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Build Back Better Still On The Agenda

EQUITIES

EU Bank option Vol trade

US EURODLR OPTIONS

March Upside Call Unwind

CORN TECHS

(H2) Rebound Extends

US EURODLR OPTIONS

Put-Centric, Rate-Hike Positioning

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US TSY SUMMARY

Tsys have receded all the way back to early Monday levels late Thursday. After a higher start to the session, futures trade broadly weaker after the close on heavier volumes (TYZ over 1.8M) as equities stage a strong rebound (ESZ0 +60.0) after Wed's rout. Yld curves sharply steeper, especially in the short end.

  • Despite the apparent risk-off unwinds risk-metrics have not changed, virus case counts continue to rise, Europe contemplates broader lock-down measures to contain, will red-zones in the US be far behind?
  • Election angst: countdown to next Wed's presidential elections winding down, trade has grown choppy amid a mix of unwinds and cross-current flow. Equities rallied sharply, partially driven by "fear of missing out" FOMO buying on the bounce; sources cited ongoing Asia bank selling Tsys to draw down Tsy positions after risk parity sold both Tsys and equities on Wednesday. Deal-tied hedging and month end flow also relevant.
  • Another auction tail, US Tsy $53B 7Y Note auction (91282CAU5) drew 0.600% rate (0.462% last month) vs. 0.587% WI; 2.24 bid/cover vs. 2.42 prior.
  • The 2-Yr yield is up 0.4bps at 0.1505%, 5-Yr is up 4bps at 0.3701%, 10-Yr is up 5.7bps at 0.828%, and 30-Yr is up 5.8bps at 1.6115%.

TECHNICALS

US 10YR FUTURE TECHS: (Z0) Focus Is On Trendline Resistance

  • RES 4: 139-16+ Bear channel resistance drawn off the Aug 4 high
  • RES 3: 139-14 High Oct 15 and a key resistance
  • RES 2: 139-07+ High Oct 16
  • RES 1: 139-02/03 Trendline resistance and High Oct 28
  • PRICE: 138-17+ @16:20 GMT Oct 29
  • SUP 1: 138-16+ Low Oct 29
  • SUP 2: 138-05 Low Oct 23
  • SUP 3: 138-04+ 1.00 proj of Aug 4 - 28 decline from Sep 3 high
  • SUP 4: 138-00+ Bear channel base drawn off the Aug 4 high

After starting the session well, Treasuries hit reverse in the latter half of the US session, inching to the lowest levels since Monday at 138-16+. Nonetheless, the underlying outlook remains bullish and recent momentum behind the current rally suggests scope for further gains. Attention is on a short-term trendline resistance that intersects at 139-02. The trendline is drawn off the Oct 2 high. A break would strengthen the bullish theme and open 139-14, Oct 15 high.

AUSSIE 3-YR TECHS

AUSSIE 3-YR TECHS: (Z0) Looking To Clear Resistance

  • RES 3: 100.00 - Psychological round number
  • RES 2: 99.886 - 3.0% Upper Bollinger Band
  • RES 1: 99.845 - All time High Oct 20, 15 and the bull trigger
  • PRICE: 99.840 @ 16:24 BST Oct 29
  • SUP 1: 99.760 - Low Oct 1 and 2
  • SUP 2: 99.705 - Low Sep 18, 21 and 22
  • SUP 3: 99.675 - Low Sep 7 and key support

Aussie 3yr futures are largely unchanged and remain bullish. The price surge at the tail-end of September and early October confirmed bullish trend conditions. Recent activity is viewed as a pause in the uptrend and in pattern terms has taken on the appearance of a bull flag. This is a continuation pattern and reinforces current trend conditions. A break of 99.845, Oct 20 high and last week's high would open 99.889. Support is at 99.760.

AUSSIE 10-YR TECHS

AUSSIE 10-YR TECHS: (Z0) Uptrend Remains Intact

  • RES 3: 99.480 - High Mar 10 and the all-time high
  • RES 2: 99.360 - High Apr 2 (cont)
  • RES 1: 99.290 - High Oct 16
  • PRICE: 99.190 @ 16:26 BST Oct 29
  • SUP 1: 99.116 - 50-dma
  • SUP 2: 99.055 - Low Sep 18 and 21
  • SUP 3: 98.970 - Low Sep 8

Aussie 10y futures remain bullish despite this week's modest pullback. The break above 99.180, an area of congestion reflecting highs in Sep and early October confirmed a resumption of the uptrend that started on Aug 28. Attention turns to 99.300 and 99.360. The latter is the Apr 2 high (cont). The near-term bull trigger is 99.290, Oct 16 high. On the downside, firm trend support is at 99.075, Oct 5 low.

JGB TECHS

JGB TECHS: (Z0) Either Side of 152.00

  • RES 3: 152.55 - High Aug 5 (cont)
  • RES 2: 152.36- 3.0% Upper Bollinger Band
  • RES 1: 152.29 - High Sep 24 and the bull trigger
  • PRICE: 152.02 @ 16:28 BST Oct 29
  • SUP 1: 151.75 - Low Oct 08 and trend support
  • SUP 2: 151.54 - Low Sep 7
  • SUP 3: 151.43 - Low Sep 1

Having topped 152.00 earlier in the week, reestablishing the recent positive outlook, JGBs faded slightly to trade either side of 152. Attention remains on 152.29, Sep 4 high, a key resistance and the bull trigger. A break of this level would confirm a resumption of the uptrend and open 152.36, a Bollinger band objective and 152.55, Aug 5 high (cont). On the downside, key trend support has been defined at 151.75, Oct 8 low.

TSY FUTURES CLOSE: Back Near Early Monday Levels

After a higher start to the session, futures trading broadly weaker after the bell on heavier volumes (TYZ over 1.8M) as equities stage a strong rebound after Wed's rout. Yld curves sharply steeper, especially in the short end. Update:

  • 3M10Y +7.226, 74.155 (L: 66.17 / H: 74.829)
  • 2Y10Y +6.013, 68.06 (L: 62.11 / H: 68.565)
  • 2Y30Y +6.333, 146.653 (L: 140.371 / H: 147.891)
  • 5Y30Y +2.376, 124.416 (L: 120.986 / H: 125.722)
  • Current futures levels:
  • Dec 2Y down 0.5/32 at 110-13.25 (L: 110-13.25 / H: 110-14)
  • Dec 5Y down 4.25/32 at 125-20.25 (L: 125-19.75 / H: 125-26)
  • Dec 10Y down 12.5/32 at 138-13 (L: 138-11.5 / H: 138-28.5)
  • Dec 30Y down 1-5/32 at 172-28 (L: 172-20 / H: 174-13)
  • Dec Ultra 30Y down 1-29/32 at 215-22 (L: 215-02 / H: 218-18)

US EURODLR FUTURES CLOSE: Long End Of Strip Weaker

Steady to mildly higher in the short end, broadly weaker out the strip; lead quarterly EDZ0 unchanged since 3M LIBOR set' steady at 0.21438% (-0.00212/wk).

  • Dec 20 steady at 99.755
  • Mar 21 +0.005 at 99.795
  • Jun 21 steady at 99.80
  • Sep 21 +0.005 at 99.805
  • Red Pack (Dec 21-Sep 22) -0.01 to +0.005
  • Green Pack (Dec 22-Sep 23) -0.025 to -0.015
  • Blue Pack (Dec 23-Sep 24) -0.04 to -0.03
  • Gold Pack (Dec 24-Sep 25) -0.06 to -0.05

US DOLLAR LIBOR: Latest settles

  • O/N +0.00075 at 0.08100% (-0.00038/wk)
  • 1 Month +0.00138 to 0.14913% (-0.00712/wk)
  • 3 Month +0.00000 to 0.21438% (-0.00212/wk)
  • 6 Month -0.00125 to 0.24288% (-0.00650/wk)
  • 1 Year +0.00337 to 0.33100% (-0.00563/wk)

US TSYS: Short Term Rates

STIR: FRBNY EFFR for prior session:

  • Daily Effective Fed Funds Rate: 0.09% volume: $59B
  • Daily Overnight Bank Funding Rate: 0.08%, volume: $172B
US TSYS: Repo Reference Rates
  • Secured Overnight Financing Rate (SOFR): 0.08%, $910B
  • Broad General Collateral Rate (BGCR): 0.06%, $333B
  • Tri-Party General Collateral Rate (TGCR): 0.06%, $309B
  • (rate, volume levels reflect prior session)
FED: NY Fed operational purchase
  • Tsy 20Y-30Y, $1.734B accepted vs. $3.942B submission
  • Next scheduled purchase:
  • Fri 10/30 1100-1120ET: TIPS 7.5Y-30Y, appr $1.225B

OUTLOOK: Look Ahead To Friday

  • US Data/Speaker Calendar (prior, estimate)
  • 30-Oct 0830 Sep total PCE price index (0.3%, 0.2%) 1.5% Y/Y
  • 30-Oct 0830 Sep core PCE price index (0.3%, 0.2%) 1.7% Y/Y
  • 30-Oct 0830 Sep current dollar PCE
  • 30-Oct 0830 Sep personal income (-2.7%, 0.4%)
  • 30-Oct 0830 Q3 ECI (0.5%, 0.5%)
  • 30-Oct 0945 Oct MNI Chicago PMI (62.4, 58.0)
  • 30-Oct 1000 Oct Michigan sentiment index (f) (81.2, 81.2)
  • 30-Oct 1100 Q4 St. Louis Fed Real GDP Nowcast
  • 30-Oct 1115 Q4 NY Fed GDP Nowcast

PIPELINE: Boeing Launched 

Boeing Launched -- leads session but well off late Apr's massive $25B jumbo:

  • Date $MM Issuer (Priced *, Launch #)
  • 10/29 $4.9B #Boeing 4pt: $1B +3Y +180, $1.4B +5Y +240, $1.1B +7Y +265, $1.4B +10Y +280a (issued $25B via 7pt jumbo on April 30: $3B 3Y +425, +450: $3.5B 5Y, $2B 7Y, $4.5B 10Y and $5.5B 30Y, $3B 20Y +440, $3.5B 40Y +462.5)
  • 10/29 $1.5B #Philip Morris $750M +5Y +58, $750M 10Y +103 (issued $2.25B on Apr 29: $750M each 3Y +100, 5Y +125 and 10Y +155)
  • 10/29 $750M #Stanley Black & Decker 30Y +112.5
  • 10/29 $650M #Baxter Int WNG 10Y +90
  • 10/29 $500M *Swedish Export Credit Corporation (SEK) 2Y +5
  • 10/29 $500M IFFIm 3Y Red S vaccine bond +18a
  • 10/29 $Benchmark State Development & Inv 5Y +160a

EURODOLLAR/TREASURY OPTIONS

Eurodollar Options:

  • +5,000 Blue Mar 90/93 3x2 put spds, 15.5
  • +25,000 Blue Mar 92/93 put spds, 4.0
  • +3,000 Blue Mar 90 puts, 2.0
  • Overnight trade
  • 2,000 Dec 96/97 2x1 put spds
  • 2,000 Blue Jun 93/95 call spds
  • 2,000 Dec 100 calls, cab
Tsy Options:
  • 12,000 TYZ 134.5/135.5 put spds, 1
  • 3,500 TYZ 136/138 put spds, 25/64
  • +2,000 TYZ 137.5 puts, 15/64
  • 2,000 USF 178/181 1x2 call spds, 6-7 earlier
  • over 5,000 more TYZ 137.75/138.75 2x1 put spds, 4/64 add to recent +25k at 3/64
  • +25,000 TYZ 137.75/138.75 2x1 put spds, 3/64 vs. 138-21/0.05%
  • 7,500 TYZ 140 calls up to 11/64 on day
  • -2,000 TYZ 136.75 puts, 7/64
  • +5,500 TYZ 140 calls, 11/64
  • Overnight trade
  • 5,600 TYF 139.5/140.5 call spds, 15/64
  • 7,100 TYZ 137 puts, 10-11
  • +2,500 USZ 178/180 call spds, 22/64
MNI Chicago Bureau | +1 312-431-0089 | bill.sokolis@marketnews.com
MNI Chicago Bureau | +1 312-431-0089 | bill.sokolis@marketnews.com
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