MNI US MARKETS ANALYSIS - Greenback Off Lows as Tsy Rally Moderates

US TSYS: Opening Bid Mostly Reversed As US Session Gets Underway

• Cash Tsys have established fresh lows for the day as the US session gets underway, pushing through narrow ranges on limited macro headlines. There has been some notable flow including a FV/US steepener block (+6,330/-2,000) even if it had little meaningful additional impact on the curve.
• 2YY +0.2bp at 5.006%, 5YY +0.4bp at 4.384%, 10YY +0.4bp at 4.206%, 30YY +0.6bp at 4.283%.
• TYU3 remains the front TY contract for now with the roll far advanced. It trades back near unchanged at 109-21 having reversed an earlier increase to 109-28+. Bears remain in the driver’s seat with attention on resistance at 109-18+ (Aug 25 low) and the bear trigger at 109-09+ (Aug 22 low).
• Data: FHFA and S&P CoreLogic house prices Jun (0900ET), JOLTS Jul (1000ET), Conf Board Consumer Confidence Survey Aug (1000ET), Dallas Fed services Aug (1030ET).
• Fedspeak: VC Supervision Barr on Banking Services (1500ET)
• Note/bond issuance: US Tsy $36B 7Y Note auction (91282CHW4) – 1300ET
• Bill issuance: US Tsy $60B 42D bill CMB – 1130ET

STIR FUTURES: Fed Implied Rates Marginally Off Fresh Post-SVB Highs

• Fed Funds implied rates are marginally off yesterday’s fresh highs, which saw a terminal effective rate nudge 5.50% for November at the end of the session, having last closed higher on Mar 7-9.
• Cumulative hikes: +5.5bp to Sep (-0.5bp), +16.5bp to 5.495% Nov (-0.5bp).
• Cuts from Nov terminal: 1bp to Dec’23, 39bp to Jun’24 and 110bp to Dec’24. The first 25bp cut from current levels isn’t fully priced until the July meeting although comes very close with -22bps for June.
• Lone scheduled Fedspeak today from VC Supervision Barr on Banking Services with no prepared text.

Source: Bloomberg

EUROPE ISSUANCE UPDATE

German auction result:

• Another strong Bobl auction for the 2.40% Oct-28 Bobl with a bid-to-cover of 1.81x and offer to cover of 2.13x with the lowest accepted price of 99.20 decent and the average price of 99.21 not seen since an hour ahead of the auction window cutoff.
• Following the close of the auction we touched a high of 99.219.
• E4bln (E3.394bln allotted) of the 2.40% Oct-28 Bobl. Avg yield 2.56% (bid-to-cover 1.81x).

German syndication update

• E3bln WNG tap of the 30-year 1.80% Aug-53 Bund (with no issuer retention). Spread set earlier at 0% Aug-52 Bund + 7.5bps. Orderbooks closed in excess of E33bln.

FOREX: Greenback Recovers Off Lows as Treasury Rally Moderates

• Asia-Pac trade kicked off with the dollar under pressure, a move triggered by the moderation in US yields, with the 10y yield bottoming out at 4.1726% alongside the European open. The greenback has recovered off lows headed into NY hours, with few macro datapoints or speakers to distract. As a result, some market focus may be being paid to potential USD demand from corporates later today, with Tuesday marking value-date month-end.
• Headed into the NY crossover, US yields recovering further off lows, further assisting the bounce in the greenback.
• The single currency is the poorest performer, with the EUR fading ahead of Thursday's August CPI Estimate. CPI is again expected to fade to 5.1% from 5.3%, marking the lowest reading since late 2021. EUR/GBP remains pinned to the 50-dma, dipping below the mark that crosses at 0.8585 today.
• AUD, NZD are among the best performers, benefiting from further signs of Chinese stimulus. Bloomberg reports that China's largest banks are considering a further deposit rate cut to support domestic growth.
• US JOLTS job openings figures take focus later today, released alongside consumer confidence for August. Fed's Barr appears for a second consecutive session, speaking on banking services.

FX OPTIONS: Expiries for Aug29 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0725-35(E1.0bln), $1.0800(E1.9bln), $1.0825-30(E560mln), $1.0855-65(E550mln), $1.0950-55(E1.4bln)
• USD/JPY: Y145.00($699mln), Y147.00-10($1.4bln)
• GBP/USD: $1.2700-20(Gbp646mln)
• AUD/USD: $0.6400(A$1.3bln)

EQUITIES: Short Term Gains in E-Mini S&P Considered Corrective

• A bearish condition in Eurostoxx 50 futures remains intact despite this week’s gains. Last Thursday’s sharp sell-off reinforces a bearish theme. The move lower signals the end of the recent corrective bounce between Aug 18 - 24. Key support and the bear trigger lies at 4187.00, the Aug 8 low. A break of this level would confirm a resumption of the downtrend. Resistance to watch is 4330.50, the 50-day EMA. A clear break would signal a short-term reversal.
• A sharp sell-off on Aug 24 in the E-mini S&P contract reinforces a bearish theme and signals the end of the Aug 18 - 24 corrective bounce. Short-term gains are considered corrective and attention is on support at 4350.00, the Aug 18 low and bear trigger. A break would confirm a resumption of the current bear cycle. Resistance to watch is 4556.73 - the base of a bull channel, drawn from the Mar 13 low that was breached on Aug 16.

COMMODITIES: WTI Future Uptrend Remains Intact

• The uptrend in WTI futures remains intact and recent weakness is considered corrective. Last week’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 and pave the way for a deeper retracement. Note that a key support also lies at the 50-day EMA, which intersects at $77.67. Initial resistance to watch is $81.75, a break would be a bullish development.
• The uptrend in WTI futures remains intact and recent weakness is considered corrective. Last week’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 and pave the way for a deeper retracement. Note that a key support also lies at the 50-day EMA, which intersects at $77.67. Initial resistance to watch is $81.75, a break would be a bullish development.