MNI ASIA OPEN: Ylds Receding, Hawkish FOMC Messaging Expected

US

Fed Preview (MNI) May 2024 Analyst Outlook: More Hawkish Message Expected As Cuts Get Pushed Back: Analysts generally look for a more hawkish message from the FOMC in May compared with March, in light of strong inflation and economic activity data.

• None expect the Statement forward guidance to be changed, though a few see potential for tweaks. Several eye risks of the characterization of inflation to be changed in a hawkish fashion.
• Generally, Powell is expected to tilt more cautious on the inflation outlook than in previous appearances, with potential flashpoints for markets including whether he acknowledges that 3 cuts are less likely to be the base case for the FOMC in 2024, and/or whether June is too early for the first cut.

NEWS

TSY BRIEF (MNI): Treasury Raises Q2 Borrowing Estimate By USD41B: The U.S. Treasury Department on Monday announced it expects to borrow USD243 billion in privately held net marketable debt in the second quarter, USD41 billion more than previously announced in January due to lower cash receipts. Officials expect to borrow USD847 billion in the third quarter.

MIDEAST (MNI): Blinken Starts MENA Trip, Proposal To Hamas 'Extraordinarily Generous': US Secretary of State Antony Blinken has started another visit to the Middle East, holding talks with Saudi Foreign Minister Prince Faisal bin Farhan bin Abdullah in Riyadh. Blinken will hold talks with his counterparts from Qatar, Egypt, the UAE, Turkey and Jordan, as will French Foreign Minister Stephane Sejourne, who is also in Saudi Arabia. Blinken is then expected to visit Israel later in the week.

CHINA-EU (MNI): Xi Visit Confirmed 5-10 May As Trade Tensions Escalate: Wires reporting comments from the Chinese Foreign Ministry ahead of President Xi Jinping's upcoming trip to Europe, taking place 5-10 May. Says that the trip to France, Serbia, Hungary, and the EU institutions in Brussels "are vitally important for China's relations" with each partner, and will "provide new impetus for global peace and development".

US Tsys Briefly Trim Gains After Higher Than Expected Tsy borrow Estimates

• Treasury futures continued to climb off last Thursday's approximate 5-month lows Monday, completely recovering from a sell-off on lower than expected weekly claims and strong PCE data that saw 10Y yield climb to 4.7351% high.
• Tsys pared gains briefly after higher than expected Tsy borrow estimates to $243 billion in privately held net marketable debt in the second quarter, USD41 billion more than previously announced in January due to lower cash receipts. Officials expect to borrow $847 billion in the third quarter.
• Otherwise, generally subdued week opener with focus on Wednesday's FOMC policy announcement and April employment report on Friday.
• Generally, Powell is expected to tilt more cautious on the inflation outlook than in previous appearances, with potential flashpoints for markets including whether he acknowledges that 3 cuts are less likely to be the base case for the FOMC in 2024, and/or whether June is too early for the first cut.
• Projected rate cut pricing largely eased slightly: May 2024 -2.1% w/ cumulative -0.5bp at 5.324%; June 2024 at -10.6% w/ cumulative rate cut -3.2bp at 5.297%, July'24 cumulative at -8.1bp, Sep'24 cumulative -18.1bp.

OVERNIGHT DATA

US DATA (MNI): Regional Fed Mfg Surveys And PMI Move In Opposite Directions Before ISM:

• The Dallas Fed manufacturing survey (-14.5 after -14.4) completes the five regional Fed manufacturing surveys for April.
• The unweighted average bounced from -10.8 to -5.1, back closer to its -3.4 in Feb (highest since Apr 2022), after April gains from Empire, Richmond and especially Philly surveys.
• This improvement goes against the decline seen in the preliminary S&P Global US manufacturing PMI for April, which surprisingly fell from 51.9 to 49.9, although taken together they’re at relative levels similar to the ISM manufacturing’s 50.3 from March.
• Consensus sees ISM mfg dipping slightly to 50.0 on Wednesday although tomorrow’s MNI Chicago PMI can help add color here.

MARKETS SNAPSHOT

• Key market levels of markets in late NY trade:
• DJIA up 146.43 points (0.38%) at 38386.09
• S&P E-Mini Future up 15.75 points (0.31%) at 5147.25
• Nasdaq up 55.2 points (0.3%) at 15983.08
• US 10-Yr yield is down 5.8 bps at 4.6053%
• US Jun 10-Yr futures are up 13/32 at 107-31.5
• EURUSD up 0.0029 (0.27%) at 1.0722
• USDJPY down 2.2 (-1.39%) at 156.13
• WTI Crude Oil (front-month) down $1.12 (-1.34%) at $82.74
• Gold is down $1.79 (-0.08%) at $2336.17
• European bourses closing levels:
• EuroStoxx 50 down 25.76 points (-0.51%) at 4981.09
• FTSE 100 up 7.2 points (0.09%) at 8147.03
• French CAC 40 down 23.09 points (-0.29%) at 8065.15

US TREASURY FUTURES CLOSE

• 3M10Y -5.423, -80.257 (L: -86.376 / H: -76.654)
• 2Y10Y -3.268, -36.932 (L: -36.932 / H: -33.846)
• 2Y30Y -2.626, -25.042 (L: -25.042 / H: -22.11)
• 5Y30Y +0.016, 8.685 (L: 7.91 / H: 10.487)
• Current futures levels:
• Jun 2-Yr futures up 1.5/32 at 101-15 (L: 101-13.25 / H: 101-15.25)
• Jun 5-Yr futures up 7/32 at 105-3 (L: 104-27.75 / H: 105-03.5)
• Jun 10-Yr futures up 13/32 at 107-31.5 (L: 107-18.5 / H: 107-31.5)
• Jun 30-Yr futures up 28/32 at 114-23 (L: 113-30 / H: 114-24)
• Jun Ultra futures up 1-04/32 at 120-26 (L: 119-23 / H: 120-26)

US 10Y FUTURE TECHS: (M4) Gains Considered Corrective

• RES 4: 110-06 High Apr 4
• RES 3: 109-26+ High Apr 10
• RES 2: 109-17 50-day EMA
• RES 1: 108-15+ 20-day EMA
• PRICE: 107-30 @ 1415 ET Apr 29
• SUP 1: 107-04 Low Apr 25
• SUP 2: 106-27 2.764 proj of Dec 27 - Jan 19 - Feb 1 price swing
• SUP 3: 106-16 Base of a bear channel drawn from the Feb 1 low
• SUP 4: 106-08 3.00 proj of Dec 27 - Jan 19 - Feb 1 price swing

The trend outlook in Treasuries is unchanged and the direction remains down. The contract traded to a fresh cycle low last Thursday. MA studies are in a bear-mode set-up too, highlighting a clear downtrend. Note too that the recent consolidation appears to have been a flag formation - a bearish continuation pattern. Sights are on 106-27 next, a Fibonacci projection. Firm resistance is 108-15+, the 20-day EMA.

SOFR FUTURES CLOSE

• Jun 24 -0.005 at 94.705
• Sep 24 steady at 94.845
• Dec 24 +0.015 at 95.015
• Mar 25 +0.025 at 95.20
• Red Pack (Jun 25-Mar 26) +0.030 to +0.045
• Green Pack (Jun 26-Mar 27) +0.055 to +0.070
• Blue Pack (Jun 27-Mar 28) +0.070 to +0.080
• Gold Pack (Jun 28-Mar 29) +0.080 to +0.085

SOFR FIXES AND PRIOR SESSION REFERENCE RATES

SOFR Benchmark Settlements:

• 1M -0.00256 to 5.31317 (-0.00117 total last wk)
• 3M -0.00269 to 5.32681 (+0.00310 total last wk)
• 6M -0.00475 to 5.30909 (+0.01094 total last wk)
• 12M -0.00727 to 5.23653 (+0.02929 total last wk)

• Secured Overnight Financing Rate (SOFR): 5.32% (+0.01), volume: $1.795T
• Broad General Collateral Rate (BGCR): 5.31% (+0.01), volume: $688B
• Tri-Party General Collateral Rate (TGCR): 5.31% (+0.01), volume: $673B
• (rate, volume levels reflect prior session)

• Daily Effective Fed Funds Rate: 5.33% (+0.00), volume: $94B
• Daily Overnight Bank Funding Rate: 5.32% (+0.00), volume: $270B

FED Reverse Repo Operation

• RRP usage climbs back over $500B to $505.530B vs. $464.912B last Friday. Compares to $327.066B on Monday, April 15 -- the lowest level since mid-May 2021.
• Meanwhile, the latest number of counterparties slips to 75 vs. 78 prior.

PIPELINE $10B Boeing 6Pt Priced, $850M DTE Energy Launched

• Date $MM Issuer (Priced *, Launch #)
• 4/29 $10B *Boeing $1B 3Y +145, $1.5B 5Y +165, $1B 7Y +175, $2.5B 10Y +190, $2.5B 30Y +210, $1.5B 40Y +225 (well below the $25B issued on April 30, 2020 over 7 tranches)
• 4/29 $850M #DTE Energy 10Y +125
• 4/29 $750M #Antofagasta 10Y +170
• 4/29 $600M *Kookmin Bank $300M 3Y +60, $300M 5Y +65
• 4/29 $Benchmark ADQ (Abu Dhabi Development Co) 5Y, 10Y investor calls

FOREX JPY Volatility In Focus To Start The Week

• USDJPY posted an impressive 563-pip range on Monday as fresh cycle highs above 160.00 likely prompted Japanese officials to intervene and stabilise the yen. In early Europe, USDJPY printed as low as 154.54 with holiday-thinned trade potentially exacerbating the price swings.
• USDJPY spent a lot of the US session edging back to the high 156’s, however, renewed weakness saw a quick late dip to 155.10, as markets remain wary over any sudden moves. As a reminder, initial key technical support to watch lies at 154.01, the 20-day EMA.
• There has been no official confirmation on intervention from Japanese authorities, with top currency official Kanda stating he has ‘no comment for now’ and that the market will find out of possible intervention when data is posted in late May.
• As a result, the USD index resides 0.40% lower, in fitting with modestly lower US yields. Stock markets trade marginally in the green, which assists the likes AUD (+0.55%) and NZD (+0.65%) which outperform in G10 and is bolstering the performance of EM FX.
• With Aussie retail sales and China PMIs due overnight, attention will be on a developing bullish phase for AUDUSD. Resistance at 0.6526, the 50-day EMA, has been breached and the clear break highlights a stronger reversal that signals scope for a climb towards 0.6644, the Apr 9 high.
• GBPUSD is also now up over half a percent on the session, trading above 1.2550. Despite the trend condition in GBPUSD remaining bearish, a corrective cycle continues to play out, which is allowing an oversold condition to unwind. Price action has narrowed the gap to resistance at 1.2580, the 50-day EMA.
• Key attention this week will rest on Wednesday’s Fed meeting and press conference, as well as Friday’s release of NFP.

TUESDAY DATA CALENDAR

Date	GMT/Local	Impact	Flag	Country	Event
30/04/2024	2301/0001	*		UK	BRC Monthly Shop Price Index
30/04/2024	2330/0830	*		JP	Labor Force Survey
30/04/2024	2330/0830	**		JP	Industrial Production
30/04/2024	2330/0830	*		JP	Retail Sales (p)
30/04/2024	0130/0930	***		CN	CFLP Manufacturing PMI
30/04/2024	0130/0930	**		CN	CFLP Non-Manufacturing PMI
30/04/2024	0130/1130	**		AU	Retail Trade
30/04/2024	0145/0945	**		CN	IHS Markit Final China Manufacturing PMI
30/04/2024	0530/0730	***		FR	GDP (p)
30/04/2024	0530/0730	**		FR	Consumer Spending
30/04/2024	0600/0800	**		DE	Retail Sales
30/04/2024	0600/0800	**		DE	Import/Export Prices
30/04/2024	0645/0845	***		FR	HICP (p)
30/04/2024	0645/0845	**		FR	PPI
30/04/2024	0700/0900	***		ES	GDP (p)
30/04/2024	0700/0900	**		CH	KOF Economic Barometer
30/04/2024	0755/0955	**		DE	Unemployment
30/04/2024	0800/1000	***		IT	GDP (p)
30/04/2024	0800/1000	***		DE	GDP (p)
30/04/2024	0830/0930	**		UK	BOE M4
30/04/2024	0830/0930	**		UK	BOE Lending to Individuals
30/04/2024	0900/1100	***		EU	HICP (p)
30/04/2024	0900/1100	***		EU	EMU Preliminary Flash GDP Q/Q
30/04/2024	0900/1100	***		EU	EMU Preliminary Flash GDP Y/Y
30/04/2024	0900/1100	***		IT	HICP (p)
30/04/2024	0900/1000	**		UK	Gilt Outright Auction Result
30/04/2024	1100/1200			UK	Asset Purchase Facility Quarterly Report 2024 Q1
30/04/2024	1230/0830	***		US	Employment Cost Index
30/04/2024	1230/0830	***		CA	Gross Domestic Product by Industry
30/04/2024	1255/0855	**		US	Redbook Retail Sales Index
30/04/2024	1300/0900	**		US	S&P Case-Shiller Home Price Index
30/04/2024	1300/0900	**		US	FHFA Home Price Index
30/04/2024	1300/0900	**		US	FHFA Home Price Index
30/04/2024	1345/0945	***		US	MNI Chicago PMI
30/04/2024	1400/1000	***		US	Conference Board Consumer Confidence
30/04/2024	1400/1000	**		US	housing vacancies
30/04/2024	1430/1030	**		US	Dallas Fed Services Survey
30/04/2024	1530/1130	*		US	US Treasury Auction Result for Cash Management Bill
01/05/2024	2245/1045	***		NZ	Quarterly Labor market data
01/05/2024	2300/0900	**		AU	IHS Markit Manufacturing PMI (f)