MNI US CLOSING FI ANALYSIS: Heavy Duration Shedding

US TSY SUMMARY: Late Volume Surge, Tsys Gap Lower Into Month End

Tsy futures reversed early strength, ground lower soon after the open to trade weaker across the curve after the closing bell bell: extending session lows amid late month-end duration shedding and position squaring ahead next week's presidential election.

• Heavy volumes for an otherwise quiet end to the week, TYZ>2.2M. massive duration selling after the bell with 500k TYZ traded over 30 minute period from 138-09 to 138-03.5 (session low).
• Tsys were well bid after stronger than expected income (+0.9% vs. 0.4% exp) and spending (1.4% vs. +1.0% exp) data but inflation weaker than expected (1.5% vs. 1.7%). Not much of a react to MNI Chicago Business Barometer: 61.1 vs. 62.4 last month.
• Talk of risk-parity fund unwinds also made the rounds again as Tsys and equities sold off in tandem.
• The 2-Yr yield is up 0.6bps at 0.1525%, 5-Yr is up 1bps at 0.3796%, 10-Yr is up 3.9bps at 0.8619%, and 30-Yr is up 4.4bps at 1.6459%.

TECHNICALS

US 10YR FUTURE TECHS: (Z0) Stalls At 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: 139-03 High Oct 28 and the bull trigger
• PRICE: 138-06 @16:46 GMT Oct 30
• SUP 1: 138-05+ Low Oct 30
• 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: 137-31+ Bear channel base drawn off the Aug 4 high

Treasuries finished the week poorly, circling just above the Oct 23 low at 138-05. The pullback follows Wednesday's failure at trendline resistance drawn off the Oct 2 high. The trendline intersects at 139-00+. A break of the line, reinforced by a move above 139-03, Oct 28 high would confirm a reversal of the recent downleg and open 139-14, Oct 15 high. While price remains below the trendline though, support at 138-05 remains exposed. A break resumes the downtrend.

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: 99.835 @ 16:48 BST Oct 30
• 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: (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: 99.155 @ 16:49 BST Oct 30
• 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: (Z0) Settling Below 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: 151.80 @ 16:28 BST Oct 30
• 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 just below 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: Extend Session Lows, Heavy Volumes

Trading weaker across the curve after the bell:

• 3M10Y +4.399, 77.546 (L: 70.124 / H: 78.222)
• 2Y10Y +4.203, 71.254 (L: 65.444 / H: 71.734)
• 2Y30Y +4.554, 149.496 (L: 143.228 / H: 150.339)
• 5Y30Y +3.481, 126.502 (L: 122.409 / H: 127.384)
• Current futures levels:
• Dec 2Y steady at 110-13.5 (L: 110-13.25 / H: 110-13.75)
• Dec 5Y down 1.75/32 at 125-19 (L: 125-18.5 / H: 125-23)
• Dec 10Y down 8/32 at 138-5 (L: 138-03.5 / H: 138-19.5)
• Dec 30Y down 20/32 at 172-7 (L: 172-00 / H: 173-19)
• Dec Ultra 30Y down 1-3/32 at 214-14 (L: 213-31 / H: 217-09)

US EURODLR FUTURES CLOSE: 

Steady to modestly lower out the strip; lead quarterly EDZ0 unchanged since 3M LIBOR set' +0.00137 to 0.21575% (-0.00075/wk).

• Dec 20 steady at 99.760
• Mar 21 -0.005 at 99.790
• Jun 21 -0.005 at 99.80
• Sep 21 -0.005 at 99.80
• Red Pack (Dec 21-Sep 22) -0.01 to -0.005
• Green Pack (Dec 22-Sep 23) -0.015 to -0.01
• Blue Pack (Dec 23-Sep 24) -0.025 to -0.015
• Gold Pack (Dec 24-Sep 25) -0.04 to -0.025

US DOLLAR LIBOR: Latest settles

• O/N +0.00038 at 0.08138% (+0.00000/wk)
• 1 Month -0.00888 to 0.14025% (-0.01513/wk)
• 3 Month +0.00137 to 0.21575% (-0.00075/wk)
• 6 Month -0.00075 to 0.24213% (-0.00725/wk)
• 1 Year -0.00087 to 0.33013% (-0.00650/wk)

US TSYS: Short End 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

• Secured Overnight Financing Rate (SOFR): 0.09%, $866B
• Broad General Collateral Rate (BGCR): 0.06%, $329B
• Tri-Party General Collateral Rate (TGCR): 0.06%, $306B
• (rate, volume levels reflect prior session)

• TIPS 7.5Y-30Y, $1.201B accepted vs. $3.538B submission
• Next week's scheduled purchases:
• Mon 11/02 1100-1120ET: Tsy 20Y-30Y, appr $1.750B
• Tue 11/03 1010-1030ET: Tsy 4.5Y-7Y, appr $6.025B
• Fri 11/06 1100-1120ET: Tsy 0Y-2.25Y, appr $12.825B

OUTLOOK: Monday Look Ahead

• US Data/Speaker Calendar (prior, estimate)
• 02-Nov 0945 Oct IHS Markit Mfg Index (final) (53.3, --)
• 02-Nov 1000 Oct ISM Manufacturing Index (55.4, 55.6)
• 02-Nov 1000 Sep construction spending (1.4%, 1.0%)
• 02-Nov 1130 US Tsy $54B 13W-Bill auction (9127963W7)
• 02-Nov 1130 US Tsy $51B 26W-Bill auction (9127965A3)

PIPELINE: $111.65B Total High-Grade Issuance For October

• Date $MM Issuer (Priced *, Launch #)
• 10/30 $Benchmark Industrial Bank HK 3Y +145a
• 10/?? $Benchmark State Development & Inv 5Y +160a
• -
• $8.8B Priced Thursday; $111.65B/month
• 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 +16

EURODOLLAR/TREASURY OPTIONS

Eurodollar Options:

• +5,000 Blue Dec 92/93 put spds 2.5 vs. 99.505/0.15%
• 3,000 Red Sep22 96/97 2x1 put spds, 0.0
• 1,500 Red Dec'21 98/100/100.12 call flys, 1.5
• -3,500 Blue Mar 90/91 put spds 0.5 over the 97/98 call spds

• +5,000 TYZ 140 calls, 7
• +4,000 FVZ 126/126.25 call spds, 3/64
• -2,000 TYZ 138.25 puts
• +2,000 TYZ 137 puts, 13/64
• -1,500 TYZ 137/140 strangles, 21
• Overnight trade
• +5,000 TYF 141/142 call spds, 3
• +4,200 TYZ 140.5 calls, 5
• +8,000 TYZ 136 puts, 5/64 lifted offer, 4- bid/at 6- now
• 4,300 TYZ 138 puts, 29/64
• 1,500 TYZ 135.75/136.75/137.75 put flys, 9/64
• Block +5,000 TYZ 138/TYF 137.5 put spds, 15/64 db Jan over