Highlights:
- Presidential voting booths open, campaigns close as stakes seen high
- Implied vols shoot higher as results seen as too-close-to-call
- Hawkish RBA tips first cut expectations back to May'25
- Treasuries are modestly lower today with no specific headlines at play, tracking moves elsewhere as EGBs underperform on German political and fiscal risks plus firmer-than-expected China data.
- It comes ahead of ISM Services and 10Y supply before attention turns to US presidential election results expected to start rolling in this evening. See MNI’s Election Viewing Guide with an estimated timetable for results here.
- Cash yields are 1.4-2.6bp higher overnight, with increases led by 7s and 10s.
- 2s10s at 14.1bps (+1.6bp) keeps to recent ranges.
- TYZ4 trades at 110-10+ (-01) having remained within yesterday’s range throughout on reasonable cumulative volumes of 310k. The bear cycle remains intact with support at 109-27+ (Nov 1 low) whilst resistance is seen at 110-30 (Nov 1 high).
- Data: Trade balance Sep (0830ET), S&P Global services/composite Oct final (0945ET), ISM services Oct (1000ET)
- Note/bond issuance: US Tsy $42B 10Y Note auction - 91282CLW9 (1300ET)
- Bill issuance: US Tsy $80B 42D CMB auction (1130ET)
US: FAQ: When Might We Have A Result In Pennsylvania & Wisconsin?
A common question surrounding the election has been on the timing of counts and potential calls, notably in the possible 'tipping-point' states of Pennsylvania and Wisconsin. There are some factors that could speed up the process in comparison to 2020. The proportion of mail-in and early voting is down on the COVID election of 2020 (69%), but remains high by historical standards (up around 50% this time according to some estimates, compared to 40% in 2016, 33% in 2012, 31% in 2008). Moreover, new technology at many counting locations is likely to enable faster scanning of ballots.
- While the election is extremely tight in terms of individual vote numbers in swing states there is the possibility of a 'polling miss' going one way or the other, meaning that former President Donald Trump or Vice President Kamala Harris end up carrying all or nearly all the swing states. This is opposed to the razor-edge outcome where the two of them split the swing states somewhat evenly.
- In the event of this 'polling miss swing state sweep' scenario, the wait for a clear outcome could be over faster than expected. In 2016, when Trump beat Hillary Clinton by 0.8% in Pennsylvania, the race there was called at 0135ET, with Trump declared the overall winner at 0229ET following the declaration of Wisconsin for Trump at that time. Local media in Wisconsin expects results no earlier than around midnight ET or the early hours of 6 Nov.
US: Election Viewing Guide-Update
In this article, we provide an estimated timetable of events for the US general election taking place on Tuesday 5 November as ballots are counted. As well as a guide of what times various states may call their results, we also provide analysis on key counties to watch in swing states that are likely to give the best indication as to the direction the presidency is heading in.
Editor's note: This is an updated version of the original Viewing Guide published on 4 Nov. Includes previously omitted information on the Georgia election count.
Full article PDF attached below:
MNIPOLITICALRISK-USElectionViewingGuide.pdf
STIR: US Near-Term Rate Path Mirrors Dot Plot In Wait-and-See Mode
- Fed Funds implied rates are near unchanged overnight ahead of today’s Presidential Election along with a still heavily influential ISM Services report.
- The path to mid-2025 can roughly be seen as consistent with the FOMC median dot plot with 50bp of cuts to year-end (mostly priced) before a quarterly pace in 2025.
- Cumulative cuts from 4.83% effective: 24.5bp Nov, 45bp Dec, 59bp Jan, 75bp Mar and 99bp June.
- The expected pace of rate cuts then slows materially after mid-2025 compared to FOMC projections for a Fed Funds target range of 3.25-3.5% end-2025 and 2.75-3% in 2026 (200bp of cumulative cuts from today). SOFR implied terminal yields show less than 125bp of cuts for the cycle, little changed on the day and close to highs since early July.
US TSY FUTURES: Long Setting In WN Futures Dominated On Monday
OI data points to net long setting across most contracts during yesterday’s rally, with modest net short cover in UXY futures providing the only exception to the broader trend.
- The only meaningful net DV01 equivalent adjustment came in WN futures, as the final rounds of pre-election positioning took hold.
| 04-Nov-24 | 01-Nov-24 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 4,442,437 | 4,424,482 | +17,955 | +653,621 |
FV | 6,237,178 | 6,218,377 | +18,801 | +787,530 |
TY | 4,592,173 | 4,580,206 | +11,967 | +758,421 |
UXY | 2,187,703 | 2,195,845 | -8,142 | -714,633 |
US | 1,834,569 | 1,834,471 | +98 | +12,623 |
WN | 1,747,503 | 1,727,578 | +19,925 | +3,988,859 |
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| Total | +60,604 | +5,486,420 |
STIR: Long Setting & Short Cover Seen In SOFR Futures On Monday
OI data points to short cover and long setting through SOFR futures on Monday, with the most concentrated adjustments coming via net long setting further our the strip.
| 04-Nov-24 | 01-Nov-24 | Daily OI Change |
| Daily OI Change In Packs |
SFRU4 | 1,269,588 | 1,267,346 | +2,242 | Whites | -19,406 |
SFRZ4 | 1,156,149 | 1,153,591 | +2,558 | Reds | +2,867 |
SFRH5 | 1,021,165 | 1,033,285 | -12,120 | Greens | +24,451 |
SFRM5 | 883,032 | 895,118 | -12,086 | Blues | +19,556 |
SFRU5 | 703,253 | 702,709 | +544 |
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SFRZ5 | 849,039 | 845,872 | +3,167 |
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SFRH6 | 601,417 | 597,448 | +3,969 |
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SFRM6 | 578,051 | 582,864 | -4,813 |
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SFRU6 | 530,713 | 525,992 | +4,721 |
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SFRZ6 | 625,931 | 630,319 | -4,388 |
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SFRH7 | 396,155 | 387,229 | +8,926 |
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SFRM7 | 336,544 | 321,352 | +15,192 |
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SFRU7 | 273,679 | 266,218 | +7,461 |
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SFRZ7 | 257,548 | 247,536 | +10,012 |
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SFRH8 | 198,629 | 197,425 | +1,204 |
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SFRM8 | 158,368 | 157,489 | +879 |
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US OUTLOOK/OPINION: Boeing Wage Deal Offers Marginal Upside Risk To Wage Growth
- Boeing workers late yesterday voted to accept a new labor contract, bringing an end to eight weeks of disruption including a strike that accounted for 33k of an unusually large 44k striking workers nationwide in the October payrolls reference period.
- Workers can return to work as early as Wednesday and must return by next Tuesday, so they should be counted as on the payroll in the November payrolls report.
- IAM representatives say 59% of union members voted in favor of the accord, which includes a 38% wage increase over four years and enhanced retirement contributions. (IAM link, Boeing link)
- This 38% wage increase over four years marks a continuation of large wage settlements in the past two years – see the below chart from Bloomberg Law compiling data back to 1988.
- It leaves an annualized run rate clearly above the 3.1% annualized or 3.8% Y/Y for private sector wages & salaries in Q3 ECI data. However, it’s important to view it after a period where pay only increased 4% between 2016-24 following a 2014 deal that also ended traditional guaranteed pensions.
- The particularly publicized nature of these negotiations runs a risk of feeding through to broader wage setting processes, but US union membership remains relatively low at ~6% for the private sector (vs 15% for Canada) and 33% for the public sector (vs 76% for Canada).
- It’s unlikely to alter Fed guidance around the labor market that has stood for some time now, e.g. Fed Chair Powell at Jackson Hole “It seems unlikely that the labor market will be a source of elevated inflationary pressures anytime soon." It does however continue to present an upside risk to this baseline assumption.
OPTIONS: Election Impact Clear to See as USD/MXN Vols Surge to Record Levels
- Overnight FX options contracts now capture the immediate outcome of the election, and the impact is clear to see - USD vols are well bid, with the currencies seen as most exposed printing a considerable risk premia.
- As a result, USD/MXN overnight implied has cleared 100 points - that's an all-time high for the contract (other notable prints: 95 points mid-COVID, 96 points on Trump's '16 election and ~100 points in the '08 GFC). This implies a ~4% swing in USD/MXN on the results, and an implied range of approximately 19.35 - 21.05.
- It's not just USD vols that are being marked higher - haven currency vols including CHF and JPY are bid, meaning hedging markets are capturing potential fallout outside of the greenback. EUR/CHF and GBP/JPY overnight vols have added 6 points and 10 points respectively.
FOREX: Greenback Softer, But Conviction low Pre-Election Results
- The greenback is softer against all others early Tuesday, but pullbacks are shallow and general market conviction light. The election booths open today, with results due to filter through across the key swing states overnight, which should provide a indication for the victor of the US election around halfway through the Asia-Pacific session. Trump remains the betting-odds implied favourite, however the narrowness of recent polling data shows the results remain too close to call at this stage.
- Overnight FX options contracts now capture the immediate outcome of the election, and the impact is clear to see - USD vols are well bid, with the currencies seen as most exposed printing a considerable risk premia. As a result, USD/MXN overnight implied has cleared 100 points - that's an all-time high for the contract (other notable prints: 95 points mid-COVID, 96 points on Trump's '16 election and ~100 points in the '08 GFC). This implies a ~4% swing in USD/MXN on the results, and an implied range of approximately 19.35 - 21.05.
- The RBA kept policy rates unchanged in overnight trade, and retained a hawkish tone on policy. Markets have continued to push back on expectations of a first RBA rate cut, which may now not be until H2'25 - a prospect that's supporting AUD against most others into the NY crossover.
- Markets are likely to look through today's trade balance stats as well as the ISM services numbers for October, with the looming election results the key focus ahead. There are a number of speakers, including EC's Lagarde & Schnabel, while the BoC minutes are also set for release.
FX OPTIONS: Expiries for Nov05 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0830-50(E1.6bln), $1.0900(E1.3bln), $1.0915-30(E727mln), $1.0940-60(E1.5bln)
- USD/JPY: Y152.00($826mln), Y152.50($1.0bln), Y153.20-25($621mln), Y153.65($751mln)
- GBP/USD: $1.3000(Gbp523mln), $1.3115-30(Gbp1.0bln)
- AUD/USD: $0.6530-40(A$533mln), $0.6600-10(A$1.8bln)
EQUITIES: Eurostoxx 50 Futures Trading Close to Recent Lows
- Eurostoxx 50 futures are trading closer to their recent lows. Last week’s move down, resulted in a breach of support at 4914.00, the Oct 16 low. Note that 4884.06, 38.2% of the Aug 5 - Sep 30 bull cycle, has also been cleared. This exposes 4815.50 next, the 50.0% retracement point. Initial firm resistance has been defined at 5015.00, the Oct 29 high, where a break is required to highlight a reversal. First resistance is at 4936.69, the 20-day EMA.
- S&P E-Minis traded sharply lower last Thursday and the contract is trading just above its recent low. Price has cleared both the 20- and 50-day EMAs - an important short-term bearish development. The break lower signals scope for an extension and has exposed the next support at 5724.00, the Oct 2 low. Clearance of this level would open 5637.60, a Fibonacci retracement. Initial firm resistance is 5816.84, the 20-day EMA.
COMMODITIES: This Week's Gains in WTI Futures Appears Technically Corrective
- A bearish theme in WTI futures remains intact and the latest recovery, including Monday’s gains, appears to be a correction. A resumption of weakness would expose $65.99, the Oct 1 low, and $64.16, the Sep 10 low and key support. For bulls, a clear reversal would instead refocus attention on the key S/T resistance at $77.70, the Oct 8 high. Clearance of this level would resume to the recent uptrend. Initial resistance is $72.34, Oct 24 high.
- The trend condition in Gold is unchanged and the latest pullback is - for now - considered corrective. Recent gains resulted in a breach of $2685.6, the Sep 26 high, confirming a resumption of the primary uptrend and maintaining the price sequence of higher highs and higher lows. Sights are on the $2800.0 handle next. Firm support is $2712.7, the 20-day EMA. A clear break of this EMA would highlight a short-term top.
| Date | GMT/Local | Impact | Country | Event |
| 05/11/2024 | - |  EU | ECB's De Guindos participate in ECOFIN Meeting | |
| 05/11/2024 | - |  US | US Presidential Election | |
| 05/11/2024 | 1330/0830 | ** | US | Trade Balance |
| 05/11/2024 | 1330/0830 | ** |  CA | International Merchandise Trade (Trade Balance) |
| 05/11/2024 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 05/11/2024 | 1430/1530 | EU | ECB's Lagarde speech at French Competition Authority's event | |
| 05/11/2024 | 1500/1000 | *** | US | ISM Non-Manufacturing Index |
| 05/11/2024 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 05/11/2024 | 1800/1300 | ** | US | US Note 10 Year Treasury Auction Result |
| 05/11/2024 | 1830/1330 | CA | BOC Minutes (Summary of Deliberations) | |
| 05/11/2024 | 1830/1930 | EU | ECB's Schnabel speech on Macroeconomic Policy | |
| 06/11/2024 | - |  SE | Riksbank Meeting | |
| 06/11/2024 | 0700/0800 | ** |  DE | Manufacturing Orders |
| 06/11/2024 | - | US | FOMC Meeting / S.E.P. | |
| 06/11/2024 | 0930/0930 | ** |  GB | S&P Global/CIPS Construction PMI |
| 06/11/2024 | 1000/1100 | ** | EU | PPI |
| 06/11/2024 | 1200/0700 | ** | US | MBA Weekly Applications Index |
| 06/11/2024 | 1400/1500 | EU | ECB's Lagarde address at 10th anniversary of Single Supervisory Mechanism | |
| 06/11/2024 | 1430/1530 | EU | ECB's De Guindos speech and Q&A at Distinguished Speaker Seminar | |
| 06/11/2024 | 1500/1000 | * | CA | Ivey PMI |
| 06/11/2024 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 06/11/2024 | 1725/1225 | CA | BOC Sr Deputy Rogers speech in Toronto. | |
| 06/11/2024 | 1800/1300 | *** | US | US Treasury Auction Result for 30 Year Bond |
| 07/11/2024 | 2330/0830 | ** |  JP | average wages (p) |