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MNI US CLOSING FI ANALYSIS: Strong Retail Sales, Brexit Talk Weighs


US TSY SUMMARY: Better Than Exp Retail Sales, Brexit Headlines Drove Vol Friday

Rates traded weaker by the bell but off early session lows to near middle session range amid modest overall volumes (TYZ w/ 825k -- a tepid pace with volumes in the 10Y futures at 290k on the open). Brexit headline and data related risk drove session vol: Retail sales beating expectation while US IP missed the survey. Salient factors spurring trade today:

  • Drug maker Pfizer hopes of vaccine provided mild risk-on tone;
  • UK PM Johnson Brexit comments spurred decent 2-way, rates quickly reversed gains after Australia-style deal intimated
  • Better than expected retail sales weighed on rates (support for equities) Tsys bounced on UK PM spokesman Slack comment:
  • NO POINT IN TRADE TALKS IF EU DOESN'T CHANGE POSITION, Bbg, and "`TRADE TALKS ARE OVER' BECAUSE EU EFFECTIVELY ENDED THEM", Bbg. More Brexit Headline Induced Vol
  • Midday bounce in Tsys w/below exp IP data and recent comments from UK PM spokesman Slack intimating Brexit negotiations are over spurred a quick round of short covering, long end back to narrow overnight range.
  • The 2-Yr yield is up 0.2bps at 0.1411%, 5-Yr is up 0.3bps at 0.3169%, 10-Yr is up 0.8bps at 0.7406%, and 30-Yr is up 1.1bps at 1.5247%.

TECHNICALS

US 10YR FUTURE TECHS: (Z0) Bullish Outlook Remains Intact

  • RES 4: 139-26 High Sep 29 and a key resistance
  • RES 3: 139-25 High Oct 2
  • RES 2: 139-17 76.4% retracement of the Sep 29 - Oct 7 sell-off
  • RES 1: 139-14 High Oct 15
  • PRICE: 139-02 @17:23 BST Oct 16
  • SUP 1: 138-31 Intraday low
  • SUP 2: 138-28+ Low Oct 13
  • SUP 3: 138-20+ Low Oct 7 and the bull trigger
  • SUP 4: 138-18+ Low Aug 28 and bear trigger
Treasuries rallied Thursday but gave back gains to close down on the day and Friday saw price edge lower again. The recent pullback does dampen the recent positive tone, however at this stage a bullish outlook still prevails. This follows recent strong gains off the Oct 7 low. Initial resistance has been defined at 139-14, Oct 15 high where a break would open 139-17, a retracement level. Support is at 138-28+.

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

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: 99.840 - All time High Oct 6, 15 and the bull trigger
  • PRICE: 99.830 @ 17:20 BST Oct 16
  • 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 99.840, Oct 7 high and this week's high would open 99.889. Support is at 99.760.

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

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: 99.265 @ 17:08 BST Oct 16
  • 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 remain bullish following this week's strong impulsive rally. 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) Bullish Focus

JGB TECHS: (Z0) Bullish Focus

  • 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: 152.18 @ 17:12 BST Oct 16
  • SUP 1: 151.75 - Low Oct 08 and trend support
  • SUP 2: 151.54 - Low Sep 7
  • SUP 3: 151.43 - Low Sep 1
JGBs remain firmer following the recent recovery that has resulted in a move above 152.00. Attention turns to 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.

Weaker But Off Early Lows

Rates traded weaker by the bell but off early session lows to near middle session range amid modest overall volumes (TYZ w/ 825k -- a tepid pace with volumes in the 10Y futures at 290k on the open). Brexit headline and data related risk drove session vol: Retail sales beating expectation while US IP missed the survey Yld curves mixed, well off early flatter levels, update:

  • 3M10Y +1.355, 63.931 (L: 61.169 / H: 65.419)
  • 2Y10Y +0.133, 59.257 (L: 58.2 / H: 61.453)
  • 2Y30Y +0.328, 137.565 (L: 135.776 / H: 140.511)
  • 5Y30Y +0.525, 120.344 (L: 119.014 / H: 122.45); Current futures levels:
  • Dec 2Y down 0.12/32 at 110-13.875 (L: 110-13.62 / H: 110-14.5)
  • Dec 5Y down 0.25/32 at 125-26.7 (L: 125-25.7 / H: 125-28.7)
  • Dec 10Y down 1/32 at 139-3 (L: 138-31 / H: 139-07.5)
  • Dec 30Y down 6/32 at 175-2 (L: 174-16 / H: 175-18)
  • Dec Ultra 30Y down 17/32 at 219-10 (L: 218-03 / H: 220-12)

US TSY SUPPLY: Preview Next Wk's Auctions

DATETIMEAMTSECURITYCUSIP
19-Oct1130ET$54B13W-Bill(9127963V9)
19-Oct1130ET$51B26W-Bill(9127962Q1)
20-Oct1130ET$30B42D-Bill CMB(912796TU3)
20-Oct1130ET$30B119D-Bill CMB(9127964D8)
21-Oct1130ETTBA105D-Bill CMB20-Oct
21-Oct1130ETTBA154D-Bill CMB20-Oct
21-Oct1300ET$22B20Y-bond/R/O(912810SQ2)
22-Oct1130ETTBA4W-Bill20-Oct
22-Oct1130ETTBA8W-Bill20-Oct
22-Oct1300ET$17B5Y-TIPS(91282CAQ4)

EURODOLLAR FUTURES CLOSE: Narrow Range

Mostly steady in the short end to marginally mixed by the bell. Lead quarterly holds steady since 3M LIBOR climbed +0.00063 off Thu's all-time lo to 0.21838% (-0.00575/wk). Latest lvls:

  • Dec 20 +0.000 at 99.760
  • Mar 21 +0.005 at 99.795
  • Jun 21 +0.005 at 99.805
  • Sep 21 +0.010 at 99.810
  • Red Pack (Dec 21-Sep 22) steady to +0.005
  • Green Pack (Dec 22-Sep 23) steady
  • Blue Pack (Dec 23-Sep 24) steady
  • Gold Pack (Dec 24-Sep 25) -0.01 to -0.005

USD LIBOR FIX

  • US00O/N 0.08113 (-0.00012)
  • US0001W 0.10075 (-0.00075)
  • US0001M 0.15138 (0.00413)
  • US0003M 0.21838 (0.00063)
  • US0006M 0.25750 (0.00425)
  • US0012M 0.33500 (-0.01275)

US TSYS/STIR

FRBNY EFFR for prior session:

  • Daily Effective Fed Funds Rate: 0.09% volume: $54B
  • Daily Overnight Bank Funding Rate: 0.08%, volume: $163B
US TSYS: Repo Reference Rates
  • Secured Overnight Financing Rate (SOFR): 0.10%, $952B
  • Broad General Collateral Rate (BGCR): 0.07%, $359B
  • Tri-Party General Collateral Rate (TGCR): 0.07%, $331B
  • (rate, volume levels reflect prior session)
FED: NY Fed Operational Purchase:
  • Tsy 0Y-2.25Y, $12.801B accepted vs. whopping $45.582B submission
  • Next week's scheduled purchases:
  • 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

OUTLOOK: Look Ahead To Monday

  • US Data/Speaker Calendar (prior, estimate)
  • 19-Oct 0800 Fed Chair Powell, panel remarks IMF event "Cross-Border Payment, A Vision for the Future", IMF Mng Dir Kristalina Georgieva moderating
  • 19-Oct 1000 Oct NAHB home builder index (83, 83)
  • 19-Oct 1130 US Tsy $54B 13W-Bill auction (9127963V9)
  • 19-Oct 1130 US Tsy $51B 26W-Bill auction (9127962Q1)
  • 19-Oct 1420 Atl Fed Bostic, economic diversity
  • 19-Oct 1500 Philly Fed Harker, Covid-19 recovery

PIPELINE: $8B BoA 5pt Launched

  • Date $MM Issuer (Priced *, Launch #)
  • 10/16 $8B #Bank of America $2B 4NC3 +63, $500M 4NC3 SOFR+73, $2.5B 6NC5 +88, $2.5B 11NC10 +118, $1B 31NC30 +130
  • 10/16 $1B #Morgan Stanley WNG 5NC4 fix/FRN, +55
  • 10/16 $500M *China Minsheng Banking 3Y FRN, L+90
  • 10/?? $Benchmark Denmark short duration bond

FI OPTIONS

Eurodollar Options:

  • 3,000 Blue Dec 91/92/93 put flys
  • 5,000 Dec 95/96 put spds vs. Red Mar 93/95 put spds
  • +2,000 Blue Jun 90/95 3x2 put spds, 26.0
  • -2,500 short Jun 96 puts .25 over Blue Dec 91/93 put spds
  • Conditional Bear Steepener
  • +2,500 Green Jun 95/96 put spds, 4.5 vs. 99.625/0.22%
  • +5,000 Blue Mar 93/95 put spds 1.0 over the short Mar 96/97 put spds -- pre-data
  • Overnight trade
  • -4,500 short Mar 100.25 calls, 0.5
  • 4,800 Dec 95/96/97 put flys
Tsy Options:
  • +5,000 TYZ 139 straddle, 1-27 1-28
  • 1,500 TYZ 136/137/138 put flys, 6/64
  • +5,000 TYZ 138.5 puts, 35/64
  • +7,000 TYZ 138 puts, 20-23, ongoing buyer
  • Overnight trade
  • +5,000 TYZ 138 puts, 20/64 recently
  • over +13,600 TYZ 135 puts, 2/64
  • 3,000 TYX 138.75/139 put spds
  • 3,600 TYX 139.5 calls

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