MNI US MARKETS ANALYSIS - Belly of Tsy Curve Trades Heavy Pre-Supply

US TSYS: Belly Underperforming Ahead Of 5Y Supply

Treasuries and rate futures are a little lower to start Thanksgiving week, with initial support overnight from China COVID concerns fading in the European morning.

• Moves across the curve have been limited so far, with flattening overall, with the belly underperforming. Supply in some focus with $42B of 2Y Note and $43B of 5Y Note on offer later today (1130ET and 1300ET, respectively).
• Rate futures are a little weaker across the strip, off 2-2.5 ticks, but minimal change in either Dec FOMC OIS hike pricing (54.5bp) or terminal rate (Jun '23, 5.06%).
• Comments from Atlanta Fed's Bostic over the weekend pointed to another 75-100bp in the hike cycle (to 4.75-5.00%).
• Early futures rolls are underway ahead of the holidays and next week's 1st notice.
• A light schedule in terms of data and speakers today: Chicago Fed Nat Activity Index (never a market mover, at 0830ET) is the data, and the speaker is SF Fed's Daly at 1300ET.
• The 2-Yr yield is down 0.2bps at 4.531%, 5-Yr is up 0.7bps at 4.0154%, 10-Yr is down 0.2bps at 3.8269%, and 30-Yr is down 1.2bps at 3.9145%.

US 10Y FUTURES TECHS: (Z2)‌‌ Corrective Pullback

• RES 4: 115-14+ 50.0% retracement of the Aug 2 - Oct 21 downleg
• RES 3: 114-17 High Sep 20
• RES 2: 113-30 High Oct 4 and a key resistance
• RES 1: 113-11 High Nov 16
• PRICE: 112-06 @ 11:19 GMT Nov 21
• SUP 1: 111-20/110-12+ 20-day EMA / Low Nov 10
• SUP 2: 109+10+ Low Nov 04
• SUP 3: 108-26+ Low Oct 21 and the bear trigger
• SUP 4: 108-06+ Low Oct 2007 (cont)

The short-term trend condition in Treasury futures is bullish and the latest retracement appears to be a correction. Recent gains have resulted in a break of 112-13+, the 50-day EMA. A continuation higher would strengthen current bullish conditions and open 113-30, the Oct 4 high and a key resistance. On the downside, initial firm support is at 111-20, the 20-day EMA. A break of this average would signal scope for a deeper retracement.

UK: PM Tries To Balance Concerns Of Brexiteers And Businesses in CBI Speech

PM Rishi Sunak has just concluded his keynote speech to the CBI conference in Birmingham.

• Chris Smyth at The Times: "Sunak says a "defining focus of this government" will be innovation, saying it is "about new ideas, new ways of doing things that drive economic and social progress". Sunak argues that focus on innovation rules out following EU rules: "we're absolutely committed to using our new Brexit freedoms to create the most pro innovation regulatory environment in the world in sectors like life sciences, financial services, AI and data".
• Smyth: "Sunak responds to [CBI chief] Danker's call for more immigration by saying "we must be honest with ourselves" that free movement ended "to rebuild public consent in our immigration system". Sunak's wonkish speech on innovation and productivity stats could not be more different to Boris Johnson...You can see why business might like it, but it's not exactly as relatable to the average voter..."
• Aubrey Allegretti at The Guardian: "Sunak tries to pacify jittery Brexiteers after reports of a Swiss-style deal being eyed up by senior government figures. He vows: "The UK will not pursue any relationship with Europe that relies on alignment with EU law."

Q3 Earnings Roundup:

Still some big names announcing Q3 earnings this week, tapering off after tomorrow ahead the Thanksgiving holiday.

• Monday after the close:
  • Agilent (A): $1.386 est
  • Zoom Video Comm (ZM): $0.836 est
• Tuesday, before the open:
  • Best Buy (BBY) +$1.055 est
  • Dicks Sporting (DKS) +$2.224 est
  • Dollar Tree (DLTR) +$1.182 est
  • Analog Devices (ADI) +$2.587 est
• Late Tuesday:
  • Autodesk (ADSK) +$1.708 est
  • HP Inc (HPQ) +$0.840 est
  • Nordstroms (JWN) +$0.146 est
  • Deere Co (DE) +$7.094 est

FOREX: ECB's Lane Adds Extra Weight to EUR

• The single currency started the session poorly, and weakened further upon release of an MNI interview with ECB's Lane. Lane flagged that the ECB will consider a slower pace of tightening at the December meeting, with the governing council weighing signs that bank lending conditions are already tightening against accelerating wage inflation.
• EUR/USD traded a low at 1.0226 Monday, narrowing the gap with support at 1.0193 - the 38.2% retracement for the November upleg.
• Risk sentiment has suffered from the off, with equity futures lower on both sides of the pond. Moves follow the deterioration in China's COVID backdrop as a number of regional governments reintroduced mobility restrictions after infections rose at the fastest rate since April.
• JPY is the poorest performer in G10, with USD/JPY boosted by the firmer Dollar Index and putting the pair above the previously well-held 100-dma resistance of 141.03. 142.48 marks the next upside level, the November 11th high.
• Datapoints are few and far between Monday, with just the Chicago Fed National Activity Index on the docket. ECB's Holzmann, Centeno and Nagel speak, as well as Fed's Daly.

Price Signal Summary - Oil Futures Remain Vulnerable

• On the commodity front, short-term trend conditions in Gold remain bullish and the latest pullback is considered corrective. Recent gains resulted in the break of $1729.5, the Oct 4 high. This strengthens the current bullish theme and opens $1800.0 and a key resistance at $1807.9, Aug 10 high. Initial firm support is seen at $1702.3, the Nov 9 low.
• In the Oil space, WTI futures traded sharply lower last week, reinforcing bearish conditions. Attention is on the next key support at $74.96, the Sep 28 low and a bear trigger. Initial resistance is seen at $82.43, Friday’s high.