MNI US MARKETS ANALYSIS - PEPP Talk

US TSYS SUMMARY: Gains Continue As Equities Correct

10Y Futures have touched the best levels since last Friday, with equities continuing to correct lower. Long-end supply and Fed speakers take focus today (ECB decision at 0745ET and subsequent 0830ET presser also of note).

• Dec 10-Yr futures (TY) up 1/32 at 133-09 (L: 133-06.5 / H: 133-12.5). The 2-Yr yield is steady at 0.2163%, 5-Yr is down 0.8bps at 0.8014%, 10-Yr is down 1.4bps at 1.3241%, and 30-Yr is down 1.4bps at 1.9413%.
• A busy Fed speaker slate ahead, though subject matter suggests that current mon-pol content may be limited: SF's Daly and Chicago's Evans each speak (separately) at 1105ET, with Gov Bowman at 1300ET. Fed "Racism and the Economy" event sees appearances by NY's Williams at 1400ET and later Kaplan/Kashkari/Rosengren at 1600ET.
• Atlanta Fed's Bostic broke somewhat from the hawkish FOMC ranks by pushing back in a WSJ interview this morning on a Sept taper decision in light of weaker-than-expected data. Not much of a reaction though suggesting that Sept was no longer considered 'live' after Powell's Jackson Hole speech.
• Supply today: $50B in 4-/8-week bills at 1130ET, with $24B 30Y bond re-open at 1300ET the main event (and following Wed's strong 10Y auction). NY Fed buys ~$6.025B in 4.5-7Y Tsys.
• Data slate centers around jobless claims at 0830ET.

EGB/GILT SUMMARY - Gilts Underperform

EGBs have mostly been mixed and within ranges, with all the attention turning to the ECB and Lagarde's presser.

• Bund trades mostly at mid range, and the curve is flat.
• Peripherals are all tighter against the German 10yr, with Greece in the lead by 1.7bps.
• Gilts have underperformed the most, translating into a wider Gilt/Bund spread, following Andrew Bailey hawkish comment yesterday afternoon.
• We are seeing similar price action in the shorter end, with the Short Sterling strip better offered.
• Looking ahead, all the attention is on the ECB, US IJC is the only notable data.
• Plenty of Fed speakers this afternoon, including Fed Daly, Evans, Bowman and Williams.
• Dec Bund futures (RX) steady at at 171.69 (L: 171.59 / H: 171.81)
• Germany: The 2-Yr yield is up 0.4bps at -0.692%, 5-Yr is down 0.2bps at -0.634%, 10-Yr is down 0.3bps at -0.326%, and 30-Yr is down 0.4bps at 0.163%.
• Dec Gilt futures (G) down 27 ticks at 127.9 (L: 127.8 / H: 128.14)
• UK: The 2-Yr yield is up 2.4bps at 0.234%, 5-Yr is up 2.3bps at 0.42%, 10-Yr is up 1bps at 0.754%, and 30-Yr is down 0.6bps at 1.074%.
• Dec BTP futures (IK) up 5 ticks at 153.29 (L: 153.06 / H: 153.42)
• Dec OAT futures (OA) up 3 ticks at 168.03 (L: 167.88 / H: 168.15)
• Italian BTP spread down 0.5bps at 107bps
• Spanish bond spread down 0.9bps at 68bps
• Portuguese PGB spread down 0.8bps at 57.2bps
• Greek bond spread down 1.2bps at 119.4bps

FOREX: A Good Session for the British Pound

• The Greenback remains better offered during our European morning trading session, and that's despite the risk off tone.
• Best performers in G10 versus the Dollar have been the safe haven currencies, JPY and CHF.
• The British Pound has also had a strong performance today, with the currency up against all the majors, following Andrew Bailey's hawkish comment yesterday.
• The USD is down against all G10s, beside the CAD, and trades flat versus the NOK.
• Most G10 crossed trade mostly within ranges, as market participants await on the ECB and Lagarde's presser.
• Looking ahead, US IJC is the only notable data.
• Plenty of speakers are scheduled, including Fed Daly, Evans, Bowman and Williams.

FX OPTIONS: Expiries for Sep09 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1725-30(E863mln), $1.1750(E1.0bln), $1.1800-10(E988mln), $1.1870-80(E1.4bln), $1.1895-05(E1.0bln)
• USD/JPY: Y109.10-30($1.1bln), Y109.50-70($1.6bln), Y110.00-20($874mln), Y110.30-50($1.2bln), Y110.60-80($618mln), Y111.00($721mln)
• GBP/USD: $1.3815-40(Gbp1.0bln)
• AUD/USD: $0.7330-40(A$625mln), $0.7375-80(A$1.0bln)

Price Signal Summary - Bund Futures Remain Vulnerable

• On the equity front, S&P E-minis are lower and continue to extend this week's corrective pullback. Support to watch is 4472.97, the 20-day EMA. The underlying trend condition is bullish and a resumption of strength would open 4591.25, 1.00 projection of Jul 19 - Aug 16 - 19 price swing. EUROSTOXX 50 futures have again traded lower this morning. Trend conditions remain bullish but watch support at 4138.50, Aug 26 low. It has been probed, a clear break would expose 4078.00, Aug 19 low and a key support.
• In the FX space, EURUSD remains below Friday's high of 1.1909 having traded lower this week. The next support lies at 1.1794, Sep 1 low. Key resistance is unchanged at 1.1909, the Jul 30 high and Sep 3 high. GBPUSD maintains a short-term bullish tone but has pulled away from recent highs. Watch support at 1.3680, Aug 27 low. A break would threaten recent bullish signals. This morning's recovery appears promising for bulls. DXY key support lies at 91.78, Jul 30 low. This level remains intact and a stronger reversal would highlight a potential base. A break of 91.78 is required to strengthen the case for bears.
• On the commodity front, Gold has pulled back from recent highs. The near-term outlook remains bullish with the key trigger for an extension higher at $1834.1, Jul 15 high. Support to watch is $1774.5, Aug 19 low. WTI futures remain in a bull mode. The focus is on $70.74, 76.4.% retracement of the Jul 30 - Aug 23 sell-off.
• In FI, Bund futures remain vulnerable following Tuesday's sharp sell-off. The focus is on 171.30, 2.382 projection of the Aug 5 - 11 - 17 price swing. Gilt futures are weaker following yesterday's breach of support at 128.03, the Jul 6 low (cont). This opens 127.65, 61.8% of the Jun 3 - Aug rally (cont).

EQUITIES: Downside Prevails Ahead of ECB Meeting

• Japan's NIKKEI down 173.02 pts or -0.57% at 30008.19 and the TOPIX down 14.68 pts or -0.71% at 2064.93
• China's SHANGHAI closed up 17.943 pts or +0.49% at 3693.13 and the HANG SENG ended 604.93 pts lower or -2.3% at 25716.
• The German DAX down 45.09 pts or -0.29% at 15568.03, FTSE 100 down 82.64 pts or -1.16% at 7013.71, CAC 40 down 19.4 pts or -0.29% at 6649.93 and Euro Stoxx 50 down 14.98 pts or -0.36% at 4164.88.
• Dow Jones mini down 97 pts or -0.28% at 34919, S&P 500 mini down 12.25 pts or -0.27% at 4500.5, NASDAQ mini down 30 pts or -0.19% at 15589.75.

COMMODITIES: NatGas Hovering Close to Highest Since 2014

• WTI Crude up $0.16 or +0.23% at $69.47
• Natural Gas up $0.02 or +0.31% at $4.932
• Gold spot up $6.25 or +0.35% at $1795.38
• Copper up $6 or +1.42% at $429
• Silver up $0.17 or +0.69% at $24.112
• Platinum up $0.39 or +0.04% at $984.12