MNI US CLOSING FI ANALYSIS: Stimulus Deal Unlikely Ahead Election

Stimulus Deal Unlikely Before Election

In spite of the early risk-off tone, Wednesday's trade was much more subdued than the prior session (TYZ only 680k by the close), Tsys were mostly firmer but off midday lows as equities see-sawed off lows (ESZ0 -14.0).

• Covid-19 and stimulus related headlines remained key drivers, though nothing really new: comments from Tsy Sec Mnuchin re: difficulty in reaching stimulus agreement before election while gulf between parties remains. Worrying European developments: French PM Macron imposes curfew for major French cities (GRENOBLE, LILLE, LYON, MARSEILLE, TOULOUSE), not a full lock-down to stem spread of virus for next 4 weeks.
• Myriad Fed speakers on day, Fed VC Clarida humming familiar tune: "additional support from monetary, and likely fiscal policy will be needed" to support recovery. Dal Fed Kaplan: 2% infl not a ceiling, "overshoot" is around 2.25%.
• Decent US$ denominated supra-sov issuance on day w/$6B total China 4pt making up half day's supply.
• The 2-Yr yield is unchanged at 0.139%, 5-Yr is down 0.3bps at 0.3008%, 10-Yr is down 0.7bps at 0.7206%, and 30-Yr is down 0.9bps at 1.5021%.

‌US 10Y FUTURES TECHS: (Z0)‌ Bounce Appears Likely To Extend ‌

• RES 4: 139-25 High Oct 2
• RES 3: 139-17 76.4% retracement of the Sep 29 - Oct 7 sell-off
• RES 2: 139-11+ 61.8% retracement of the Sep 29 - Oct 7 sell-off
• RES 1: 13910+ High Oct 14
• PRICE: 139-08 @ 18:39 BST Oct 14
• SUP 1: 138-28+ Low Oct 13
• SUP 2: 138-20+ Low Oct 7 and the bull trigger
• SUP 3: 138-18+ Low Aug 28 and the bear trigger
• SUP 4: 138-04+ 1.000 proj of Aug 4 - 28 sell-off from Sep 3 high

Treasuries remain firm following Tuesday's rally that signals a possible reversal of the recent bearish theme. Wednesday extension higher reinforces current conditions and signals scope for stronger S/T gains. Futures are testing a band of resistance defined by the 20- and 50-day EMAs. Clearance of these averages would strengthen a bullish argument and open 139-11+, a retracement. Initial support is at 138-28+.

AUSSIE 3-YR TECHS: (Z0) Broader Bullish Theme Remains Intact

• RES 3: 100.00 - Psychological round number
• RES 2: 99.887 - 3.0% Upper Bollinger Band
• RES 1: 99.840 - All time High Oct 6 and the bull trigger
• PRICE: 99.805 @ 18:30 BST Oct 14
• 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

The Aussie 3yr bond price surge at the tail-end of September and early October confirmed bullish trend conditions. The outlook remains positive. 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 99.840, Oct 7 high would open 99.887, a Bollinger band objective. 99.760 is support, Oct 1 and 2 low.

AUSSIE 10-YR TECHS: (Z0) Focus Is On Key Resistance 

• RES 3: 99.222 - 3.0% Upper Bollinger Band
• RES 2: 99.185 - High Aug 5 (cont)
• RES 1: 99.180 - High Sep 23, 28, 29 and Oct 2 congestion
• PRICE: 99.165 @ 18:51 BST Oct 14
• SUP 1: 99.075 Low Oct and the key support
• SUP 2: 99.055 - Low Sep 18 and 21
• SUP 3: 98.970 - Low Sep 8

Aussie 10y futures remains bullish. Recent gains off 99.075, Oct 6 refocuses attention on the congestion area at 99.180 and a bull trigger. A break of this hurdle would confirm a resumption of the underlying uptrend and open 99.222, a Bollinger band projection. Key support has been defined at 99.075, Oct 6 where a break would threaten the bullish outlook and signal a near-term reversal.

JGB TECHS: (Z0) Holds Onto Recent Gains

• RES 3: 152.53 - 1.50 proj of Aug 28 - Sep 4 rally from Sep 7 low
• RES 2: 152.34 - 3.0% Upper Bollinger Band
• RES 1: 152.29 - High Sep 24 and the bull trigger
• PRICE: 152.03 @ 18:49 BST Oct 14
• SUP 1: 151.75 - Low Oct 08 and key near-term support
• SUP 2: 151.54 - Low Sep 7
• SUP 3: 151.43 - Low Sep 1

JGBs remain firmer following the recent recovery and move above 152.00. Attention turns to resistance at 152.20, Sep 30 high where a break would expose the key resistance at 152.29, Sep 24 high and the bull trigger. A break of this latter level would confirm a resumption of the uptrend and open 152.34, a Bollinger band objective and 152.53, a Fibonacci projection. Support is at 151.75, Oct 8 low.

TSY FUTURES CLOSE: Risk-Off Cools Late

Steady to firmer in the long end -- well off midday highs, yld curves flatter but off lows, very light volumes (TYZ<720k), update:

• 3M10Y -0.748, 61.832 (L: 59.912 / H: 62.736)
• 2Y10Y -0.496, 58.129 (L: 56.838 / H: 59.488)
• 2Y30Y -0.732, 136.241 (L: 134.257 / H: 138.105)
• 5Y30Y -0.574, 119.938 (L: 118.391 / H: 121.219)
• Current futures levels:
• Dec 2Y steady at 110-14.125 (L: 110-13.75 / H: 110-14.25)
• Dec 5Y steady at 125-28.5 (L: 125-27 / H: 125-29.75)
• Dec 10Y up 0.5/32 at 139-7 (L: 139-04.5 / H: 139-10.5)
• Dec 30Y up 3/32 at 175-9 (L: 175-01 / H: 175-22)
• Dec Ultra 30Y up 10/32 at 219-30 (L: 219-10 / H: 221-01)

US TSY/SUPPLY: Bill Auction Review

US EURODOLLAR FUTURES CLOSE: Narrow Range

Mildly higher to steady at points along the strip, narrow ranges on modest volumes. Lead quarterly holds steady since 3M LIBOR set' -0.00675 to 0.23013% (+0.00600/wk). Latest lvls:

• Dec 20 steady at 99.755
• Mar 21 +0.005 at 99.795
• Jun 21 +0.005 at 99.805
• Sep 21 +0.005 at 99.805
• Red Pack (Dec 21-Sep 22) +/-0.005
• Green Pack (Dec 22-Sep 23) steady to +0.005
• Blue Pack (Dec 23-Sep 24) steady to +0.005
• Gold Pack (Dec 24-Sep 25) steady to +0.005

US LIBOR FIXING

• US00O/N 0.08088 0.00088
• US0001W 0.09988 0.00338
• US0001M 0.14575 -0.00263
• US0003M 0.23013 -0.00675
• US0006M 0.25325 -0.00125
• US0012M 0.34400 -0.00150

STIR: FRBNY EFFR

Reflects prior session

• Daily Effective Fed Funds Rate: 0.09% volume: $54B
• Daily Overnight Bank Funding Rate: 0.08%, volume: $172B

US TSY: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 0.09%, $930B
• Broad General Collateral Rate (BGCR): 0.06%, $352B
• Tri-Party General Collateral Rate (TGCR): 0.06%, $330B
• (rate, volume levels reflect prior session)

FED: NY Fed Operational Purchase

• TIPS 7.5Y-30Y, $1.201B accepted of $2.814B submission

• Thu 10/15 1010-1030ET: TIPS 1Y-7.5Y, appr $2.425B
• Fri 10/16 1010-1030ET: Tsy 0Y-2.25Y, appr $12.825B
• Mon 10/19 1010-1030ET: Tsy 20Y-30Y, appr $1.750B
• Tue 10/20 1010-1030ET: Tsy 4.5Y-7Y, appr $6.025B
• Wed 10/21 1010-1030ET: TIPS 7.5Y-30Y, appr $1.225B
• Thu 10/22 1010-1030ET: Tsy 20Y-30Y, appr $1.750B
• Fri 10/23 1010-1030ET: Tsy 2.25Y-4.5Y, appr $8.825B
• Tue 10/27 1010-1030ET: Tsy 7Y-20Y, appr $3.625B
• Wed 10/28 1010-1030ET: Tsy 20Y-307Y, appr $1.750B

OUTLOOK: Thursday Look Ahead

• US Data/Speaker Calendar (prior, estimate)
• 15-Oct 0830 10-Oct initial jobless claims (840k, 825K)
• 15-Oct 0830 10-Oct continuing claims (10.976M, 10.550M)
• 15-Oct 0830 Oct Philadelphia Fed Mfg Index (15.0, 14.3)
• 15-Oct 0830 Oct Empire Manufacturing Index (17.0, 14.0)
• 15-Oct 0830 Sep exports price index (0.5%, 0.3%)
• 15-Oct 0830 Sep imports price index (0.7%, 0.5%)
• 15-Oct 0900 Atl Fed Bostic, on benefits cliff
• 15-Oct 1030 9-Oct natural gas stocks w/w
• 15-Oct 1100 9-Oct Distillate, Gas, Oil stocks w/w change
• 15-Oct 1100 Dallas Fed Pres Kaplan
• 15-Oct 1100 Fed VC Quarles IIF Annual meet
• 15-Oct 1630 14-Oct Fed weekly securities holdings
• 15-Oct 1700 Mn Fed Kashkari eco-outlook

PIPELINE: China Launched

• Date $MM Issuer (Priced *, Launch #)
• 10/14 $6B #China $1.25B 3Y +25, $2.25B 5Y +30, $2B 10Y +50, $500M 30Y +80
• 10/14 $3B *CADES 10Y Social bond +28
• 10/14 $1B *EIB WNG 7Y +13
• 10/14 $1B *Council of Europe 3Y +3
• 10/14 $Benchmark New York Life, 3Y +37a, 3Y FRN SOFR equiv
• 10/14 $750m #Franklin Resources 10Y +90
• 10/14 $Benchmark Naftogaz investor call, interest in 5- and 7Y