Highlights:
- USD Index on cusp of resuming primary uptrend
- Fed's Waller should draw interest, with data calendar empty
- Columbus Day could keep volumes light, although many US markets open
US TSYS: TY At Lows On Columbus Day, Fed’s Waller In Firm Focus
- Treasury futures have pushed lower today amidst low volumes with Columbus Day, as S&P 500 futures extend for fresh highs.
- TYZ4 has seen session lows of 111-30, nudging through Friday’s 111-30+, with cumulative volumes of just 160k. Low volumes have been further exacerbated by a Japan holiday.
- It remains above Thursday’s post-CPI low of 111-22 but the bear threat has nevertheless firmed. Further support is seen at 111-14 (50% retrace of Apr-Sep bull cycle).
- There is no data of course but Columbus Day doesn’t stop Fedspeak with Fed Governor Waller (voter) speaking on the economic outlook at 1500ET (text + Q&A). Kashkari (non-voter) is in discussions either side at 0900ET and 1700ET.
- Waller, who has done some of the heavy lifting for Fed communications in recent months, noted last month the particularly soft run of core PCE inflation that had been seen in the four months to August, averaging 1.8% annualized (or 0.15% M/M). Latest tracking after last week’s CPI and PPI reports looks for circa 0.25% M/M. Waller told CNBC on Sep 20 that a 50bp cut felt right for the September FOMC to keep the economy strong but the size of future cuts will depend on incoming data. He could consider another 50bp cut if the job market worsens (said prior to a stronger than expected payrolls report) or could argue for a pause if inflation progress stalls.
- Fed Funds cumulative cuts from 4.83% effective: 22bp Nov, 45bp Dec, 64bp Jan and 119bp June.
MNI: US Inflation Insight: Nuanced Prints Don’t Alter Skip Odds
- We have published and e-mailed to subscribers the MNI US Inflation Insight.
- Please find the full report including MNI analysis and views from 20 analysts on rate implications plus latest core PCE tracking after the CPI and PPI reports: https://media.marketnews.com/US_Inflation_Insight_Oct2024_f0be680881.pdf
US TSY FUTURES: OI Points To Net Long Setting Across Much Of Curve On Friday
OI suggests modest net long setting was seen across much of the futures curve on Friday, with the only exception coming via apparent short cover in FV futures.
- Overall net DV01 equivalent movement on the curve was fairly limited (sub-$2.5mn).
| 11-Oct-24 | 10-Oct-24 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 4,452,272 | 4,436,749 | +15,523 | +585,750 |
FV | 6,249,042 | 6,279,992 | -30,950 | -1,329,160 |
TY | 4,750,836 | 4,739,316 | +11,520 | +748,273 |
UXY | 2,197,043 | 2,195,288 | +1,755 | +157,806 |
US | 1,779,839 | 1,777,261 | +2,578 | +340,520 |
WN | 1,719,889 | 1,710,626 | +9,263 | +1,892,624 |
|
| Total | +9,689 | +2,395,814 |
STIR: OI Points To Long Setting & Short Cover In SOFR Futures On Friday
OI data points to short cover in the front 6 SOFR futures during Friday’s rally, with rounds of net long setting and short cover then seen further out the strip.
- Fed funds futures now price ~44bp of cuts through year-end, little lasting impact from Friday’s data.
| 11-Oct-24 | 10-Oct-24 | Daily OI Change |
| Daily OI Change In Packs |
SFRU4 | 1,230,037 | 1,236,361 | -6,324 | Whites | -41,998 |
SFRZ4 | 1,075,338 | 1,091,826 | -16,488 | Reds | -30,320 |
SFRH5 | 985,612 | 993,343 | -7,731 | Greens | +11,112 |
SFRM5 | 839,624 | 851,079 | -11,455 | Blues | +3,310 |
SFRU5 | 676,268 | 679,474 | -3,206 |
|
|
SFRZ5 | 903,754 | 937,917 | -34,163 |
|
|
SFRH6 | 608,010 | 603,522 | +4,488 |
|
|
SFRM6 | 605,585 | 603,024 | +2,561 |
|
|
SFRU6 | 548,915 | 551,851 | -2,936 |
|
|
SFRZ6 | 633,884 | 615,731 | +18,153 |
|
|
SFRH7 | 363,518 | 365,529 | -2,011 |
|
|
SFRM7 | 299,793 | 301,887 | -2,094 |
|
|
SFRU7 | 250,677 | 250,117 | +560 |
|
|
SFRZ7 | 259,140 | 257,192 | +1,948 |
|
|
SFRH8 | 182,839 | 182,108 | +731 |
|
|
SFRM8 | 156,397 | 156,326 | +71 |
|
|
EGBS: Cash Flows May Be Supportive Through the Rest Of October
Eurozone net issuance is expected to be negative for the next three weeks, which may provide some underlying support to EGBs in the absence of fundamental drivers.
- MNI estimates net issuance at negative E18.6bln this week, its most negative since W/C 12 August.
- This reflects expected issuance of E26.2bln, redemptions of E41.8bln and coupon payments of E2.9bln.
- The largest redemption this week will be E22.5bln from the 0% Oct-24 Bobl, which will be available for reinvestment from Wednesday. E14.6bln from an Italian CCTeu.
- Notable upcoming redemptions over the rest of October include E12.6bln from a formerly 7- year Belgian OLO, E11.7bln from a formerly 10-year Austrian RAGB and E24.2bln from a formerly 10-year Spanish Obli.
- For more, see the MNI EGB Issuance, Redemption and Cash Flow Matrix here.
US TSY FUTURES: CFTC CoT Shows Mixed Swings In Long End Positioning
The latest CFTC COT report points to a mix of net shorts being added and trimmed across non-commercial accounts.
- This came as traders reacted to the latest NFP report, with the survey cut off coming ahead of the CPI data (covering the period through October 8).
- Levered accounts covered shorts in FV, TY & US futures, while adding to shorts in TU, UXY & WN futures.
- Meanwhile, asset managers cut longs in FV, TY, US & WN futures, but added to longs in TU & UXY.
- Further forwards, speculators and levered funds trimmed longs in SOFR futures during the hawkish post-NFP reaction, while dealers took the other side of that trade,
Source: MNI - Market News/CFTC/Bloomberg
RATINGS: Friday's Updates Headlined By France Outlook Moved To Negative At Fitch
Sovereign rating reviews of note from after hours on Friday include:
- Fitch affirmed France at AA-; Outlook changed to Negative
- Fitch affirmed Slovenia at A; Outlook Stable
- Moody's affirmed Belgium at Aa3, outlook changed to negative
- Moody's affirmed Slovenia at A3, outlook changed to positive
- Morningstar DBRS confirmed Malta at A (high), Stable Trend
- Scope Ratings affirmed the Netherlands at AAA; Outlook Stable
- Scope Ratings affirmed the United Kingdom at AA; Outlook Stable
SECURITY: US Prepares To Send Ground Troops To Israel
The US has authorised deploying 100 ground troops to operate a Terminal High-Altitude Area Defense battery (THAAD) to “bolster Israel’s air defences.” The Telegraph notes it will be the "first time that US troops have been deployed in combat in Israel during the current crisis."
- The deployment of US ‘boots on the ground’ signals concern that the expected Israeli response to Iran’s ballistic missile attack could lead to additional tit-for-tat strikes from Iran.
- Semafor reports: “Tehran is signaling it will respond: Iran’s foreign minister said there are 'no red lines' for the country’s defense and that it is prepared for a 'war situation.'”
- John Hudson at the Washington Post notes: “Biden's decision to deliver the THAAD system before Israel’s attack represents another example of his desire to trust Netanyahu and give him the benefit of the doubt at the front-end of negotiations.”
- Fighting between Israel and Hezbollah in Lebanon may escalate further after an overnight drone strike on an Israeli military installation killed four and injured dozens, a major breach of Israeli airspace which indicates that Hezbollah retains the capacity to overwhelm Israel's air defence systems.
- There are some signs that ceasefire talks may be reopening. Axios reports that the director of the Israeli Shin Bet intelligence agency, “secretly visited Cairo on Sunday” for discussions on re-engaging with Hamas leader Yahya Sinwar.
- Roi Kais at Kann reports that for the fourth night in a row, there were no Israeli strikes on Hezbollah in Beirut, which could be taken as a sign that Israel may be responding to US pressure to seek a diplomatic solution.
EUROPE ISSUANCE UPDATE:
Luxembourg syndication: Mandate
- "The GRAND DUCHY OF LUXEMBOURG has mandated BARCLAYS, BCEE, BGL BNP PARIBAS, BIL and HSBC as Joint Lead Managers for its upcoming new 10-year Euro-denominated senior fixed rate benchmark. The transaction is expected to be launched and priced in the near future, subject to market conditions. RegS only, Bearer form, CAC, FCA/ICMA stabilisation."
- We expect a transaction tomorrow for the Luxembourg syndication and pencil in a E1.25bln transaction (with upside risks).
- Luxembourg issued a 10-year LGB in February for E1.25bln (from books of E10.6bln). The latest update of its funding plans for 2024 (published in March) saw long-term debt issuance of E2.5bln (hence there is E1.25bln remaining).
FOREX: USD Index Again Presses Resistance
- The greenback is among the strongest performers in G10 Monday, although the rally is shallow at these levels. That said, the strength is keeping the USD Index well within range of last week's highs of 103.178, and a break and close back above these levels will confirm a resumption of the primary uptrend drawn off the late September lows. 100-dma above at 103.241 provides the next level - a rally toward which would bring 149.55 in USD/JPY and 1.0900 in EUR/USD into play.
- Equity futures are mixed on both sides of the pond, with a softer open triggered by the negative reception of China's policy briefing proving short-lived, as buying interest in the e-mini S&P and Eurostoxx50 tipped both indices back in positive territory.
- Risk back-loaded, with UK inflation, US import/export price indices and Australian jobs data for September all set to follow in the second half of the week.
- There are no key data releases set for the rest of the Monday session, with US Columbus Day holidays likely to keep markets quieter than usual - although there are no major closes across US equity or fixed income markets. There are a number of central bank speakers due which could prove more market-sensitive, including Fed's Kashkari and Waller.
OPTIONS: Expiries for Oct14 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0945-50(E756mln), $1.1055-75(E1.3bln)
- USD/JPY: Y149.00($1.9bln)
- AUD/USD: $0.6730(A$649mln), $0.6750(A$657mln)
- USD/CAD: C$1.3345($1.1bln), C$1.3840($850mln)
EQUITIES: Last Week's Gains Reinforce Bullish E-Mini S&P Set-Up
Eurostoxx 50 futures are holding on to their most recent gains. Key short-term support to watch is 4938.44, the 50-day EMA. A clear break of this EMA would signal scope for a deeper retracement. Recently, the contract breached resistance at 5024.00, the Sep 3 high. This confirmed a resumption of the bull leg that started Aug 5 and cancels a recent bearish theme. Key resistance and bull trigger is 5106.00, the Sep 30 high. A bull cycle in S&P E-Minis remains intact and last week’s gains reinforce this condition. Price has traded to fresh all-time highs, once again, confirming a resumption of the primary uptrend. Note that moving average studies are in a bull-mode setup, highlighting a dominant uptrend and positive market sentiment. Sights are on 5868.50, a Fibonacci projection, and 5900.00 further out. Initial support to watch is 5768.92, the 20-day EMA. It has been pierced. Key support lies at 5693.38 the 50-day EMA.
- In China the SHANGHAI closed higher by 66.585 pts or +2.07% at 3284.323 and the HANG SENG ended 159.11 pts lower or -0.75% at 21092.87.
- Across Europe, Germany's DAX trades higher by 22.44 pts or +0.12% at 19397.92, FTSE 100 lower by 9.48 pts or -0.11% at 8243.97, CAC 40 down 22.76 pts or -0.3% at 7555.27 and Euro Stoxx 50 down 3.43 pts or -0.07% at 5000.49.
- Dow Jones mini down 31 pts or -0.07% at 43112, S&P 500 mini up 4.5 pts or +0.08% at 5864.5, NASDAQ mini up 22 pts or +0.11% at 20472.75.
COMMODITIES: Gold Extends Recovery From Last Week's Lows
WTI futures traded remain in a bull cycle and short-term weakness is - for now - considered corrective. Recent gains suggest potential for a continuation higher near-term. Attention is on $77.40, the 76.4% retracement of the Jul 5 - Sep 10 bear leg. This level has been pierced, a clear break of it would strengthen a bullish condition. On the downside, initial firm support to watch is $72.33, the 20-day EMA. The recent short-term retracement in Gold is considered corrective. The trend condition is unchanged and bulls remain in the driver’s seat. Moving average studies are in a bull-mode set-up too, highlighting a clear uptrend and positive market sentiment. A resumption of gains would refocus attention on $2690.2, a Fibonacci projection. Firm support lies at $2620.2, the 20-day EMA. It has been pierced, a clear break would signal scope for a deeper retracement.
- WTI Crude down $1.05 or -1.39% at $74.46
- Natural Gas down $0.05 or -1.79% at $2.585
- Gold spot up $2.98 or +0.11% at $2659.02
- Copper down $4.15 or -0.92% at $445.1
- Silver down $0.08 or -0.25% at $31.4549
- Platinum down $1.09 or -0.11% at $985.74
| Date | GMT/Local | Impact | Country | Event |
| 14/10/2024 | - |  GB | International Investment Summit | |
| 14/10/2024 | 1300/0900 |  US | Minneapolis Fed's Neel Kashkari | |
| 14/10/2024 | 1900/1500 | US | Fed Governor Christopher Waller | |
| 14/10/2024 | 2100/1700 | US | Minneapolis Fed's Neel Kashkari | |
| 15/10/2024 | 0430/1330 | ** |  JP | Industrial Production |
| 15/10/2024 | 0600/0800 | *** |  SE | Inflation Report |
| 15/10/2024 | 0600/0700 | *** | GB | Labour Market Survey |
| 15/10/2024 | 0645/0845 | *** |  FR | HICP (f) |
| 15/10/2024 | 0700/0900 | *** |  ES | HICP (f) |
| 15/10/2024 | 0800/1000 | ** |  EU | ECB Bank Lending Survey |
| 15/10/2024 | 0900/1100 | *** |  DE | ZEW Current Conditions Index |
| 15/10/2024 | 0900/1100 | *** | DE | ZEW Current Expectations Index |
| 15/10/2024 | 0900/1100 | ** | EU | Industrial Production |
| 15/10/2024 | 0900/1000 | ** | GB | Gilt Outright Auction Result |
| 15/10/2024 | 1230/0830 | *** |  CA | CPI |
| 15/10/2024 | 1230/0830 | ** | CA | Wholesale Trade |
| 15/10/2024 | 1230/0830 | ** | US | Empire State Manufacturing Survey |
| 15/10/2024 | 1255/0855 | ** | US | Redbook Retail Sales Index |
| 15/10/2024 | 1300/0900 | * | CA | CREA Existing Home Sales |
| 15/10/2024 | 1500/1100 | ** | US | NY Fed Survey of Consumer Expectations |
| 15/10/2024 | 1530/1130 | US | San Francisco Fed's Mary Daly | |
| 15/10/2024 | 1530/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 15/10/2024 | 1530/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 15/10/2024 | 1700/1300 | * | US | US Treasury Auction Result for Cash Management Bill |
| 15/10/2024 | 1700/1300 | US | Fed Governor Adriana Kugler | |
| 16/10/2024 | 2145/1045 | *** |  NZ | CPI inflation quarterly |