MNI US CLOSING FI ANALYSIS: Good Night & Good Luck, Election Eve

US TSY SUMMARY

Tsys were nearly back to where they started the session -- steady to mixed, long end bid but well off late morning highs with a block sale in Dec 30Y ultra-bonds (WNZ0) after the closing bell weighing (only -2k at 215-11, well through the 215-16 bid at the time).

• Curves were flatter but off midday levels as the long end scaled back long end support. Overall volumes were well off last Fri's month end trade (TYZ 1.1M vs. 2.1M) with trade more tentative ahead Tuesday's presidential election and swing states results.
• Of course there's a lot of other event and data risk this week: FOMC policy announcement on Wednesday, October employment data on Friday (+600k est job gains vs. +661k last month), and ongoing covid-19 spread concerns.
• Trade two-way, mostly position squaring/paring, option related hedging, no deal-related flow, some swap-tied selling in the short end.
• The 2-Yr yield is up 0.4bps at 0.1564%, 5-Yr is down 1.1bps at 0.3733%, 10-Yr is down 2.7bps at 0.8468%, and 30-Yr is down 3.8bps at 1.6218%.

TECHNICALS

US 10YR FUTURE TECHS: (Z0) Probes Key Support

• RES 4: 139-14 High Oct 15 and a key resistance
• RES 3: 139-07+ High Oct 16
• RES 2: 139-03 High Oct 28 and the bull trigger
• RES 1: 138-25+ 20-day EMA
• PRICE: 138-13 @16:31 GMT Nov 2
• SUP 1: 138-03+ 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 maintain a bearish stance following last week's sell-off that followed a failure on Oct 28 at trendline resistance drawn off the Oct 2 high. The trendline intersects at 138-31+. A break of the line, reinforced by a move above 139-03, Oct 28 high would confirm a reversal of the recent down-leg and open 139-14, Oct 15 high. While price remains below the trendline and with support at 138-05 breached, Oct 30 low, the risk is for further weakness.

AUSSIE 3Y

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 @ 16:48 BST Nov 2
• 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 10Y

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: 99.180 @ 16:34 BST Nov 2
• 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 last 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 10Y

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 @ 16:36 BST Nov 2
• 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 last 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.

US TSY FUTURES CLOSE: Off Late Morning Highs

Trading steady to mixed after the bell, off late morning highs amid much lighter volume compared to last Fri's month end trade (TYZ 1.1M vs. 2.1M), yield curves flatter with long end outperforming. Update:

• 3M10Y -2.358, 75.864 (L: 73.229 / H: 77.805)
• 2Y10Y -2.559, 69.175 (L: 67.406 / H: 71.764)
• 2Y30Y -3.309, 146.961 (L: 145.107 / H: 151.507)
• 5Y30Y -2.322, 124.992 (L: 123.773 / H: 128.898)
• Current futures levels:
• Dec 2Y -0.37/32 at 110-13.12 (L: 110-13 / H: 110-13.75)
• Dec 5Y steady at 125-19.25 (L: 125-18.75 / H: 125-22.5)
• Dec 10Y up 2/32 at 138-9 (L: 138-04.5 / H: 138-15.5)
• Dec 30Y up 5/32 at 172-20 (L: 171-31 / H: 173-06)
• Dec Ultra 30Y up 17/32 at 215-17 (L: 213-20 / H: 216-11)

US EURODOLLAR FUTURES CLOSE: Mirroring Tsy Futures Curve

Futures trading steady/weaker in the short end to modestly firmer out the strip, little off session highs. Lead quarterly holding steady since 3M LIBOR set +0.00438 to 0.22013% (-0.00075 last wk). Currently:

• Dec 20 steady at 99.755
• Mar 21 -0.005 at 99.790
• Jun 21 steady at 99.800
• Sep 21 -0.005 at 99.800
• Red Pack (Dec 21-Sep 22) +0.005 to +0.015
• Green Pack (Dec 22-Sep 23) +0.015 to +0.025
• Blue Pack (Dec 23-Sep 24) +0.025 to +0.030
• Gold Pack (Dec 24-Sep 25) +0.030 to +0.035

US DOLLAR LIBOR

Latest settles

• O/N -0.00025 at 0.08113% (+0.00000 net last wk)
• 1 Month +0.00025 to 0.14050% (-0.01513 net last wk)
• 3 Month +0.00438 to 0.22013% (-0.00075 last wk)
• 6 Month +0.00387 to 0.24600% (-0.00725 net last wk)
• 1 Year +0.00225 to 0.33238% (-0.00650 net last wk)

US TSY: Short Term Rates

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 0.09% volume: $56B
• Daily Overnight Bank Funding Rate: 0.08%, volume: $147B

• Secured Overnight Financing Rate (SOFR): 0.09%, $873B
• Broad General Collateral Rate (BGCR): 0.07%, $332B
• Tri-Party General Collateral Rate (TGCR): 0.07%, $305B
• (rate, volume levels reflect prior session)

• Tsy 20Y-30Y, $1.734B accepted vs. $5.508B submission
• Next scheduled purchases:
• 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: Look Ahead To Tuesday

• US Data/Speaker Calendar (prior, estimate)
  
• 03-Nov ---- Oct NA-made light vehicle sales SAAR (16.34M, 16.50M)
• 03-Nov 0855 31-Oct Redbook retail sales m/m (0.8%, 0.8%)
• 03-Nov 0945 Oct ISM-NY current conditions (56.1, --)
• 03-Nov 1000 Sep factory new orders (0.7%, 1.0%)
• 03-Nov 1000 Sep factory orders ex transport (0.7%, 0.6%)
• 03-Nov 1000 Nov IBD/TIPP Optimism Index (55.2, --)
• 03-Nov 1130 US Tsy $30B 42D Bill CMB auction (9127963K3)
• 03-Nov 1130 US Tsy $30B 119D Bill CMB auction (9127964F3)
• 03-Nov 1300 US Tsy $34B 52W-Bill auction (9127964W6)
• 03-Nov ---- US Presidential Election

PIPELINE

Issuers sidelined ahead US presidential election; $111.65B total high-grade debt issued in October.

EURODOLLAR/TREASURY OPTIONS

Eurodollar Options:

• 5,000 Green Jun 92 puts, 2.25
• -5,000 Blue Jun 88/91/92/95 put condors, 6.5
• +5,000 Jun 98/100 call strip, 3.75

• 5,000 FVF 125.25 1-.5 over 2,500 TYF 135.5 puts
• 4,500 TYH 132 puts, 7/64
• +2,000 FVZ 124.75/125.25 put spds, 4.5/64
• +4,200 USZ 170.5/171.5 put spds, 23
• 2,150 USZ 161/185 strangles
• 2,000 USZ 180 calls, 13
• -1,250 USZ 172 straddles, 425
• +2,000 TYZ 137/137.5 put spds, 8/64
• -5,000 TYZ 136.5/139.5 strangles, 22
• +1,000 USZ 168/177 call over risk reversals, 2
• Overnight trade
• 3,000 TYZ 137/138 put spds, 19/64
• Block 10,000 TYZ 137.25 puts vs. 138-08.5/0.28% at 0742:30ET (adds to 8k on screen)
• Block 2,000 USZ 177/179 2x3 call spds, 23/64 at 0741:20ET
• 8,000 TYZ 137.25 puts, 19/64
• 12,000 TYF 140 calls, 12-13
• 8,500 TYZ 136 puts, 7/64
• 4,600 FVF 126/126.25/126.5 call trees