Highlights:
- Treasury yield curve a touch flatter, with Fed pricing just off recent highs
- European PMIs flag stubborn nature of services inflation
- BoE's Pill, ECB's Nagel highlight speaker schedule, with Fed inside blackout period
- Cash Tsy yields sit 1.2bp higher (2-5Y) to 0.3bp lower (30Y), with the modest sell-off at the front-end in line with European FI but the long end underperforming a larger rally in EGBs/Gilts on limited new drivers.
- TYM4 is near unchanged at 107-28+ (+01) after earlier touching yesterday’s high of 107-31. Volumes of ~300k are closer to longer-term averages for the time of data after some particularly high recent sessions.
- The earlier increase was a small step closer to resistance at 108-22+ (Apr 19 high) but the trend needle points south with support tat 107-13+ (Apr 16 low) after which lies Fibo projection-based levels starting with 107-07+.
- Fed Funds implied rates have lifted slightly but remain off most recent highs. Cumulative cuts from 5.33% effective: 1bp May, 4bp Jun, 11bp Jul, 22bp Sep, 28bp Nov and 39bp Dec.
- Data: Philly Fed non-mfg Apr (0830ET), S&P Global US PMIs Apr prelim (0945ET), Retail sales annual revisions (1000ET), New home sales Mar (1000ET), Richmond Fed mfg Apr (1000ET)
- Note/bond issuance: US Tsy $69B 2Y Note auction (91282CKK6) – 1130ET. Last month's 2Y saw a small tail (4.595% high yield vs 4.592% WI)
- Bill issuance: US Tsy $65B 42D Bill CMB auction – 1300ET
US TSY FUTURES: OI Points To Little Change In Net Positioning During Low Conviction Monday
The combination of yesterday’s downtick in most Tsy futures and preliminary OI data points to a mix of very modest net short setting and long cover to start the week.
- That came as a lack of meaningful macro news flow and fairly steady state in geopolitical risk surrounding the Middle East made for a low conviction, reduced volume session.
| 22-Apr-24 | 19-Apr-24 | Daily OI Change | OI DV01 Equivalent Change ($) | |
| TU | 4,025,528 | 4,011,527 | +14,001 | +509,055 |
| FV | 5,943,477 | 5,942,650 | +827 | +33,963 |
| TY | 4,476,556 | 4,467,915 | +8,641 | +546,175 |
| UXY | 2,060,789 | 2,059,857 | +932 | +79,274 |
| US | 1,546,647 | 1,551,228 | -4,581 | -572,769 |
| WN | 1,615,130 | 1,616,583 | -1,453 | -279,060 |
| Total | +18,367 | +316,637 |
STIR: OI Also Points To Low Conviction Monday In SOFR Futures
The lack of conviction wasn’t long end-specific on Monday, with SOFR futures seemingly subjected to a mix of all possible types of net positioning swings amid marginal and mixed price moves come settlement.
- The net positioning changes largely netted off to make for limited movement in net pack OIs through the blues.
- This came as FOMC-dated OIS stabilised around pricing ~40bp of cuts through ’24, which has become a familiar level since the CPI data and recent communique from Fed leadership filtered through into market pricing.
| 22-Apr-24 | 19-Apr-24 | Daily OI Change | Daily OI Change In Packs | ||
| SFRH4 | 932,541 | 937,957 | -5,416 | Whites | -7,598 |
| SFRM4 | 1,112,901 | 1,127,329 | -14,428 | Reds | +3,862 |
| SFRU4 | 978,990 | 968,368 | +10,622 | Greens | +3,058 |
| SFRZ4 | 1,220,071 | 1,218,447 | +1,624 | Blues | +5,340 |
| SFRH5 | 728,130 | 728,001 | +129 | ||
| SFRM5 | 800,106 | 802,930 | -2,824 | ||
| SFRU5 | 696,698 | 679,273 | +17,425 | ||
| SFRZ5 | 796,961 | 807,829 | -10,868 | ||
| SFRH6 | 482,325 | 488,189 | -5,864 | ||
| SFRM6 | 494,085 | 494,000 | +85 | ||
| SFRU6 | 373,851 | 373,072 | +779 | ||
| SFRZ6 | 346,453 | 338,395 | +8,058 | ||
| SFRH7 | 235,992 | 230,115 | +5,877 | ||
| SFRM7 | 186,758 | 187,896 | -1,138 | ||
| SFRU7 | 170,167 | 170,711 | -544 | ||
| SFRZ7 | 150,692 | 149,547 | +1,145 |
FED: Key Inter-Meeting FedSpeak – May 2024
In advance of the May 1 FOMC decision, we've published our review of Federal Reserve officials' communications since the March meeting, including an update of MNI's Hawk-Dove matrix.
EUROPE ISSUANCE UPDATE:
Italy BTP-ST/BTPei auction results
* E2.5bln of the 3.20% Jan-26 BTP Short Term. Avg yield 3.42% (bid-to-cover 1.44x).
* E1.25bln of the 1.50% May-29 BTPei. Avg yield 1.35% (bid-to-cover 1.41x).
* E1.25bln of the 1.80% May-36 BTPei. Avg yield 1.87% (bid-to-cover 1.41x).
Germany Schatz auction results
* E5bln (E4.069bln allotted) of the 2.90% Jun-26 Schatz. Avg yield 2.91% (bid-to-offer 2.20x; bid-to-cover 2.70x).
Finland syndication: Final terms
* E4bln (MNI expected E3bln, possible upsize to E4bln) of the Sep-34 RFGB. Books in excess of E23bln, spread set at MS+20bp (guidance was MS+23bp area).
Greece syndication:
* The Hellenic Republic mandate banks for sale of 30-year EUR benchmark CAC bond maturing in June 2054.
EU dual-tranche syndication: Final terms
* E4bln WNG (MNI had expected E5bln) of the new Dec-27 EU-bond (ISIN: EU000A3K4EW6). Books in excess of E37bln, spread set at MS-6bps (guidance was MS-4 bps area).
* E4bln WNG (MNI had expected E3bln) of the (ISIN: EU000A3K4EL9). Books in excess of E59bln, spread set at MS+66bps (guidance was MS+69 bps area).
FOREX: Solid EU, UK PMIs Flag Services Inflation as Stubborn Issue
- A flattering set of PMI numbers from the UK, France and Germany this morning has raised further questions over the sustainability of a downtick in services inflation - and thereby the requirement for a sustained pace of rate cuts from the ECB starting as soon as June.
- The subsequent EUR rally put EUR/USD through yesterday's highs to touch 1.0695 before fading, with markets clearly taking the view that S/T stubborn price pressures will still give way to easing across H2. GBP saw very similar price action, helping markets steer clear of any test of the pullback low printed yesterday at the 1.2300 handle.
- The USD Index is flat-to-higher, shrugging off early PMI-induced weakness. Options markets have shown evidence of renewed demand for USD upside early Tuesday, evident in solid demand for EUR/USD, GBP/USD put structures.
- Focus ahead turns to advance US April PMI figures and the new home sales release. The central bank speaker slate revolves around BoE's Pill and ECB's Nagel. The Fed remain inside their pre-decision media blackout period.
OPTIONS: Demand for EUR/USD, GBP/USD Downside Evident in Early Hedging Trades
- The EUR spot rally on the back of the firmer PMI data has done little to dissuade demand for downside, with sizeable EUR puts trading across the morning. This is typified by the close to €500mln traded against 1.0430 put strikes - eyeing a late May expiry to capture the run-up to the June ECB rate decision, the meeting at which most of the Governing Council appear to be eyeing for a first rate cut of the cycle.
- Elsewhere, USD upside exposure was also evident in the busy GBP/USD hedging market overnight. A series of downside trades crossed at ~2am UK time, consistent with a 1.20/1.19 calendar put spread appearing to target the potential inflection point for the BoE policy cycle in H2 this year.
- Currency hedging markets are posting a more muted start to the week relative to last week's busy trade (the 5-day average for last week saw ~$120bln notional trade per day vs. yesterday's ~$90bln). Implied vol markets are holding up well in the JPY front-end, with one-week vols consolidating the recovery off the late March lows ahead of this week's BoJ decision: today's 9.3 points is close to 1.5 points over the YTD average.
OPTIONS: Expiries for Apr23 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0600(E904mln), $1.0650(E746mln)
- USD/JPY: Y153.00($1.3bln), Y155.00($770mln)
- AUD/NZD: N$1.0825(A$593mln)
- AUD/USD: $0.6415-20(A$2.4bln), $0.6525-30(A$2.2bln), $0.6630(A$1.4bln)
- USD/CAD: C$1.3500($505mln)
EQUITIES: Short-Term Trend Condition in E-Mini S&P Remains Bearish
Eurostoxx 50 futures traded to a fresh cycle low Friday, before recovering. Despite the bounce, a bearish corrective cycle remains in play and the move down this month has allowed an overbought trend condition to unwind. The contract has traded through 4860.60, the 50-day EMA. A clear break of this average would signal scope for a deeper retracement and opens 4711.00, Feb 19 low. Initial firm resistance is 4923.80, the 20-day EMA. The short-term trend condition in S&P E-Minis is unchanged and remains bearish. Friday’s extension reinforces current short-term conditions. The contract has recently cleared support at the 50-day EMA, signalling scope for a continuation lower near-term. Sights are on 4907.57 next, a Fibonacci retracement. Firm resistance is seen at 5153.25, the 20-day EMA. A clear break of the average would signal a possible reversal.
COMMODITIES: Breach of 20-Day EMA in Gold Signals Start of Bearish Corrective Cycle
Last week’s move lower in WTI futures highlights the start of a short-term bearish corrective cycle. The contract has traded through the 20-day EMA and this has exposed key short-term support at the 50-day EMA, at $80.75. A clear break of the average would signal a stronger bearish theme and open $76.07, the Mar 11 low. On the upside, key resistance and the bull trigger has been defined at $86.97, the Apr 12 high. Gold traded lower yesterday and is softer again today. The precious metal has breached the 20-day EMA and this signals the start of a corrective cycle. A continuation would signal scope for an extension towards $2217.4, the 50-day EMA. Note that a short-term bear cycle would allow a significant overbought trend condition to unwind. Key resistance and the bull trigger has been defined at $2431.5, the recent Apr 12 high.
| Date | GMT/Local | Impact | Country | Event | |||||
| 23/04/2024 | 1115/1215 |  GB | BOE's Pill Speech at University of Chicago | ||||||
| 23/04/2024 | 1230/0830 | ** |  US | Philadelphia Fed Nonmanufacturing Index | |||||
| 23/04/2024 | 1255/0855 | ** | US | Redbook Retail Sales Index | |||||
| 23/04/2024 | 1345/0945 | *** | US | IHS Markit Manufacturing Index (flash) | |||||
| 23/04/2024 | 1345/0945 | *** | US | S&P Global Services Index (flash) | |||||
| 23/04/2024 | 1400/1000 | *** | US | New Home Sales | |||||
| 23/04/2024 | 1400/1000 | ** | US | Richmond Fed Survey | |||||
| 23/04/2024 | 1530/1130 | * | US | US Treasury Auction Result for Cash Management Bill | |||||
| 23/04/2024 | 1700/1300 | * | US | US Treasury Auction Result for 2 Year Note | |||||
| 24/04/2024 | 2301/0001 | * | GB | XpertHR pay deals for whole economy | |||||
| 24/04/2024 | 0130/1130 | *** |  AU | CPI Inflation Monthly | |||||
| 24/04/2024 | 0130/1130 | *** | AU | CPI inflation | |||||
| 24/04/2024 | 0600/0800 | ** |  SE | Unemployment | |||||
| 24/04/2024 | 0600/1400 | ** |  CN | MNI China Liquidity Index (CLI) | |||||
| 24/04/2024 | 0735/0935 |  EU | ECB's Cipollone speech at ECB retail payments conference | ||||||
| 24/04/2024 | 0800/1000 | ** |  IT | ISTAT Business Confidence | |||||
| 24/04/2024 | 0800/1000 | ** | IT | ISTAT Consumer Confidence | |||||
| 24/04/2024 | 0800/1000 | *** |  DE | IFO Business Climate Index | |||||
| 24/04/2024 | 0910/1110 | EU | ECB's Cipollone panel at ECB Retail Payments Conference | ||||||
| 24/04/2024 | 1000/1100 | ** | GB | CBI Industrial Trends | |||||
| 24/04/2024 | 1100/0700 | ** | US | MBA Weekly Applications Index | |||||
| 24/04/2024 | 1230/0830 | ** |  CA | Retail Trade | |||||
| 24/04/2024 | 1230/0830 | ** | US | Durable Goods New Orders | |||||
| 24/04/2024 | 1300/1500 | ** |  BE | BNB Business Sentiment | |||||
| 24/04/2024 | 1400/1600 | EU | ECB's Schnabel remarks at '"Frankfurt liest ein Buch" | ||||||
| 24/04/2024 | 1430/1030 | ** | US | DOE Weekly Crude Oil Stocks | |||||
| 24/04/2024 | 1530/1130 | ** | US | US Treasury Auction Result for 2 Year Floating Rate Note | |||||
| 24/04/2024 | 1700/1300 | * | US | US Treasury Auction Result for 5 Year Note | |||||
| 24/04/2024 | 1730/1330 | CA | BOC Minutes (Summary of Deliberations) | ||||||