MNI US MARKETS ANALYSIS - Asset Prices Steady, UK Holiday Curtails Volumes

US TSYS: Rates Treading Water, Focus on Friday Jobs Data

• Treasury futures staying close to home overnight, levels marginally mixed, inside narrow range. Rather decent overnight volumes (TYU3>330k) despite London out on bank holiday today, elevated volumes due to Sep'23 option expiring and Sep/Dec rolls ahead Thursday's "First Notice" date where Dec'23 takes lead quarterly.
• Curves flatter with bonds trading firmer: 3M10Y -2.588 at -129.455, 2Y10Y -2.141 at -86.626. Sep'23 10Y currently -1 at 109-12, yield 4.2315% -.0039.
• Initial technical support for the Sep'23 10Y contract is 108-28/26+ Low Aug 22 / Low Oct 21 2022 (cont). On the flipside, Firm resistance is 110-08+, the 20-day EMA. Gains are considered corrective.
• Economic data limited to Dallas Fed Mfg Activity (-20.0, -19) at 1030ET, focus on the latest employment data for August this Friday.
• Scheduled Fed speak: Fed VC Barr on banking services, no text, Q&A at 1230ET.
• STIR Update: Secured Overnight Financing Rate 3M futures are moving lower in the minutes after SOFR 3M rate settled +0.01355 to 5.41744 (+0.02072 total last wk).
• Rate hike projections through year end are gaining: Sep 20 FOMC is 22.8% w/ implied rate change of +5.7bp to 5.386%. November cumulative of +16.8bp at 5.496, December cumulative of 16.4bp at 5.493%. Fed terminal climbs to 5.50% in Nov'23.

EGBs: Hawkish Holzmann Helps Space Lower, Before Support Kicks In

Bunds have continued to cheapen, with futures showing through Friday’s base before recovering from worst levels.

• Comments from ECB Governing Council hawk Holzmann underscored his desire to start the debate on ending PEPP reinvestments, while he also outlined his belief that the ECB is behind the curve and should assess policy settings when the deposit rate hits 4% (his hawkish words came as no real surprise given his historical leaning).
• The comments helped the contract to fresh session lows, before a downtick in global equity futures and a move off best levels for crude oil provided some support.
• Extensions lower would expose initial firm support at 131.20, the Aug 23 low. A stronger reversal lower and a break of this level would be seen as a bearish development.
• German cash benchmarks run 1.5-3.5bp cheaper as the curve flattens.
• EGB/Bund spreads little changed to a touch tighter with peripherals outperforming at the margins.
• EU supply had little impact on the space this morning, with a few EUR-denominated IG deals mandated.

FOREX: UK Holiday Thins Price Action, But CNH Remains Weak

• Currency markets are muted ahead of the Monday NY crossover, with the UK market holiday keeping volumes and activity light. The single currency is modestly outperforming to keep EUR top of the pack, however a set of sizeable strikes effectively top-and-tail the Friday spot range in EUR/USD, helping to define price action so far.
• The greenback is mixed, but off the European morning lows, aided by GBP/USD fading toward Friday's 1.2548 ahead of the crossover. NOK is among the poorest performers, keeping USD/NOK pinned to fresh multi-month highs as markets reverse the July downleg. 10.8299 marks the next major upside level.
• Chinese markets remain a point of focus, with further headlines crossing this morning to suggest the authorities have requested funds to avoid net equity sales to boost index prices for a second consecutive week. The headlines have failed to contain CNH weakness, pushing USD/CNH through the Friday high to narrow the gap with 7.3361, the Monday high.
• Datapoints are few and far between Monday, keeping focus on the speaker schedule as ECB's Nagel, Holzmann and Fed's Barr are all set to speak. Risk events pick up later in the week, with nonfarm payrolls the market focus on Friday.

FX OPTIONS: Expiries for Aug28 NY cut 1000ET (Source DTCC)

Despite the Bank Holiday in the UK, FX options pipeline relatively busy for today's NY cut, particularly for EUR/USD, with sizeable strikes effectively top-and-tailing the Friday spot range:

• EUR/USD: $1.0745-50(E609mln), $1.0790-00(E1.5bln), $1.0825(E833mln), $1.0850(E632mln), $1.0900(E1.5bln)
• USD/JPY: Y146.50($701mln), Y147.00($656mln)
• EUR/GBP: Gbp0.8555-65(E591mln)
• AUD/USD: $0.6410-25(A$2.6bln)
• USD/CNY: Cny7.3000($2.0bln)

EQUITIES: European Equities Higher, FTSE-100 Closed for Bank Holiday

• A sharp sell-off last Thursday in the E-mini S&P contract reinforces a bearish theme and signals the end of the recent corrective bounce between Aug 18 - 24. Attention is on support at 4350.00, the Aug 18 low and bear trigger.
• A bearish trend condition in Eurostoxx 50 futures remains intact and last Thursday’s sharp sell-off reinforces this theme. The move lower signals the end of the recent corrective bounce between Aug 18 - 24.

COMMODITIES: Crude in Minor Positive Territory, But Gold Trend Remains Bearish

• The outlook in Gold remains bearish, however, a short-term correction resulted in a recovery last week. The yellow metal has breached resistance at the 20-day EMA and attention turns to the 50-day EMA, at $1930.8.
• The uptrend in WTI futures remains intact and recent weakness is considered corrective. Last Wednesday’s move lower resulted in a print below support at $78.33, the Aug 3 low. A clear break of this level would highlight a stronger bear cycle.