Highlights:
- Treasuries surge as proximity narrows with election day
- Greenback suffers, pressing USD Index to multi-week lows
- Monday data unlikely to move the needle ahead of vote, Fed decision
- Treasuries have modestly extended the sizeable rally seen with the open, driven by Democrat presidential candidate Harris faring better in weekend polls, but with the result of Tuesday’s election still deemed extremely tight.
- In particular, some refer to the Des Moines Register/Mediacom Iowa poll showing Harris with a 3pp lead over former president Trump, a potential bellwether for one of the seven swing states in nearby Wisconsin.
- Political developments are likely in the driving seat although 3Y supply could see attention later on. Last week's 2Y saw a 0.8bp tail, as did last month's 3Y where the bid-to-cover although pulled back swiftly.
- Cash yields are 5-11bp lower, with declines led by 20s, nearly all of which came with the London open after a Japan holiday.
- 10Y yields at 4.278% have pulled back off Friday’s high of 4.384% at what had been the highest since early July.
- 2s10s at 12.5bps (-5.5bps) helps pare some of the post-payrolls steepening flows seen.
- TYZ4 at 110-17 (+15+) has kept to relatively narrow ranges ever since the Asia open on strong cumulative volumes above 500k.
- It keeps to within Friday’s wide range seen at the payrolls report, with an initial high of 110-30 (first resistance) before sliding to a latest low of 109-27+ (first support). The bear cycle is still deemed in play with subsequent support seen at 109-15 (Jul 1 low).
- Data: Factory orders/finalized durable goods for Sept (1000ET)
- Note/bond issuance: US Tsy $58B 3Y Note auction - 91282CLX7 (1300ET)
- Bill issuance: US Tsy $81B 13W, $72B 26W Bill auctions
STIR: Fed Funds Rally On More Favorable Harris Weekend Polls
- Fed Funds implied rates reflect broader themes seen across US fixed income today owing to Democrat presidential candidate Harris faring better in weekend polls, but with the result still deemed extremely tight.
- It sees very near-term meeting implications little changed but mid-2025 rates some 4bps lower.
- Cumulative cuts from 4.83% effective: 24.5bp Nov, 45bp Dec, 60bp Jan and 101bp June.
- Despite the decline, mid-2025 implied rates still hold a sizeable paring of the initial drop seen Friday’s weak payrolls report, with some assuming large weather impacts at play along with general data quality concerns after the lowest initial response rate since 1991.
- Political factors are likely in the driving seat in the near-term ahead of tomorrow’s election with today’s data limited to factory orders/finalized durable goods for September.
US TSY FUTURES: OI Points To Mix Of Short Setting & Long Cover On Friday
OI points to a mix of net short setting and long cover that generally offset (in net DV01 terms) during Friday's sell off.
- Set up ahead of this week's event risk was cited as the driver of the reversal of the initial NFP-driven gains.
- Further swap spread tightening was seen.
| 01-Nov-24 | 31-Oct-24 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 4,425,116 | 4,497,660 | -72,544 | -2,645,632 |
FV | 6,220,157 | 6,188,466 | +31,691 | +1,329,448 |
TY | 4,582,826 | 4,552,678 | +30,148 | +1,940,564 |
UXY | 2,195,745 | 2,200,263 | -4,518 | -397,375 |
US | 1,833,697 | 1,833,773 | -76 | -9,815 |
WN | 1,727,796 | 1,725,899 | +1,897 | +380,926 |
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| Total | -13,402 | +598,116 |
STIR: OI Points To Short Setting & Long Cover In Most SOFR Futures On Friday
OI data points to a mix of net short setting and long cover during Friday’s downtick in most SOFR futures. Exception came via apparent modest net long setting and short cover in SFRU4 & Z4.
- Set up ahead of this week's event risk was cited during the reversal of the initial NFP-driven dovish move.
- Dovish moves then seen early this week, linked to election betting odds/opinions polls pointing to positives for Harris, leave the following cut cycle priced: 24.5bp Nov, 45bp Dec, 60bp Jan and 101bp June.
| 01-Nov-24 | 31-Oct-24 | Daily OI Change |
| Daily OI Change In Packs |
SFRU4 | 1,267,346 | 1,268,902 | -1,556 | Whites | +13,493 |
SFRZ4 | 1,159,403 | 1,151,477 | +7,926 | Reds | -34,145 |
SFRH5 | 1,033,313 | 1,022,988 | +10,325 | Greens | +12,563 |
SFRM5 | 895,131 | 898,333 | -3,202 | Blues | +4,544 |
SFRU5 | 702,721 | 712,453 | -9,732 |
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SFRZ5 | 845,232 | 867,943 | -22,711 |
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SFRH6 | 597,448 | 598,250 | -802 |
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SFRM6 | 582,864 | 583,764 | -900 |
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SFRU6 | 525,992 | 523,949 | +2,043 |
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SFRZ6 | 630,200 | 626,164 | +4,036 |
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SFRH7 | 387,291 | 384,673 | +2,618 |
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SFRM7 | 321,352 | 317,486 | +3,866 |
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SFRU7 | 266,218 | 264,882 | +1,336 |
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SFRZ7 | 247,536 | 245,164 | +2,372 |
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SFRH8 | 197,425 | 196,278 | +1,147 |
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SFRM8 | 159,446 | 159,757 | -311 |
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US TSY FUTURES: CFTC: Asset Managers Build On Longs, Levered Funds Add Shorts
The latest CFTC COT report pointed to relatively familiar themes when it came to positioning movements, as asset managers built on their broader net longs (only WN futures saw a cut in net length from that cohort), while levered funds added to overall net shorts (albeit while cutting net shorts in US & WN futures).
- Non-commercial net shorts swelled in TU through UXY futures, while overall net short non-commercial positioning was trimmed in US & WN futures.
- A reminder that the survey covers the period through October 29, so doesn’t capture reaction to the NFP release.
- The presence of basis trades will skew positioning provided within the CFTC CoT.
Source: MNI - Market News/CFTC/Bloomberg
FOREX: Positioning Adjustments Still Favored USD Towards End October
- Last week's CFTC positioning update (up to Oct 29th) still showed a strong bias towards the USD. Across leveraged funds and asset managers we saw a further 90k contracts shift in favour of the dollar. This was the third straight week of strong flows into the USD.
- By currency we saw leveraged funds shift back into a net short for JPY and add to shorts against the EUR and CAD.
- AUD and NZD saw a modest uptick from leveraged funds, but this was more than offset by asset managers adding to shorts for both currencies.
- Indeed, asset managers were net sellers of all currencies against the USD last week, see the table below.
- Price action so far this week has been heavily skewed against the USD, as election uncertainty rises. Weekend opinion polls pointed to a very close Presidential race.
- This is likely seeing some USD long exposure trimmed, particularly given the build up seen in recent weeks ( nearly 380k contracts for the USD since mid Oct).
Table 1: CFTC Positioning By Currency/By Type
| Leveraged Contracts | Asset manager Contracts | |||
| Weekly Change | Outright Position | Weekly Change | Outright Position | |
| JPY | -10288 | -3462 | -13438 | -32924 |
| EUR | -20056 | -30212 | -1071 | 192049 |
| GBP | 871 | 56721 | -11599 | -18928 |
| AUD | 3184 | 19061 | -11339 | -24102 |
| NZD | 2822 | 12177 | -6035 | -11875 |
| CAD | -15910 | -80811 | -4942 | -136111 |
| CHF | 1154 | -7013 | -3235 | -28296 |
| MXN | 5659 | -3141 | -5967 | 38060 |
Source: CFTC/MNI - Market News/Bloomberg
FOREX: Haven FX Making Minor Inroads Ahead of Busy Week
- The greenback is modestly weaker in early Monday trade, helping press the USD Index to a new multi-week low, however conviction remains narrow, with markets seemingly unwilling to wade into markets at these levels. There remains a modest risk-off feel, with CHF and JPY the strongest performers of the day.
- Equity markets are trading better, with the e-mini S&P in minor positive territory, however prices are yet to make any material reversal of last week's losses.
- EUR/GBP made a notable break higher last week, with the cross breaking 0.8434 a potential reversal point and another indication of the strength of longer-term range-defining support at ~0.8300. Last week's strength will be tested by rates markets in the very near-term - as conviction for persistent sequential ECB cuts runs against a more contained BoE easing cycle in light of last week's Budget. But further progress in the cross exposes 0.8464 - the next major resistance.
- Factory orders numbers come alongside the final durable goods orders print for September later today, but market moves are likely to be contained as markets look ahead to not only the particularly consequential US election results, but the Fed and BoE decisions also. Speakers due Monday include ECB's Holzmann and Nagel - although neither of which are expected to result in major moves for rates.
EQUITIES: E-Mini S&P Still Trading Below 20- and 50-Day EMAs
- Eurostoxx 50 futures traded lower last week. The 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. Initial resistance is at 4943.50, the 20-day EMA.
- S&P E-Minis traded sharply lower last Thursday but the contract has found some support for now. 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 5824.59, the 20-day EMA.
COMMODITIES: Recovery in WTI Futures Still Appears to Be a Short-Term Correction
- A bearish theme in WTI futures remains intact and the latest recovery appears to be a short-term correction. A resumption of weakness would expose $65.99, the Oct 1 low, and $64.16, the Sep 10 low and a key support. For bulls, a clear reversal would instead refocus attention on the key short-term resistance at $77.70, the Oct 8 high. Clearance of this level would resume to the recent uptrend. Initial resistance is at $72.34, the 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 $2710.1, the 20-day EMA. A clear break of this EMA would highlight a short-term top.
| Date | GMT/Local | Impact | Country | Event |
| 04/11/2024 | - |  EU | ECB's Lagarde and Cipollone in Eurogroup meeting | |
| 04/11/2024 | 1330/1430 | EU | ECB's Elderson speech at '10 years of SSM' conference | |
| 04/11/2024 | 1400/1500 | EU | ECB's Elderson in panel 'Achievement...and the outlook' | |
| 04/11/2024 | 1500/1000 | ** |  US | Factory New Orders |
| 04/11/2024 | 1530/1030 |  CA | BOC market participants survey | |
| 04/11/2024 | 1630/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 04/11/2024 | 1630/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 04/11/2024 | 1800/1300 | *** | US | US Note 03 Year Treasury Auction Result |
| 05/11/2024 | 0001/0001 | * |  GB | BRC-KPMG Shop Sales Monitor |
| 05/11/2024 | 0330/1430 | *** |  AU | RBA Rate Decision |
| 05/11/2024 | 0645/0745 | ** |  CH | Unemployment |
| 05/11/2024 | 0745/0845 | * |  FR | Industrial Production |
| 05/11/2024 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 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 |
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