MNI US MARKETS ANALYSIS - Tsy Rebound Follows Bunds Higher

Highlights: 

• EUR knocked as political rumourmill drives denial from French Presidency
• Treasuries rebound, taking lead from Bunds
• Central bank speak revolves around ECB, as members claim no victory over inflation

US TSYS: Rebounding as Tsys Take Cues From EGBs, Focus on Wed CPI, FOMC

• Treasuries are firmer, little off late overnight highs amid ongoing political uncertainty in France. OAT spread to Bunds wider amid speculation France President Macron is considering resignation after calling for snap election following weekend parliamentary elections. EGB moves moderated after rumors denied.
• Sep'24 10Y Treasury futures are currently trading +10 at 109-13 vs. 109-14 overnight high, 109-02.5 low during early Asia hours.
• Friday's sharp sell-off post-NFP continues to undermine the recent bullish theme, highlighting a potential bearish reversal. The TYU4 contract breached both the 50- and 20-day EMA, while continued decline would strengthen a bearish threat at at 108-27.5 (June 3 low). Key short-term resistance is Friday’s high of 110-21, where a break is required to reinstate the recent bullish theme.
• Cash yields are currently lower: 5s -.0496 at 4.4324, 10s -.0433 at 4.4237%, 30s -.0336 at 4.5622%, while curves are running mixed: 2s10s -0.118 at -41.668, 5s30s +1.599 at 12.806.
• Today's US data was limited to NFIB Small Business Optimism, reported 90.5 vs. 89.7 prior. The two day FOMC kicks off deliberations at 1000ET. Main focus is on Wednesday's May CPI and FOMC policy announcement.
• US Treasury auctions on tap today: $46B 52W and $60B 42D CMB bills at 1130ET, $59B 10Y Note reopen (91282CKQ3) at 1300ET.

US TSY FUTURES: OI Points To Long Cover Dominating During Monday's Sell Off

The combination of yesterday’s weakness in Tsy futures and preliminary OI data points to net long cover as the dominant positioning factor on Monday, as the impact of European political uncertainty and soft demand metrics at the latest 3-Year Tsy auction applied pressure.

• Pockets of short setting were seen in TU & UXY futures, but the net long cover elsewhere comfortably outweighed those moves in net curve OI DV01 equivalent terms.
• Today's 10-Year Tsy auction will come under additional scrutiny in the wake of the tepid demand at Monday's 3-Year offering, while wider macro focus is on tomorrow's CPI data & FOMC decision.

STIR: OI Points To Mix Of Short Setting & Long Cover In SOFR Futures On Monday

Yesterday’s modest downtick in SOFR futures and preliminary OI data points to a mix of short setting and long cover, with the only meaningful movement in net pack OI pointing to long cover in all of the the red contracts.

• SOFR futures have recovered from yesterday's lows, with demand for core global FI markets noted as semi-core and peripheral spreads widen further today.
• Soft demand at the latest 3-Year Tsy auction and European political unrest dominated headline flow, with little spill over seen from the latest NY Fed inflation expectations survey.
• FOMC-dated OIS has since moved to price ~38bp of cuts through '24, paring some of Friday's NFP-driven hawkish move, with the first 25bp cut ~90% discounted come the end of the Nov FOMC.
• Wider macro focus is on tomorrow's CPI data & FOMC decision.

UK: Initial Conservative Manifesto Headlines Match Expectations

Initial headlines from the Conversative Party manifesto are completely in line with expectations/pre-announcements/press leaks. No movement in gilts & GBP. With the Conservatives still trailing heavily in the polls, these policy pledges aren't expected to have any impact.

EUROPE ISSUANCE UPDATE:

Netherlands auction results
* E1.655bln of the 2.50% Jul-34 DSL. Avg yield 2.983%.

Finland auction results
* E856mln of the 3.00% Sep-34 RFGB. Avg yield 3.262% (bid-to-cover 1.19x).
* E640mln of the 2.95% Apr-55 RFGB. Avg yield 3.389% (bid-to-cover 1.34x).

UK syndication: Allocations out
* GBP11GBP (MNI had expected GBP8.5-10.0bln or slightly higher) of the 4.25% Jul-34 gilt. Books closed in excess of GBP110bln. Spread set at 4.625% Jan-34 Gilt (GB00BPJJKN53) + 4.0bps (Guidance was 4.625% Jan-34 Gilt + 4.0/+4.5 bps)

EU syndication: Final terms
E6bln (MNI had expected E5-8bln) of the 15-year Oct-39 EU-bond. Books in excess of E40bln, spread set at MS+52bps (guidance was MS+53bps area)

Macron Presser Delayed To 12 June; Left Alliance Expands To Counter RN

Wires reporting that the office of French President Emmanuel Macron has confirmed a press conference for around 1200CET (0600ET, 1100BST) on Wednesday 12 June. This will be the first time Macron has spoken publicly since the announcement a snap legislative election on 30 June. The presser could be used as the launch for the centrist Rennaisance-led bloc of parties that back Macron. 

• There have been unsubstantiated rumours circling that Macron is considering resigining depending on the election result. The Elysee Palace has firmly rebutted this prospect. 
• The other piece of political speculation swirling is that Macron is willing to allow the far-right Rassemblement National (National Rally, RN) to govern should they emerge as the largest party. This 'cohabitation' between a president and PM from different parties is rare, but some pundits hypothesise that Macron could leave the path clear for RN to govern in order to allow the party the opportunity to fail, and therefore boost the prospects for a centrist presidential candidate in the 2027 election (in which Macron cannot run due to term limits). 
• The first opinion polling carried out after the calling of the election showed the RN comfortably in first place but short of an overall majority (see "FRANCE: National Rally Projected To Win 235-265 Seats In National Assembly ", 1740BST 10 June). 
• The formation of a new leftist alliance, the New Popular Front, involving almost all parties of the left and centre-left, could bolster the efforts to counter the RN's rise in support. 

Political Rumourmill Puts EUR Lower into NY Cut

• The greenback trades firmer headed into the NY crossover, in a session dominated by political speculation and economic releases, as rumours circulate that the French President Macron could consider resignation should the right-wing emerge victorious in the snap election called on Sunday night. While the Presidency have seemingly denied the rumours, the rescheduling of a press conference originally set for today will have added to the uncertainty, which continues to weigh on French bonds and benefit haven currencies.
• As a result, the USD Index is stronger early Tuesday, while the EUR slips. EUR/USD has traded back below 1.0750, however the Monday lows remain out of reach for now and mark next support at 1.0733.
• Meanwhile, UK labour market data has been in focus, and showed a faster pace of wage gains than expected, however softness is beginning to build around joblessness, as the claimant count and employment change numbers for May and April respectively fared worse than expected. 
• GBP/JPY remains either side of the 200 level, within striking distance of the 200.74 cycle high. USD and GBP are the session's best performers, while NOK is the weakest. 
• Focus for the remainder of the Tuesday session rests on US NFIB Small Business Optimism data as well as Building Permits numbers from Canada. The ECB speaker slate further picks up, with appearances from ECB's Holzmann, Villeroy, Lane, Makhlouf and Elderson all scheduled. 

Expiries for Jun11 NY cut 1000ET (Source DTCC)

• USD/JPY: Y154.00($695mln), Y154.75-87($970mln), Y159.00($500mln)
• USD/CAD: C$1.3650($590mln), C$1.3680-00($1.6bln)

Short-Term Gains in WTI Futures Considered Technically Corrective

• WTI futures traded higher Monday. For now, short-term gains are considered corrective and the trend direction remains bearish. Resistance to watch is $78.38, the 50-day EMA. Clearance of this EMA would expose the key short-term resistance at $80.62, the May 1 high, where a break is required to cancel a bear theme. On the downside, a resumption of weakness would open $71.33, the Feb 5 low.
• A sharp sell-off in Gold Friday reinforces a short-term bearish theme. The yellow metal has cleared support around the 50-day EMA, at 2313.5. The break confirms a resumption of the reversal that started May 20 and signals scope for a deeper correction near-term. This has opened $2277.4, the May 3 low. Clearance of this price point would strengthen a bearish theme. Initial resistance to watch is $2387.8, last Friday’s high.  

E-Mini S&P Holds Onto Recent Gains, Uptrend Intact

• The trend condition in Eurostoxx 50 futures is bullish and short-term weakness is considered corrective. A resumption of gains would refocus attention on key resistance and the bull trigger at 5110.00, the May 16 high. Clearance of this level would confirm a resumption of the uptrend. On the downside, support to watch lies at 4947.00, the Jun 4 low. A break would be bearish and instead expose 4894.90, a Fibonacci retracement.
• The uptrend in S&P E-Minis remains intact and the contract is holding on to its recent gains. Price has traded above 5368.25, the May 23 high and bull trigger. The move confirms a resumption of the uptrend. A continuation higher would signal scope for a climb towards the 5400.00 handle next. On the downside, key short-term support has been defined at 5205.50, the May 31 low. Clearance of this level is required to signal a short-term reversal.     

Date	GMT/Local	Impact	Country	Event
11/06/2024	1100/1300		EU	ECB's Lane chat at Banking and Payments Federation Conference
11/06/2024	1230/0830	*	CA	Building Permits
11/06/2024	1255/0855	**	US	Redbook Retail Sales Index
11/06/2024	1400/1000	*	US	Services Revenues
11/06/2024	1530/1130	**	US	US Treasury Auction Result for 52 Week Bill
11/06/2024	1530/1130	*	US	US Treasury Auction Result for Cash Management Bill
11/06/2024	1645/1845		EU	ECB's Elderson at Annual Banking Supervision Conference
11/06/2024	1700/1300	**	US	US Note 10 Year Treasury Auction Result
12/06/2024	0130/0930	***	CN	CPI
12/06/2024	0130/0930	***	CN	Producer Price Index
12/06/2024	0600/0700	**	GB	UK Monthly GDP
12/06/2024	0600/0700	**	GB	Trade Balance
12/06/2024	0600/0700	**	GB	Index of Services
12/06/2024	0600/0700	***	GB	Index of Production
12/06/2024	0600/0700	**	GB	Output in the Construction Industry
12/06/2024	0600/0800	***	DE	HICP (f)
12/06/2024	0900/1000	*	GB	Index Linked Gilt Outright Auction Result
12/06/2024	0930/1130		EU	ECB's Schnabel at German Finance Committee
12/06/2024	1100/0700	**	US	MBA Weekly Applications Index
12/06/2024	-	***	CN	Money Supply
12/06/2024	-	***	CN	New Loans
12/06/2024	-	***	CN	Social Financing
12/06/2024	-		GB	Sky News- Election Leaders Event
12/06/2024	1230/0830	***	US	CPI
12/06/2024	1230/0830	*	CA	Intl Investment Position
12/06/2024	1300/1500		EU	ECB's De Guindos at MNI Connect Event
12/06/2024	1430/1030	**	US	DOE Weekly Crude Oil Stocks
12/06/2024	1600/1200	***	US	USDA Crop Estimates - WASDE
12/06/2024	1800/1400	**	US	Treasury Budget
12/06/2024	1800/1400	***	US	FOMC Statement
12/06/2024	1915/1515		CA	BOC Governor Macklem speaks at panel in Montreal.