MNI US MARKETS ANALYSIS - BoE Sequencing a Market Focus

US TSYS SUMMARY: Curve Flattens Further Ahead Of Jobless Claims

Treasuries are trading mixed early Thursday, with the short-end underperforming. Some immediate global attention on Bank of England decision at 0700ET, with US jobless claims data to follow.

• Curve flattening after Wednesday's comments by Fed Clarida / ISM Services beat has extended slightly further: 2-Yr yield is up 0.6bps at 0.1862%, 5-Yr is up 0.5bps at 0.6809%, 10-Yr is down 0.2bps at 1.1803%, and 30-Yr is down 0.7bps at 1.8318%.
• Sep 10-Yr futures (TY) down 1/32 at 134-25.5, in narrow ranges (L: 134-21.5 / H: 134-27.5) and on unspectacular volume (~250k).
• Today's Fed speakers include Gov Waller (1000ET, on cenbank digital currency) and Minn's Kashkari at 1600ET. Overnight, SF Fed Pres Daly reiterated she saw potential for tapering to start end 2021/early 2022.
• At 0730ET we get Challenger Job Cuts data, and then at 0830ET we get jobless claims alongside international trade data.
• In supply: $75B in 1-/2-month bills at 1130ET. NY Fed buys ~$2.025B of 22.5Y-30Y Tsys.

EGB/GILT SUMMARY: Short-End Gilts A Little Weaker Pre-BoE

Futures are broadly higher but within limited ranges early Thursday. Fairly light volumes overall ahead of the Bank of England decision.

• The UK short end is notably weaker (2-Yr yield is up 1.4bps at 0.077%) in a bear flattening move on the UK curve ahead of the BoE decision.
• Bund takes another leg higher and we test yesterday's high at 177.52, printed 177.51. The contract has gained a whopping 380 ticks since the 14th July. Seeing better offers at these level, but a clear break above the latter would eye 177.69 1.764 proj of the May 19 - Jun 11 - Jun 22 price swing next. German 5s/30s trade near yesterday's low at 70.471 (lowest/flattest since 10th Feb), now at 70.823
• Spain sold E4.7bln of Bono/Obli - SPGBs are leading EGB periphery tightening, with large screen buying in 10s (about a half hour before the auction). Meanwhile France sold E7.5bln of LT OAT.
• The calendar for the rest of the session includes the BoE decision (0700ET/1200BST) and press conference an hour later; as well as appearances by Fed's Waller and Kashkari.
• US initial jobless claims are the data highlight (earlier, German factory orders beat expectations).

EUROPE ISSUANCE UPDATE

Spain sells:

• E1.124bln 0% May-24 Bono, Avg yield -0.55% (Prev. -0.44%), Bid-to-cover 2.27x (Prev. 2.02x)
• E2.001bln 0% Jan-26 Bono, Avg yield -0.44% (Prev. -0.25%), Bid-to-cover 1.57x (Prev. 1.99x)
• E1.544bln 0.50% Oct-31 Obli, Avg yield 0.20% (Prev. 0.35%), Bid-to-cover 1.30x (Prev. 1.79x)
• E420mln 1.00% Nov-30 Obli-Ei, Avg yield -1.33% (Prev. -0.89%), Bid-to-cover 1.62x (Prev. 1.39x)

France sells:

• E4.16bln 1.50% May-31 OAT Avg yield -0.23% (Prev. -0.21%), Bid-to-cover 1.77x (Prev. 1.79x)
• E1.133bln 5.75% Oct-32 OAT Avg yield -0.17% (Prev. -0.26%), Bid-to-cover 2.79x (Prev. 2.08x)
• E2.205bln 1.25% May-34 OAT Avg yield 0.01% (Prev. -0.09%), Bid-to-cover 2.31x (Prev. 2.13x)

FOREX: EUR/CHF Shows at New 2021 Low

• Modest downside pressure on EUR/CHF has persisted this morning, with the cross showing at new 2021 lows of 1.0721, the lowest level since November last year. While persistent CHF strength may normally suggest a bout of risk-off, equity markets are trading solidly, with uniform gains across European cash markets as well as US index futures.
• JPY is the poorest performer so far Thursday, helping USD/JPY hold above the 109.50 level and retain the recovery off the week's lows. This keeps US weekly jobless claims and and trade balance data in focus as markets gear up for Friday's payrolls release.
• AUD and NZD remain firm, with antipodean currencies remaining strong after the Kiwi jobs data earlier in the week suggested August's RBNZ decision could see rate hikes in play.
• The Bank of England rate decision takes focus going forward, with markets focusing on the vote split for the asset purchase target as well as any conclusions drawn from the Bank's assessment of the sequencing for the unwinding of the bank balance sheet at a later date.

OPTIONS: Expiries for Aug05 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1795-00(E1.2bln), $1.1825-30(E1bln), $1.1850-60(E3.4bln), $1.1885-00(E1.5bln), $1.1905-25(E958mln), $1.2000(E602mln)
• USD/JPY: Y109.00-05($878mln), Y109.15-30($1.3bln), Y109.35-50($1.4bln), Y110.00($584mln)
• AUD/USD: $0.7480-90(A$532mln)
• USD/CAD: C$1.2470($658mln), $C1.2525($721mln), C$1.2550($1.1bln)

Price Signal Summary - Oil Prints Fifth Session of Lower Lows

• S&P E-minis outlook is bullish as evidence of dip buying remains solid on intraday pullbacks. Recent gains have confirmed a resumption of the uptrend and signal scope for a continuation near-term. EUROSTOXX 50 futures continue to trade firmly, keeping the bullish short-term theme intact. This follows the recent print above a key near-term resistance at 4101.50, Jul 1 high. The breach of this level places on hold a recent bearish outlook and instead signals scope for a stronger recovery.
  
• In FX, the USD is weaker. EURUSD traded higher last week to clear a former resistance at 1.1851, Jul 15 high. The extension has exposed the 50-day EMA at 1.1916. This average represents a key short-term resistance. GBPUSD traded higher again Friday before fading into the close. The pair has cleared the 50-day EMA. The move above this average strengthens the current corrective recovery. USDJPY extended the slippage Tuesday, taking out first support to trade through the Y109 handle. A bearish focus dominates.
  
• On the commodity front, Gold staged a decent intraday rally, but the rally faltered ahead of resistance, keeping the near-term outlook neutral. has faded off last week's highs, but remains in recovery mode after printing 1790.0 in mid-July. Brent futures remain weak, edging to new weekly lows and prompting a sharp deterioration in the outlook. The move below the 50-day EMA looks convincing, with support now exposed at 70.52 initially as well as the Jul 20 low and bear trigger at 66.91/43.
  
• Within FI, Bund futures printed another higher high Wednesday before price action reversed and the rally faded. BTPs further cemented the uptrend, extending the gains to hit fresh alltime highs. A positive outlook follows the recent resumption of the uptrend that started May 19 - gains on Jul 6 and 7 resulted in a breach of a former key resistance at 152.47, Jun 14 high and established a bullish price sequence of higher highs and higher lows.

EQUITIES: Stock Futures Higher, But E-mini S&P Short of Wednesday Highs

• Continental equity markets are generally higher, but have faded off the session's best levels, with UK's FTSE-100 and Spain's IBEX-35 drifting into negative territory at the NY crossover.
• Equity futures across the US are firmer, with the e-mini S&P back above the 4,400 level and around 15 points off the overnight lows. Weekly jobless claims data will be watched for any clues headed into Friday's payrolls release.
• Europe's tech sector is leading the strength, with real estate and healthcare names also trading solidly. Consumer discretionary and materials sectors are the sole firms in the red.

COMMODITIES: Oil Markets Off Bottom, But Bounce is Shallow

• Both WTI and Brent crude futures trade higher ahead of the Thursday session, albeit still considerably lower on the week. Both oil benchmarks touched new weekly lows in early European hours but further terse comments from the Israeli Defense Minister Gantz, who reiterated that Israel is prepared to directly engage with Iran on a military footing, should the situation require it.
• Gold and silver are far more sanguine relative to Wednesday's volatility, although the weekly US jobless claims data will be keenly watched for clues ahead of Friday's payrolls release.