MNI US MARKETS ANALYSIS - GBP/JPY Crests at New Multi-Year High

US TSYS: Marginally Cheaper Ahead of Solid Data Docket, 5Y Issuance

• Cash Tsys trade +0.5-1.5bp cheaper across the curve for a mild bear steepening on the day, albeit with yesterday’s new 2Y issuance distorting historical 2s10s spreads which currently sit at -96bps from beyond -100bps in the past two sessions.
• Today sees a solid docket, including preliminary core durable goods, housing data and consumer confidence (plus potential spillover from CAD CPI) before 5Y supply.
• 2YY +0.6bp at 4.687%, 5YY +1.1bp at 3.979%, 10YY +1.2bp at 3.733%, 5YY +1.5bp at 3.830%.
• TYU3 trades 3+ ticks lower at 113-03+ off lows of 113-01 amidst subdued cumulative volumes of just 200k. The bear threat remains present with the trigger at 112-12+ (Jun 14 low) after which lies 112-00 (May 10 low).
• Data: Durable goods May prelim (0830ET), FHFA house price index Apr (0900ET), S&P CoreLogic house price index Apr (0900ET), New home sales May (1000ET), Conf Board consumer confidence Jun (1000ET), Richmond Fed mfg index Jun (1000ET), Dallas Fed services activity (1030ET).
• Note/bond issuance: US Tsy $43B 5Y Note auction (91282CHK0) – 1300ET
• Bill issuance: US Tsy $50B 42D Bill CMB auction – 1130ET

STIR FUTURES: Fed Rates Un-Swayed By ECB Speak, One Further Hike Priced By Nov

• Fed Funds implied rates are minimally changed on the day with no spillover from Lagarde headlines (won’t be able to “state with full confidence” in the near future that the peak for rates has been reached) and further ECB speak.
• Earlier, Morgan Stanley sees the Fed hiking 25bps in July with rates then still at 5.375% at end-23 before 100bp of cuts to 4.375% by end-24.
• Cumulative changes from 5.08% effective: +18bp Jul (unch), +22.5bp Sep (+0.5bp), +25.5bp to a peak effective 5.33% in Nov (+0.5bp), +17.5bp Dec (+0.5bp) and +5.5bp Jan (+0.5bp).
• No Fedspeak scheduled for today with focus still on Powell’s panel discussion in Sintra tomorrow.

EUROPE ISSUANCE UPDATE:

Dutch auction result:

• E1.685bln of the 2.00% Jan-54 DSL. Avg yield 2.589%.

• E2.5bln of the 3.40% Mar-25 BTP Short Term. Avg yield 3.71% (bid-to-cover 1.6x)
• E1.75bln of the 1.50% May-29 BTPei. Avg yield 1.59% (bid-to-cover 1.49x)

• GBP1.5bln of the new 0.75% Nov-33 linker. Avg yield 0.602% (bid-to-cover 2.33x).

German Q3-23 issuance update

• Total issuance reduced by E14bln (E4bln capital market, E10bln bubill).

Changes/confirmations to the calendar capital markets calendar:

• 19 July: Confirmed E1.5bln of the 1.80% Aug-53 Bund (ISIN: DE0001102614) alongside E1.0bln of another 30-year issue.
• 2 August: 15-year multi-ISIN auction reduced from E2.5bln to E2.0bln: E1.25bln of the 1.00% May-38 Bund (ISIN: DE0001102598) alongside E750mln 15-year Bund.
• 8 August: E4bln (instead of E5bln) of the 2.40% Oct-28 Bobl (ISIN: DE000BU25018).
• 15 August: E5.5bln (instead of E6bln) of the Sep-25 Schatz (ISIN: DE000BU22023).
• 16 August: E1.5bln of the 0% Aug-52 Bund (ISIN: DE0001102572) alongside E1.0bln of another 30-year Bund.
• 23 August: E3bln (instead of E4bln) of the Nov-30 Bund (ISIN: DE000BU27006).
• 13 September: E1.5bln of the 1.80% Aug-53 Bund (ISIN: DE0001102614) alongside E1.0bln 15/30-year Bund.
• 27 September: E4bln (instead of E5bln) of the Aug-33 Bund (ISIN: DE000BU2Z015)

FOREX: GBP/JPY Tops Y183, an Eight Year High

• Broad JPY weakness Tuesday is most clearly noted against GBP, pushing the GBP/JPY cross briefly above Y183.00 - the highest level for prices since 2015.
• Rate dynamics remain the key driver, with markets continuing to price a strong likelihood of a peak BoE rate at 6.25% against the acutely low likelihood of a BoJ hike across the forecast horizon. Resistance in the cross is seen light into Y185.00, ahead of Y188.81 and 195.89, the 2015 high and highest since 2008.
• ECB's Lagarde formally kicked off proceedings in Sintra, Portugal, with a somewhat hawkish speech, at which she stated that it's unlikely the ECB will be able to conclude that they have reached peak rates anytime soon.
• Markets continue to price a July hike, but pricing drifts thereafter, signalling traders see slower tightening pace in H2 this year. EUR has held resilient across much of the morning, with the single currency ahead of all others in G10 - although generally respecting recent ranges.
• Canadian CPI is the data highlight ahead of US durable goods orders for May and the latest new home sales report. US Consumer Confidence crosses for June, with markets expecting confidence to tick higher to 103.9
• Sintra speakers later today include BoC's Kozicki and Norges Bank governor Ida Wolden Bache.

Expiries for Jun27 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0895-15(E2.1bln), $1.1000(E603mln)
• AUD/USD: $0.6685-90(A$598mln)
• USD/CNY: Cny7.1750($860mln), Cny7.2150($686mln)

EQUITIES: Recent Pullback in E-Mini S&Ps Appears Technically Corrective

• The Eurostoxx 50 futures uptrend remains intact, however, a bearish cycle since Jun 16 resulted in a correction. The contract has breached support at 4301.00, the Jun 8 low. This level represented a key short-term support and the clear break signals scope for a deeper retracement, exposing 4241.00, the May 31 low and an important medium-term support point. Key resistance and the bull trigger has been defined at 4438.00, the Jun 16 high.
• A bull theme in S&P E-minis remains intact and the recent pullback appears to be a correction. The move lower is allowing a recent overbought condition to unwind. Initial key support lies at the 20-day EMA, at 4360.26. A break of this average would strengthen a short-term bearish theme and signal scope for a deeper pullback. On the upside, the bull trigger is 4493.75, the Jun 16 high. A break would open 4506.23 the top of a bull channel.

COMMODITIES: WTI Futures Remain in Bear Mode

• WTI futures remain in a bear mode condition and the sharp sell-off late last week reinforces this condition. Support at $67.21, the May 31 low, has recently been pierced, a clear break would open $64.41, the May 4 low. Moving average studies are in a bear mode position highlighting a downtrend. The contract is trading below resistance at $75.70, the Jun 5 high. A break of this level would signal a reversal.
• The bear cycle in Gold remains intact and the yellow metal traded lower last week. Trendline support has been breached - the line is drawn from the Nov 3 2022 low and the break reinforces a bearish condition. Furthermore, the move lower confirms a resumption of the downtrend. The focus is on $1903.5, 61.8% of the Feb 28 - May 4 bull cycle. Key resistance is $1985.3, the May 24 high. Initial resistance is at $1946.4, the 20-day EMA.