MNI US MARKETS ANALYSIS - Ample Fedspeak, But Little on Monpol

Highlights:

• UMich and Canadian jobs data round off the week
• Heavy Fedspeak schedule, but little expected on monetary policy
• NOK/SEK plumbs new monthly highs as Norwegian CPI proves sticky

US TSYS: Consolidating Post Jobless Claims and 30Y Auction Rally, Awaiting U.Mich

• Treasuries are near unchanged on the day, consolidating yesterday’s two-stage rally on higher-than-expected initial jobless claims before the 30Y auction traded through.
• Cash yields range from unchanged to 0.7bp lower, with 2s10s unchanged at -36bps having pulled back from post-jobless claims but pre-auction highs of -31.7bps yesterday.
• TYM4 at 109-01+ sits within extremely narrow ranges of 108-31 to 109-03+ on reasonable volumes of 290k.
• Yesterday’s rally saw it lift away from support at 108-18 (20-day EMA). Channel resistance is exposed at 109-06+ (top from Feb 1 high) followed closely by 109-07+ (50-day EMA) and 109-09+ (May 3 high).
• Data: U.Mich consumer survey May prelim (1000ET), Mthly budget statement Apr (1400ET)
• Fedspeak: Bowman (0900ET), Logan (1000ET), Kashkari (1000ET), Goolsbee (1245ET), Barr (1330ET) and Kashkari/Goolsbee (1415ET) – see STIR bullet.
• No issuance.

STIR: Heavy Fedspeak Ahead But Seems Unlikely To Offer Much New On Mon Pol

• Fed Funds implied rates are near unchanged overnight as they keep to levels seen after higher than expected initial jobless claims. The preliminary U.Mich consumer survey for May headlines an otherwise light data docket.
• Cumulative cuts from 5.33% effective: 3bp Jun, 9bp Jul, 23bp Sep, 32bp Nov and 47bp Dec.
• Bostic (’24 voter) in unscheduled remarks from an interview with Reuters: the Fed remains on track for a single rate cut this year although the timing is uncertain.
• There’s a heavy schedule for Fedspeakers today although we see a low likelihood of meaningful monetary policy comments considering the combination of topics and recent comments. Of those more likely to touch on mon pol, Goolsbee and Kashkari have each spoken since Friday’s NFP report.
• Recent context: Goolsbee said more jobs reports like [April’s release] the more comfort I will have but need to have comfort that the bump in inflation isn’t a sign of reacceleration. He then followed up on Sat criticizing the dot plot lacking conditionality context. Kashkari said Tuesday that his June dot could be two cuts, one cut or no cuts at all, but not more than two cuts, and that if inflation becomes embedded the Fed could hike if needed.
• 0900ET Gov Bowman (voter) on financial stability risks (with text)
• 1000ET Logan (non-voter) in moderated Q&A at a bankers’ conference
• 1000ET Kashkari (non-voter) in tech-based Q&A
• 1245ET Goolsbee (’25 voter) in moderated Q&A
• 1330ET VC Supervision Barr (voter) gives commencement speech
• 1415ET Kashkari (non-voter) and Goolsbee (’25) in CNBC interview

US TSY FUTURES: OI Points To Net Long Setting Across Most Of The Curve On Thursday

The combination of yesterday’s rally in Tsy futures and preliminary OI data points to net long setting across most of the curve, with only an apparent round of modest short cover in WN futures breaking the broader trend.

• That left the net curve DV01 OI equivalent move tilted comfortably towards net long setting.
• FV futures saw the largest net positioning swing.
• A reminder that Tsy futures retain their net short positioning bias, although there will be some skew from basis trade positioning, with the latest J.P.Morgan Tsy client surveys pointing to net long positioning in cash markets.
• The dovish BoE outcome, push higher in weekly initial jobless claims and a well-received round of 30-Year Tsy supply all factored into yesterday’s rally.

STIR: OI Points To Long Setting In SOFR Greens On Thursday

The combination of yesterday’s uptick in SOFR futures and preliminary OI data points to a mix of net long setting and short cover through the blues.

• Those forces largely offset when it came to net pack OI movement in the whites & reds.
• The greens saw net long setting in all 4 contracts, providing the most meaningful net OI change in pack terms.
• The blues also saw a slightly more pronounced bias towards long setting than both the whites and reds.
• The dovish BoE outcome and weekly jobless claims data factored into the SOFR uptick.
• Those looking for cross-market monetary policy divergence plays may be emboldened by the prospect of a seemingly imminent ECB cut, as well as the BoE’s insistence that the inflation picture is different in the UK than it is in Europe.
• The latter has opened up the potential for a swifter round of UK rate cuts than markets currently discount.

STIR: OI Points To Net Short Cover In SONIA White & Red Packs Post-BoE

The combination of yesterday’s rally in most SONIA futures and OI data points to fairly meaningful short cover in SFIU4 & Z4 after BoE Governor Bailey flagged the potential for a swifter round of rate cuts than the market currently prices. Long cover was seemingly seen in SFIH4, with modest long setting in SFIM4.

• Short cover also provided the most meaningful positioning movement in the reds, although pockets of net long setting were also seen here.
• Net pack OI movement was a little more balanced in the greens and blues, with the positioning movement in the former tilted towards net short cover and the latter tilted towards net long setting.
• BoE-dated OIS now shows around 60bp of cuts through year end, which compares to closer to 50bp of easing at the end of last week.
• The first 25bp cut is fully discounted come the end of the August MPC and near 50/50 odds of a June cut are currently priced.
• The two CPI reports released between now and the June meeting will provide the key inputs for the Bank, with the labour market data being de-emphasised.
• Elsewhere, the pricing components of the PMI data will also be eyed given the Bank’s reference to the significance of the survey evidence that firms were passing less of their increased costs through to output prices.

EUROPE ISSUANCE UPDATE:

Italy 3/7/15+ year BTP Results

• E2bln of the 2.95% Feb-27 BTP. Avg yield 3.32% (bid-to-cover 1.60x)
• E1bln of the 1.10% Apr-27 BTP. Avg yield 3.28% (bid-to-cover 1.96x)
• E4.5bln of the 3.45% Jul-31 BTP. Avg yield 3.52% (bid-to-cover 1.37x)
• E1bln of the 5.00% Sep-40 BTP. Avg yield 4.14% (bid-to-cover 1.67x)
• E750mln of the 2.15% Mar-72 BTP. Avg yield 3.96% (bid-to-cover 1.55x)

The cumulative total for the for the 6-year retail-only BTP Valore is currently E11.1bln, around 30 minutes before books are due to close (at 13:00CET today)
•    Day 5 take-up is currently E856mln. Take-up on the final day in previous issues has ranged from E1.1-1.6bln.
•    Final take-up is likely to fall well below the E18.3bln seen in Feb/Mar for the previous 6- year issue (as well as last year's E18.2bln /E17.2bln).
•    E3.701bln was sold on day 1 and E2.865bln on day 2, E2.129bln on day 3 and E1.562bln on day 4.
•    Italy's previous 6-year Mar-30 BTP Valore issue saw E6.44bln sold on day 1, E4.611bln sold on day 2, E3.603bln on day 3 and E2.29bln sold on day 4 and E1.37bln on day 5.

FOREX: NOK/SEK Through to New Highs as Norwegian CPI Proves Sticky

• Early Friday trade has been largely consolidative across G10 FX, as the USD Index trades flat and holds the entirety of the late Thursday losses. Antipodean currencies are faring less effectively, with AUD and NZD softer as they moderate a small part of the Thursday rally.
• Meanwhile, NOK/SEK has cleared the April high, helped by the higher inflation reading in Norway this morning. April CPI came in at 0.8% M/M vs. Exp. 0.6%, with the Norges Bank's favoured inflation measure CPI-ATE slowing by just 0.1ppts to 4.4% vs. Exp. 4.2%.
• GBP has been a currency in focus following Thursday's BoE decision. EUR/GBP has mean-reverted to the 200-dma of 0.8605, but markets remain in a short-term bullish condition and clearly sensitive to further BoE re-pricing. A handful of sell-side analysts have brought forward their call for a first BoE rate cut to June, for which a 25bps rate cut step remains only partially priced.
• The Canadian jobs report is the data highlight Friday, with markets expecting Canada to gain 20k jobs over April, but also see a 0.1ppts tick higher in the unemployment rate to 6.2%. Central bank speak due today includes ECB's Elderson, BoE's Pill & Dhingra and Fed's Bowman, Logan, Kashkari, Goolsbee and Barr.

OPTIONS: Expiries for May10 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0825(E1.1bln)
• GBP/USD: $1.2500(Gbp509mln), $1.2525(Gbp475mln)
• EUR/GBP: Gbp0.8600-10(E504mln)
• AUD/USD: $0.6540(A$697mln)
• USD/CAD: C$1.3680-85($2.4bln), C$1.3710($653mln), C$1.3750($937mln), C$1.3795($1.4bln)
• USD/CNY: Cny7.1800($1.1bln)

EQUITIES: E-Mini S&P Extends Current Bull Cycle

Eurostoxx 50 futures build on the recent firm tone and the contract has traded higher again early Friday. Recent gains have resulted in a breach of the 20-day EMA, and resistance at 4990.00, Apr 15 high, highlighting a stronger reversal. Wednesday’s break of 5006.00, the Apr 4 high, reinforces the current bullish condition. Sights are on the bull trigger at 5079.00, Apr 2 high. Key support is 4762.00, the Apr 19 low. Initial support to watch is 4890.80, the 50-day EMA. S&P E-Minis have traded higher this week, extending the current bull cycle. Price has moved through resistance at the 20-day EMA - a bullish development. This highlights scope for a continuation higher that would expose the key resistance and bull trigger at 5333.50, the Apr 1 high. Initial resistance is 5246.18, a Fibonacci retracement. Initial firm support lies at 5036.25, the May 2 low.

COMMODITIES: Gains in WTI Futures Off This Week's Lows Considered Corrective

A bearish theme in WTI futures remains intact and the contract traded to a fresh short-term cycle low this week. Gains off this mark are considered corrective for now. Price has recently breached the 50-day EMA, strengthening a short-term bearish theme that highlights potential for a deeper correction. Scope is seen for a move to $76.07, Mar 11 low. Key resistance and the bull trigger is at $86.97, the Apr 12 high. Initial firm resistance is at $84.46, the Apr 26 high. Gold has rallied well for two consecutive sessions as markets undergo a corrective bump higher. This breaks the consolidation phase and concludes the bearish short-term condition. The end of the corrective leg lower has unwound the overbought condition, and allows markets to focus on next resistance at 2431.50 - the bull trigger. Any return lower would eye $2255.0, the 50-day EMA.

Date	GMT/Local	Impact	Country	Event
10/05/2024	1115/1215		GB	BOE's Pill at National MPC Agency Briefing
10/05/2024	1145/1245		GB	BOE's Dhingra remarks at KCL Econdat Conference
10/05/2024	1230/0830	***	CA	Labour Force Survey
10/05/2024	1300/0900		US	Fed Governor Michelle Bowman
10/05/2024	1400/1000	**	US	U. Mich. Survey of Consumers
10/05/2024	1400/1000		US	Dallas Fed's Lorie Logan
10/05/2024	1400/1000		US	Minneapolis Fed's Neel Kashkari
10/05/2024	1600/1200	***	US	USDA Crop Estimates - WASDE
10/05/2024	1645/1245		US	Chicago Fed's Austan Goolsbee
10/05/2024	1700/1300	**	US	Baker Hughes Rig Count Overview - Weekly
10/05/2024	1730/1330		US	Fed Vice Chair Michael Barr
10/05/2024	1800/1400	**	US	Treasury Budget