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Free AccessMNI UST Issuance Deep Dive: Dec 2024
MNI US Employment Insight: Soft Enough To Keep Fed Cutting
MNI ASIA MARKETS ANALYSIS: Jobs Data Green Lights Rate Cuts
MNI US MARKETS ANALYSIS - US 30y Yield Fails to Sustain New Highs
Highlights:
- The US 30y yield touched 5% and a new cycle high before abating into NY hours
- USD sees scant support from steeper curve
- ADP Employment Change, ISM Services to provide more labour market clues
US TSYS: 30Y Yield Topped 5% Briefly
- Cash Tsys running mostly weaker, off overnight lows after 30Y yield topped 5% for first time since late 2007 briefly (5.009%), wings flirting with steady to mildly higher. Tsy 10Y yields have been marking higher highs for weeks, tapped 4.8799% high around the London crossover, curves steeper but off highs: 3M10Y currently 69.445 (+2.464) vs. -62.860 high, 2Y10Y -32.945 (+2.947) vs. -29.979 high.
- Heavy overnight futures volume (TYZ3 >565k) as 10Y contract fell to a fresh cycle low of 106-03.5, currently trades 106-15 (-5.5). Bear trend remains intact, initial technical support at 106-00 followed by 105-27.5 (3% lower Bollinger Band).
- Economic data picks up in earnest with ADP Private Employment at 0815ET, S&P Services/Composite PMIs at 0945, followed by ISM services and durables/cap goods orders at 1000ET. Treasury auctions $4B 17W bills at 1130ET.
- Fed speakers Gov Bowman at a community bank conference (10.25ET) and Chicago Fed Goolsbee open remarks at a bank conf (1030ET) followed by a moderated discussion with former Bank of India Gov Rajan at 1500ET.
- Rate hike projections moderate into early 2024: November 30.5% w/ implied rate change of +7.6bp to 5.405%. Projections ease slightly for next two meetings: December cumulative of 12.5bp at 5.452%, January 2024 11.9bp at 5.448%. Fed terminal at 5.455% in Jan'24.
- Headline watching: aftermath of House Speaker McCarthy ousting late Tuesday and who will fill the void (front runners Scalise and Jordan).
US TSYS: Short Setting Seemed To Dominate Again On Tuesday
The combination of yesterday’s outright cheapening and preliminary open interest data point to a mix of net short setting and long cover across the Tsy futures curve on Tuesday.
- Looking more granularly, only US futures appeared to be subjected to net long cover, while the largest round of apparent short setting (in DV01 equivalent terms) came in FV futures.
- ~$3.8mn of DV01 equivalent net OI was added across the Tsy futures curve.
03-Oct-23 | 02-Oct-23 | Daily OI Change | OI DV01 Equivalent Change ($) | |
TU | 3,959,266 | 3,925,344 | +33,922 | +1,284,718 |
FV | 5,633,138 | 5,590,477 | +42,661 | +1,769,722 |
TY | 4,786,626 | 4,765,911 | +20,715 | +1,302,218 |
UXY | 1,893,098 | 1,891,601 | +1,497 | +130,637 |
US | 1,408,372 | 1,418,967 | -10,595 | -1,361,423 |
WN | 1,562,987 | 1,559,025 | +3,962 | +720,493 |
Total | +92,162 | +3,846,365 |
SOFR: OI Points to Mix Of Short Setting & Long Cover On SOFR Strip On Tuesday
The mix of the bear steepening on the SOFR curve on Tuesday and preliminary open interest data point to a mix of net positioning swings on the strip.
- The whites and reds were seemingly dominated by long cover, albeit with pockets of apparent short setting seen.
- Meanwhile, the greens and the blues were seemingly dominated by short setting, with pockets of apparent long cover seen.
03-Oct-23 | 02-Oct-23 | Daily OI Change | Daily OI Change In Packs | ||
SFRU3 | 1,004,143 | 1,013,069 | -8,926 | Whites | -1,952 |
SFRZ3 | 1,385,422 | 1,400,502 | -15,080 | Reds | -17,332 |
SFRH4 | 971,662 | 958,839 | +12,823 | Greens | +11,699 |
SFRM4 | 937,516 | 928,285 | +9,231 | Blues | +10,371 |
SFRU4 | 809,462 | 815,251 | -5,789 | ||
SFRZ4 | 933,626 | 942,902 | -9,276 | ||
SFRH5 | 544,299 | 547,093 | -2,794 | ||
SFRM5 | 571,278 | 570,751 | +527 | ||
SFRU5 | 496,302 | 505,554 | -9,252 | ||
SFRZ5 | 509,028 | 499,596 | +9,432 | ||
SFRH6 | 311,072 | 309,236 | +1,836 | ||
SFRM6 | 268,304 | 258,621 | +9,683 | ||
SFRU6 | 215,903 | 206,576 | +9,327 | ||
SFRZ6 | 180,474 | 180,775 | -301 | ||
SFRH7 | 130,769 | 130,352 | +417 | ||
SFRM7 | 137,049 | 136,121 | +928 |
EUROPE ISSUANCE UPDATE
German 7Y Auction Result:
- E3bln 2.40% Nov-30 Bund. Avg Yield 2.890% (Bid-to-cover 2.67x, allotted E2.392Bln)
Gilt Auction Results:
- GBP4.25bln 3.50% Oct-25 Gilt. Avg. Yield 4.964% (bid-to-cover 2.61x).
- A fairly average auction for the 3.50% Oct-25 gilt with the tail of 1.1bp broadly in line with recent auctions and the lowest accepted price below the pre-auction mid-price again (as it was in the last 3.50% Oct-25 gilt auction in August).
- After initially pulling back on the publication of the results, the 3.50% Oct-25 gilt is now trading between the LAP and the average auction price.
FOREX: Early USD Support Fades, Putting Greenback Weaker into NY Crossover
- Currency markets are relatively steady heading into the US crossover, with the greenback edging lower in recent trade as the relentless rise in US yields abates off the cycle high. The US sovereign curve has traded higher and steeper again in Europe, putting the 30y yield briefly at 5% and tipping the 10y yield to a fresh cycle best.
- The greenback initially saw support, tipping the likes of EUR/USD and GBP/USD to new pullback lows of 1.0451 and 1.2037 respectively. This impact faded following the cash equity open on the continent, helping both pairs spill back into positive territory.
- Resultingly, the greenback is among the poorer performers in G10, with NZD similarly weak. EUR, GBP and AUD are faring better, running in contrast to their poor performance earlier this week.
- Markets are no clearer on whether the Japanese authorities formally intervened in currency markets yesterday after the sharp pullback after prices showed above Y150.00. The Japanese finance minister, top currency official and a government spokesman declined to comment, leaving traders waiting until the end of the month for any official confirmation from the BoJ.
- The US labour market takes focus going forward, with the September ADP employment change and ISM services data set for release. Markets expect ADP gains to slow to 150k from 177k, while ISM services is also seen lower this month. Markets remain on watch for any further clues on the labour market ahead of Friday's NFP release, at which consensus looks for job gains of 170k.
FX OPTIONS: Expiries for Oct04 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0475(E841mln)
- USD/JPY: Y148.00($567mln), Y148.50($723mln), Y150.00($766mln)
- EUR/JPY: Y154.00(E520mln)
- AUD/USD: $0.6490(A$550mln), $0.6700(A$1.4bln)
BONDS: Early Sell Off Moderates After Bears Probe Round Numbers/Tech Support
Momentum from Tsys in Asia-Pac hours spilled over in the early rounds of London trade, with a fresh wave of cheapening pressure seen.
- Still, bears couldn’t hold the move above 3.00% in German 10-Year yields (last 2.96%), nor the move above the 5.00% mark in 30-Year Tsys (last 4.93%). Technical support in gilt futures held.
- The failure of bears to consolidate moves through round numbers, coupled with the scale of the recent cheapening and lack of meaningful headline flow, allowed bonds to rebound from worst levels.
- Lighter net long positioning in Tsys (as outlined by the latest J.P.Morgan client survey) may give some scope to add to longs when such round numbers (roughly) hold, while the usual talk of profit taking also does the rounds given the speed and scope of the recent moves.
- A block buy in TY futures also helped the stabilisation.
- The German curve twist flattens on the day, while gilts and Tsys twist steepen.
- Bund, gilt & TY futures operate comfortably off session cheaps.
- EGBs are little changed to a touch wider vs. Bunds.
- Comments from ECB President Lagarde and BoE Governor Bailey failed to add to the respective policy debates.
EQUITIES: Recent Move Lower in E-Mini S&P Confirms Resumption of Bear Leg
- Eurostoxx 50 futures trend conditions remain bearish and the latest bounce has been corrective. The contract has traded below 4128.00, the Sep 27 low. This confirms a resumption of the downtrend that started late July and signals scope for a move towards 4055.40, a Fibonacci retracement point. Initial firm resistance is at 4226.20, the 20-day EMA. A break of this average would signal a possible short-term base.
- A bear cycle in S&P E-minis remains in play. The contract traded lower yesterday, confirming a resumption of the bear leg and maintaining the price sequence of lower lows and lower highs. This signals scope for weakness towards 4242.15, a Fibonacci retracement point. A break of this level would open 4194.75, the May 24 low. Pivot resistance is 4453.89, the 50-day EMA. Ahead of the 50-day average is resistance at 4401.10, the 20-day EMA.
COMMODITIES: Gold Remains Close to its Lowest Levels Since March
- WTI futures started the week on a bearish note and a corrective cycle is in play. The contract has traded through support at $88.19, the Sep 26 low. The breach highlights a short-term top and signals scope for a move towards the 50-day EMA, which intersects at $84.56 today. A clear break of this average would strengthen a bearish condition. On the upside, key short-term resistance has been defined at $95.08, the Sep 28 high.
- Gold started this week’s session on a bearish note and the metal is trading just above this week’s low. The recent sell-off resulted in a break of support at $1901.1 and this was followed by a breach of $1884.9, the Aug 21 low. This confirmed a resumption of the downtrend that started early May. The focus is on $1804.9, the Feb 28 low and a key support. On the upside, firm resistance is at $1890.9, the 20-day EMA.
Date | GMT/Local | Impact | Flag | Country | Event |
04/10/2023 | 1100/0700 | ** | US | MBA Weekly Applications Index | |
04/10/2023 | 1140/1340 | EU | ECB's de Guindos speaks at Cyprus CB Conference | ||
04/10/2023 | - | UK | BoE's Bailey Interview in Prospect Magazine | ||
04/10/2023 | 1215/0815 | *** | US | ADP Employment Report | |
04/10/2023 | 1345/0945 | *** | US | IHS Markit Services Index (final) | |
04/10/2023 | 1400/1000 | *** | US | ISM Non-Manufacturing Index | |
04/10/2023 | 1400/1000 | ** | US | Factory New Orders | |
04/10/2023 | 1400/1600 | EU | ECB's Panetta speaks at ECB MP Conference | ||
04/10/2023 | 1425/1025 | US | Fed Governor Michelle Bowman | ||
04/10/2023 | 1430/1030 | ** | US | DOE Weekly Crude Oil Stocks | |
04/10/2023 | 1600/1800 | EU | ECB's Lagarde speaks at Columbia University | ||
05/10/2023 | 0030/1130 | ** | AU | Trade Balance | |
05/10/2023 | 0600/0800 | ** | DE | Trade Balance | |
05/10/2023 | 0645/0845 | * | FR | Industrial Production | |
05/10/2023 | 0700/0900 | ** | ES | Industrial Production | |
05/10/2023 | 0730/0930 | ** | EU | IHS Markit Final Eurozone Construction PMI | |
05/10/2023 | 0830/0930 | UK | BOE DMP Survey | ||
05/10/2023 | 0830/0930 | ** | UK | IHS Markit/CIPS Construction PMI | |
05/10/2023 | 0945/1145 | EU | ECB's Lane, BOE Broadbent and Riksbank Breman at ECB MP Conference | ||
05/10/2023 | 1230/0830 | *** | US | Jobless Claims | |
05/10/2023 | 1230/0830 | ** | US | WASDE Weekly Import/Export | |
05/10/2023 | 1230/0830 | ** | CA | International Merchandise Trade (Trade Balance) | |
05/10/2023 | 1230/0830 | ** | US | Trade Balance | |
05/10/2023 | 1300/0900 | US | Cleveland Fed's Loretta Mester | ||
05/10/2023 | 1400/1000 | * | CA | Ivey PMI | |
05/10/2023 | 1400/1600 | EU | ECB's de Guindos speaks at ECB MP Conference | ||
05/10/2023 | 1430/1030 | ** | US | Natural Gas Stocks | |
05/10/2023 | 1530/1130 | US | Richmond Fed's Tom Barkin | ||
05/10/2023 | 1530/1130 | ** | US | US Bill 04 Week Treasury Auction Result | |
05/10/2023 | 1530/1130 | * | US | US Bill 08 Week Treasury Auction Result | |
05/10/2023 | 1600/1200 | US | San Francisco Fed's Mary Daly | ||
05/10/2023 | 1615/1215 | US | Fed Vice Chair Michael Barr |
To read the full story
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.