24%) at 18493.39
• French CAC 40 down 0.61 points (-0.01%) at 7524.11

US TREASURY FUTURES CLOSE

• 3M10Y +4.573, -130.772 (L: -137.376 / H: -129.561)
• 2Y10Y -1.871, -15.225 (L: -15.625 / H: -12.494)
• 2Y30Y -2.592, 11.893 (L: 11.385 / H: 14.72)
• 5Y30Y -1.358, 40.595 (L: 39.246 / H: 42.301)
• Current futures levels:
• Sep 2-Yr futures down 5.875/32 at 103-6.5 (L: 103-05.875 / H: 103-12.125)
• Sep 5-Yr futures down 12.5/32 at 108-29 (L: 108-26.75 / H: 109-09)
• Sep 10-Yr futures down 19/32 at 113-9.5 (L: 113-05.5 / H: 113-27)
• Sep 30-Yr futures down 43/32 at 124-1 (L: 123-24 / H: 125-04)
• Sep Ultra futures down 61/32 at 132-11 (L: 131-31 / H: 133-28)

US 10YR FUTURE TECHS: (U4) Trend Needle Points North

• RES 4: 115-30+ 2.764 proj of the Apr 25 - May 16 - 29 price swing
• RES 3: 115-17 2.618 proj of the Apr 25 - May 16 - 29 price swing
• RES 2: 115-03+ High Aug 5 and the bull trigger
• RES 1: 114-03/114-16 High Aug 6 / 76.4% of the Aug 5 - 8 pullback
• PRICE: 113-06 @ 1240 ET Aug 22
• SUP 1: 112-26+ 20-day EMA
• SUP 2: 111-25 50-day EMA values
• SUP 3: 111-06+ Low Jul 29
• SUP 4: 110-18+ Low Jul 22

A bullish theme in Treasuries remains intact and the contract has traded higher this week and remains above support. Note that MA studies are in a bull-mode position and this continues to highlight bullish sentiment. The recent breach of 111-01, Jun 14 high, confirmed a resumption of the uptrend. Sights are on 115-17, a Fibonacci projection. The recent move down is considered corrective. Support to watch is 112-26+, the 20-day EMA.

SOFR FUTURES CLOSE

• Sep 24 -0.055 at 95.058
• Dec 24 -0.090 at 95.705
• Mar 25 -0.115 at 96.195
• Jun 25 -0.115 at 96.495
• Red Pack (Sep 25-Jun 26) -0.11 to -0.09
• Green Pack (Sep 26-Jun 27) -0.085 to -0.08
• Blue Pack (Sep 27-Jun 28) -0.08 to -0.075
• Gold Pack (Sep 28-Jun 29) -0.07 to -0.065

SOFR FIXES AND PRIOR SESSION REFERENCE RATES

SOFR Benchmark Settlements:

• 1M -0.03063 to 5.27795 (-0.05773/wk)
• 3M -0.03045 to 5.07131 (-0.05710/wk)
• 6M -0.05534 to 4.75475 (-0.08494/wk)
• 12M -0.07526 to 4.26359 (-0.12501/wk)

• Secured Overnight Financing Rate (SOFR): 5.31% (-0.01), volume: $1.975T
• Broad General Collateral Rate (BGCR): 5.30% (-0.01), volume: $785B
• Tri-Party General Collateral Rate (TGCR): 5.30% (-0.01), volume: $762B
• (rate, volume levels reflect prior session)

• Daily Effective Fed Funds Rate: 5.33% (+0.00), volume: $93B
• Daily Overnight Bank Funding Rate: 5.33% (+0.00), volume: $273B

FED Reverse Repo Operation

RRP usage recedes to $316.777B from $321.329B Wednesday -- compares to $286.660B on Wednesday, Aug 7 -- the lowest since mid-May 2021. Number of counterparties slips to 63 from 66 prior.

PIPELINE $1.25B Athene Global 2Pt Launched

• Date $MM Issuer (Priced *, Launch #)
• 8/22 $1.25B #Athene Global $850M 2Y +85, $400M 2Y SOFR+103
• 8/22 $800M #IFC 4Y SOFR+31
• 8/22 $500M #Mondelez 10Y +92
• 8/22 $500M #Pacific Life 5Y +78

FOREX: Greenback Trades on Firmer Footing as US Yields Rise

• Slightly firmer US composite PMI data and some cautious comments from Fed’s Schmid have seen treasury futures come under pressure Thursday, with US front-end yields rising around 8bps, resulting in a better session for the US dollar.
• The USD index stands 0.45% higher as we approach the APAC crossover, with most notable gains against the Japanese Yen, given the JPY’s ongoing sensitivity to movements in core yields. Despite this furtive advance, the greenback remains much lower on the week and close to the lowest levels of the year and focus will quickly turn to Chair Powell’s comments tomorrow.
• Another impressive range for USDJPY during today’s session, which after printing an overnight low of 144.85, we have rallied as high as 146.29. Overall, the pair continues to trade below the Aug 15 high, and firm resistance at the 20-day EMA is intact. The trend structure is bearish, and MA studies remain in a bear-mode set-up. Resistance to watch is 148.70, the 20-day EMA.
• Weakness for equities and the broader greenback recovery Thursday has weighed on the likes of AUDUSD and EURUSD, with the latter still holding just above the 1.11 handle. This week’s appreciation reinforces the current bullish set-up, with moving average studies highlighting a rising trend. Sights are on 1.1201 next, a Fibonacci projection. The trend has entered overbought territory, and any corrective pullback would allow this condition to unwind. Key short-term support is seen at 1.0973, the 20-day EMA.    
• Focus will be on central bank speakers on Friday, who are attending the Jackson Hole symposium. Retail sales data for both New Zealand and Canada highlight Friday’s data calendar. 

FRIDAY DATA CALENDAR

Date	GMT/Local	Impact	Flag	Country	Event
23/08/2024	2301/0001	**		UK	Gfk Monthly Consumer Confidence
23/08/2024	2330/0830	***		JP	CPI
23/08/2024	0600/0800	**		SE	Unemployment
23/08/2024	0645/0845	**		FR	Manufacturing Sentiment
23/08/2024	0800/1000	**		EU	ECB Consumer Expectations Survey
23/08/2024	1230/0830	*		CA	Quarterly financial statistics for enterprises
23/08/2024	1230/0830	**		CA	Retail Trade
23/08/2024	1230/0830	**		CA	Retail Trade
23/08/2024	1400/1000	***		US	New Home Sales
23/08/2024	1400/1000			US	Fed Chair Jerome Powell
23/08/2024	1400/1000	***		US	US Fed Chair Speech
23/08/2024	1700/1300	**		US	Baker Hughes Rig Count Overview - Weekly
23/08/2024	1900/2000			UK	BOE's Bailey Speech at Jackson Hole