Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
US TSYS: Negative vaccine headline flow reintroduced itself in Asia-Pac trade, as STAT News noted that "the study of Johnson & Johnson's Covid-19 vaccine has been paused due to an unexplained illness in a study participant." This weighed on e-minis after Monday's rally (e-minis were already ticking lower as cash Tsys re-opened flatter after the elongated weekend), with yesterday's rally being a product of market pricing surrounding the odds of a blue wave in the November election, and the fiscal stimulus that such a result would entail.
- Still, T-Notes held to a narrow 0-03+ range overnight, last +0-00+ at 138-29+, with cash Tsys trading 0.4-1.8bp richer across the curve amid bull flattening, albeit with the space back from richest levels ahead of European hours.
- Worth flagging ~11.5K worth of the TYZ0 132.50 puts were bought on screen during Monday's session (trading at 0-01), which targets a move to ~1.50% for 10-Year yields, a blue wave hedge?
- Tuesday's local data release docket is headlined by the latest round of CPI and average earnings prints. Elsewhere, we are set to hear from Fed's Barkin.
- Results from the latest liquidity enhancement auction for off the run 15.5-39 Year JGBs were firmer than the previous offering, as the tail and spreads narrowed, while the cover ratio nudged higher.
- Cash trade saw 5s outperform on the day, with swaps generally wider vs. JGBs across the curve. The long ends of both the JGB and swaps curves underperformed, resulting in some twist steepening for both spaces.
- 1-10 Year BoJ Rinban ops headline locally on Wednesday.
AUSSIE BONDS: There was little in the way of meaningful activity in the Aussie Bond space, with YM unchanged and XM +0.5. The cash curve is flatter at the margins.
- Most of today's focus has gone into assessments surrounding Sino-Aussie coal trade matters. A story that generated little interest when it hit on Friday is receiving more focus during the early part of this week. To recap, Platts sources suggested that "state-owned utilities and steel mills in China received verbal notice from China's customs to stop importing Australian thermal and coking coal with immediate effect." This would of course represent the latest blow to Sino-Aussie relations. Australian Trade Minister Birmingham has noted that the government has contacted China as it looks to assess the validity of the reports.
- Bills sit unchanged to -1 through the reds.
- Local Westpac consumer confidence data is due Wednesday, with A$2.5bn worth of ACGB 1.25% 21 May 2032 supply also due.
JGBS AUCTION: The Japanese Ministry of Finance (MOF) sells Y498.4bn of 15.5-39 Year JGBs in a liquidity enhancement auction:
- Average Spread: -0.002% (prev. +0.009%)
- High Spread: 0.000% (prev. +0.014%)
- % Allotted At High Spread: 93.5747% (prev. 69.6113%)
- Bid/Cover: 2.330x (prev. 2.025x)
- Average Yield: -0.6312% (prev. -0.4371%)
- High Yield: -0.6250% (prev. -0.4325%)
- Bid/Cover: 5.6333x (prev. 4.3000x)
- Amount allotted at highest accepted yield as percentage of amount bid at that yield 60% (prev. 40%)
- bidders 43 (prev. 33), successful 9 (prev. 6), allocated in full 8 (prev. 5)
BUND TECHS: (Z0) Focus Is On Key Resistance
* RES 4: 175.74 1.236 proj of Aug 28 - Sep 9 rally from the Sep 10 low
* RES 3: 175.23 1.00 proj of Aug 28 - Sep 9 rally from the Sep 10 low
* RES 2: 175.08 High Aug 4 and the bull trigger
* RES 1: 174.97 High Oct 2 and key near-term resistance
* PRICE: 174.84 @ 04:56 BST Oct 13
* SUP 1: 174.39 20-day EMA
* SUP 2: 173.93 Low Oct 7
* SUP 3: 173.74 Low Sep 17
* SUP 4: 173.61 50.0% retracement of the Aug 28 - Oct 2 high
Bund futures maintain a positive tone. The contract found support last week at 173.93, Oct 7 low and the resulting move higher refocuses attention on 174.97, Oct 2 high where a break would improve short-term conditions and open the key resistance and bull trigger at 175.08, Aug 4 high. Clearance of 175.08 would confirm a resumption of the broader uptrend. Key support is at 173.93, a move through this level would instead be bearish.
BOBL TECHS: (Z0) Resumes Broader Uptrend
* RES 4: 135.730 1.500 proj of Sep 1 - Sep 9 rally from Sep 10 low
* RES 3: 135.660 1.382 proj of Sep 1 - Sep 9 rally from Sep 10 low
* RES 2: 135.500 High May 22 (cont)
* RES 1: 135.420 Intraday high
* PRICE: 135.380 @ 05:07 BST Oct 13
* SUP 1: 135.188 20-day EMA
* SUP 2: 135.030 Low Oct 6
* SUP 3: 134.900 Low Sep 11 and 17
* SUP 4: 134.760 Low Sep 11 and key support
BOBL futures rebounded on Oct 7 off 135.030. The subsequent recovery has resulted in a clear break of resistance at 135.370, Sep 21 and the Oct 5 high. This confirms a resumption of the uptrend that has dominated since early September and opens 135.41 next, a Fibonacci projection. 135.030 marks the key short-term support where a break is required to reverse the trend. Initial support lies at 135.188, the 20-day EMA.
SCHATZ TECHS: (Z0) Bullish Focus
* RES 4: 112.385 High Jul 30
* RES 3: 112.383 1.236 proj of Aug 26 - Sep 9 rally from the Sep 10 low
* RES 2: 112.360 High Sep 21 and the bull trigger
* RES 1: 112.330 High Oct 12 and intraday high
* PRICE: 112.325 @ 05:14 BST Oct 13
* SUP 1: 112.29420-day EMA
* SUP 2: 112.255 Low Oct 7
* SUP 3: 112.250 Low Sep 17 and key near-term support
* SUP 4: 112.240 Low Sep 11
Schatz futures rebounded last week off 112.255, Oct 7 low easing recent bearish pressure. Resistance at 112.325, Oct 2 and 5 high was breached yesterday, reinforcing the current positive tone and signalling scope for strength towards the 112.360 high from Sep 21. This level also marks the bull trigger. A breach would confirm a resumption of the broader uptrend and open 112.383, a Fibonacci Projection. Key support is at 112.255.
GILT TECHS: (Z0) Remains Vulnerable
* RES 4: 137.04/05 High Sep 21 / 76.4% of the Aug 4 - 28 decline
* RES 3: 136.60 High Sep 30 and the near-term bull trigger
* RES 2: 136.19 High Oct 1 and key near-term resistance
* RES 1: 135.81 20-day EMA
* PRICE: 135.48 @ Close Oct 12
* SUP 1: 135.06 Low Oct 7 and the bear trigger
* SUP 2: 134.96 76.4% retracement of the Aug 28 - Sep 28 rally
* SUP 3: 134.59 Low Sep 1
* SUP 4: 134.32 Low Aug 28 and a key support
Gilts futures remain vulnerable following with price trading closer to the lower end of the recent range. Recent weakness has resulted in a break of support at 135.32, Oct 1 low opening up potential for a pullback towards 134.96 next, a Fibonacci retracement. An extension lower would expose primary support at 134.32, Aug 28 low. Initial firm resistance is seen at 136.19, Oct 2 high. A move above this hurdle is required to ease the current bearish pressure.
* RES 4: 151.17 0.764 of Jun 10 - Aug 20 swing from Sep 9 low (cont)
* RES 3: 150.74 Bull channel top drawn off the Sep 8 low
* RES 2: 150.00 Psychological round number
* RES 1: 149.99 High Oct 8
* PRICE: 149.97 @ Close Oct 12
* SUP 1: 149.05 Bull Channel support drawn off the Aug 9 low
* SUP 2: 148.15 Low Oct 2
* SUP 3: 147.96 Low 20-day EMA
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.