Highlights:
- Year-end OIS implied Fed rate close to cycle best
- CAD, CHF net shorts grow to new multi-year highs
- Fed enter media blackout period, keeping calendar quiet
US TSYS: Holding Lower After Haven Trade Unwind, Thin Docket Ahead
- Treasuries are off lows but still biased cheaper after a lack of weekend escalation in the Israel-Iran situation and U.S. fiscal support for Ukraine dominating most macro conversations.
- Cash yields sit 0.5-3.5bp lower, bear steepening with 2s10s at -34bps (+2.5bps) although the latter remains off last week’s high of -27.8bps.
- TYM4 trades at the lower end of the overnight range, currently at 107-210(-09) off a low of 107-17+, with solid cumulative volumes of 370k even if it’s low by last week’s particularly elevated standards.
- The bearish trend structure remains in place with support at 107-13+ (Apr 16 low) after which lies Fibo projections starting with 107-07+.
- Data: Chicago Fed national activity index Mar (0830ET)
- Bill issuance: US Tsy $70B 13- and 26W Bill auctions (1130ET)
STIR: Fed End-2024 Implied Rate Close To Highs
- Fed Funds implied rates hold higher as part of the broader unwinding of haven flow after a lack of Israel-Iran escalation over the weekend.
- The Dec’24 implied rate touched 4.96% overnight to equal highs seen after last week’s strong retail sales. Currently at 4.945%, it’s close to the high seen after Chair Powell’s “lack of progress” from Tuesday.
- Cumulative cuts: 1bp May, 4bp Jun, 11.5bp Jul, 22bp Sep, 28bp Nov and 38bps Dec.
- The FOMC is now in media blackout ahead of the Apr 30 – May 1 meeting.
US TSY FUTURES: OI Suggests Long Setting In TY & WN Futures Dominated On Friday
The combination of Friday’s rally in Tsy futures and preliminary OI data points to a mix of net long setting and short cover as markets digested the Israel-Iran situation ahead of the weekend.
- A reminder that contracts across the curve finished well shy of their Asia-Pac highs, with rhetoric from both Israel and Iran seemingly playing down the odds of further imminent military action in light of the tepid Israeli response to the Iranian-led attack.
- The only notable net OI DV01 equivalent swings came via apparent long setting in TY & WN futures, leaving net curve OI movement titled towards net long setting on the day.
| 19-Apr-24 | 18-Apr-24 | Daily OI Change | OI DV01 Equivalent Change ($) | |
| TU | 4,011,449 | 4,009,490 | +1,959 | +71,302 |
| FV | 5,942,343 | 5,951,963 | -9,620 | -394,775 |
| TY | 4,470,106 | 4,439,908 | +30,198 | +1,904,744 |
| UXY | 2,059,860 | 2,056,951 | +2,909 | +246,700 |
| US | 1,550,835 | 1,555,354 | -4,519 | -562,472 |
| WN | 1,616,655 | 1,609,207 | +7,448 | +1,421,505 |
| Total | +28,375 | +2,687,004 |
STIR: OI Suggests Net Short Cover In SOFR Whites & Greens Dominated On Friday
Friday’s light rally in SOFR futures and preliminary OI data points to net short cover as the dominant pre-weekend positioning factor in the whites and greens. Meanwhile, modest net long setting was seen in the red and blue packs (in net pack terms).
- A reminder that contracts across the strip finished comfortably shy of session highs, with rhetoric from both Israel and Iran seemingly playing down the odds of further imminent military action in light of the tepid Israeli response to the Iranian-led attack.
| 19-Apr-24 | 18-Apr-24 | Daily OI Change | Daily OI Change In Packs | ||
| SFRH4 | 937,957 | 936,700 | +1,257 | Whites | -26,937 |
| SFRM4 | 1,125,392 | 1,161,104 | -35,712 | Reds | +2,896 |
| SFRU4 | 971,449 | 973,208 | -1,759 | Greens | -12,307 |
| SFRZ4 | 1,218,447 | 1,209,170 | +9,277 | Blues | +678 |
| SFRH5 | 728,026 | 724,571 | +3,455 | ||
| SFRM5 | 803,574 | 812,465 | -8,891 | ||
| SFRU5 | 679,293 | 680,610 | -1,317 | ||
| SFRZ5 | 807,831 | 798,182 | +9,649 | ||
| SFRH6 | 488,189 | 485,538 | +2,651 | ||
| SFRM6 | 494,002 | 508,621 | -14,619 | ||
| SFRU6 | 373,072 | 372,366 | +706 | ||
| SFRZ6 | 338,428 | 339,473 | -1,045 | ||
| SFRH7 | 230,115 | 227,590 | +2,525 | ||
| SFRM7 | 187,952 | 190,903 | -2,951 | ||
| SFRU7 | 170,711 | 169,367 | +1,344 | ||
| SFRZ7 | 149,547 | 149,787 | -240 |
EUROZONE ISSUANCE: EU-bond syndication mandate
"The EU (EUROPEAN UNION) has mandated BofA Securities, BNP Paribas, Citi, LBBW and Natixis as Joint Lead Managers for its upcoming EUR Fixed Rate RegS Bearer dual tranche transaction comprising a new long 3-year benchmark line due 6th December 2027 and an increase of EU 4.00% benchmark due 4th April 2044 (EU000A3K4EL9). No further group. The transaction will be launched tomorrow, subject to market conditions."
From market source
- We look for a size of around E5bln for the 3-year and E3bln for the 4.00% Apr-44 EU-bond.
US TSY FUTURES: Mixed Swings, Hedge Funds Set Fresh Record TU Short Position
Friday’s CFTC CoT report points to mixed net positioning movement in Tsy futures in the wake of the monthly CPI data.
- There was a reduction in net short positioning across FV, TY, US & WN futures, while net short positioning in UXY futures increased.
- Net TU positioning was little changed.
- Note that net TY positioning registered the shallowest net short of the last 52 weeks (in outright and % of OI terms), as the recent reduction extended.
- Net short positioning in US futures moved towards the shallowest levels seen in the last 52 weeks.
- Diving deeper into the data, hedge fund net shorts in TU futures rose to a record level.
- The CFTC CoT report covered April 10-16, meaning that the CPI, PPI, UoM and retail sales data were all released during the reporting period.
- Also note that the well-documented comments from Fed Chair Powell & Vice Chair Jefferson (which seemed to cool on the idea of imminent rate cuts) hit during the reporting window.
- As such, the period covered by this CFTC CoT report saw the bulk of the recent hawkish repricing for the market-implied ’24 Fed rate path.
- Positioning will be skewed by basis trades, as ever.
Source: MN - Market News/Bloomberg
CFTC: CAD, CHF Net Shorts Stretch to Largest in Years
- Friday's CFTC update showed markets cut net long EUR and GBP positions back to neutral, while pushing both the CAD and CHF net shorts to their largest levels in over a year.
- At a net short of 36,212 contracts, the CHF position is its largest since 2019 as the SNB easing cycle contrasts further with ECB/BoE/Fed cycles that continue to be pushed back.
- Separately, the buoyant oil price is doing little to shore up CAD, as markets push the net short to 82,815 contracts for the shortest outright position since 2017. The building net short came just days after the March jobs report, which showed a decline of 2.2k jobs vs. an expected gain of 25k. Meanwhile the unemployment rate unexpectedly ticked higher to 6.1% vs. Exp. 5.9%.
- The net NZD position improved by just under 2,000 contracts, or 5.4% of open interest, putting the net short at 18.7%, less than half the 52w low.
Full update here:
FOREX: Markets Flatline as Geopolitical Risk Fades
- Antipodean currencies are modestly higher, with AUD and NZD modestly firmer against broader G10. Resultingly, AUD/USD has firmed just above last week's lows, however there are few technical signs of a firmer bounce at current levels. Last week's 0.6363 print marks multi-month lows in the pair, and renewed weakness opens mid-November lows at 0.6339 and below.
- The USD Index is flat but holds the bulk of the early April rally. With the Fed inside the pre-meeting media blackout, focus remains on recent highs of 106.517, a break above which puts prices at the best levels since November.
- CHF trades among the poorest in G10. Friday's CFTC update showed markets built the CHF net short to its largest level since 2019 as the SNB easing cycle contrasts further with the persistent pushback in ECB/BoE/Fed cycle expectations.
- Focus for the duration of the Monday session rests on the US Chicago Fed National Activity Index as well as Eurozone consumer confidence. The central bank speaker slate sees ECB's Villeroy and Lagarde on the docket, with Fed speakers notably absent as the FOMC enter their pre-meeting media blackout period.
JPY: USD/JPY Inches to New Highs, Narrows Gap with Cycle Best
- USD/JPY shows just above the overnight highs to print again the best levels of the day and narrow in on the cycle high at 154.79.
- Activity so far Monday is on the muted end of the scale, with cumulative JPY futures volumes around 25% below average for this time of day - potentially indicating a lack of participation on the recovery off 154.60.
- JPY selling in the crosses also contributing as AUD, NZD sit firmer on the session, and the more sizeable option expiries today include $1.4bln rolling off at Y155.00 - which could be influencing price action here.
- We wrote last week that while the technical trend condition in USD/JPY remains positive, the next phase of strength could be harder to come by without another major shift in Fed policy pricing, as positioning looks stretched and diplomatic blockers to potential intervention appear to peel away. This remains the case as outright JPY net short was unchanged in last week's CFTC release, contrasting with a trimming of positioning across both EUR and GBP.
OPTIONS: Expiries for Apr22 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0550(E9436mln), $1.0585-00(E520mln), $1.0700(E1.1bln)
- USD/JPY: Y153.25($1.4bln), Y154.00-20($1.6bln), Y155.00($1.4bln)
- GBP/USD: $1.2400(Gbp994mln)
- AUD/USD: $0.6475(A$559mln)
- USD/CAD: C$1.3775($810mln), C$1.3900($643mln)
EQUITIES: Bearish Corrective Cycle in Eurostoxx 50 Futures Remains in Play
Eurostoxx 50 futures traded to a fresh cycle low Friday, before recovering. A bearish corrective cycle remains in play and the move down this month has allowed an overbought trend condition to unwind. The contract has traded through 4859.20, the 50-day EMA and a key pivot price point. A clear break of this average would signal scope for a deeper retracement and opens 4711.00, the Feb 19 low. Initial firm resistance is 4926.90, the 20-day EMA. The short-term trend condition in S&P E-Minis is unchanged and remains bearish. Friday’s extension reinforces current short-term conditions. The contract has cleared support at the 50-day EMA, signalling scope for a continuation lower near-term. Sights are on 4907.57 next, a Fibonacci retracement. Firm resistance is seen at 5164.38, the 20-day EMA. A clear break of the average would signal a possible reversal.
- Japan's NIKKEI closed higher by 370.26 pts or +1% at 37438.61 and the TOPIX ended 36.14 pts higher or +1.38% at 2662.46.
- Elsewhere, in China the SHANGHAI closed lower by 20.666 pts or -0.67% at 3044.595 and the HANG SENG ended 287.55 pts higher or +1.77% at 16511.69.
- Across Europe, Germany's DAX trades higher by 50.56 pts or +0.29% at 17786.38, FTSE 100 higher by 82.31 pts or +1.04% at 7977.68, CAC 40 down 7.85 pts or -0.1% at 8014.56 and Euro Stoxx 50 down 0.89 pts or -0.02% at 4917.2.
- Dow Jones mini up 127 pts or +0.33% at 38332, S&P 500 mini up 17.75 pts or +0.35% at 5020.75, NASDAQ mini up 78.25 pts or +0.46% at 17259.75.
COMMODITIES: Trend Condition in Gold Unchanged and Bullish
A bull theme in WTI futures remains intact, however, last week’s move lower highlights the start of a short-term bearish corrective cycle. The contract has traded through the 20-day EMA and this signals scope for an extension towards the 50-day EMA, at $80.70. A clear break of the 50-day EMA would signal a stronger bearish theme. On the upside, key resistance and the bull trigger has been defined at $86.97, the Apr 12 high. The trend condition in Gold is unchanged and the outlook remains bullish with price continuing to trade closer to its recent highs. The latest rally maintains the price sequence of higher highs and higher lows and note that moving average studies are in a bull-mode condition, reflecting positive market sentiment. The next objective is $2452.5, a Fibonacci projection. Initial firm support is at $2310.2, the 20-day EMA.
- WTI Crude down $1 or -1.2% at $82.14
- Natural Gas down $0.02 or -1.37% at $1.728
- Gold spot down $31.21 or -1.3% at $2360.7
- Copper down $0.3 or -0.07% at $452.15
- Silver down $0.85 or -2.97% at $27.839
- Platinum down $9.54 or -1.02% at $926.6
| Date | GMT/Local | Impact | Country | Event | |||||
| 22/04/2024 | 1230/0830 | * |  CA | Industrial Product and Raw Material Price Index | |||||
| 22/04/2024 | 1400/1600 | ** |  EU | Consumer Confidence Indicator (p) | |||||
| 22/04/2024 | 1430/1030 | CA | BOC market participants survey | ||||||
| 22/04/2024 | 1530/1730 | EU | ECB's Lagarde Lecture at Yale | ||||||
| 22/04/2024 | 1530/1130 | * |  US | US Treasury Auction Result for 13 Week Bill | |||||
| 22/04/2024 | 1530/1130 | * | US | US Treasury Auction Result for 26 Week Bill | |||||
| 23/04/2024 | 2300/0900 | *** |  AU | Judo Bank Flash Australia PMI | |||||
| 23/04/2024 | 0030/0930 | ** |  JP | Jibun Bank Flash Japan PMI | |||||
| 23/04/2024 | 0600/0700 | *** |  GB | Public Sector Finances | |||||
| 23/04/2024 | 0715/0915 | ** |  FR | S&P Global Services PMI (p) | |||||
| 23/04/2024 | 0715/0915 | ** | FR | S&P Global Manufacturing PMI (p) | |||||
| 23/04/2024 | 0730/0930 | ** |  DE | S&P Global Services PMI (p) | |||||
| 23/04/2024 | 0730/0930 | ** | DE | S&P Global Manufacturing PMI (p) | |||||
| 23/04/2024 | 0800/1000 | ** | EU | S&P Global Services PMI (p) | |||||
| 23/04/2024 | 0800/1000 | ** | EU | S&P Global Manufacturing PMI (p) | |||||
| 23/04/2024 | 0800/1000 | ** | EU | S&P Global Composite PMI (p) | |||||
| 23/04/2024 | 0800/0900 | GB | BOE's Haskel Panelist at Econometric Seminar | ||||||
| 23/04/2024 | 0830/0930 | *** | GB | S&P Global Manufacturing PMI flash | |||||
| 23/04/2024 | 0830/0930 | *** | GB | S&P Global Services PMI flash | |||||
| 23/04/2024 | 0830/0930 | *** | GB | S&P Global Composite PMI flash | |||||
| 23/04/2024 | 1115/1215 | GB | BOE's Pill Speech at University of Chicago | ||||||
| 23/04/2024 | 1230/0830 | ** | US | Philadelphia Fed Nonmanufacturing Index | |||||
| 23/04/2024 | 1255/0855 | ** | US | Redbook Retail Sales Index | |||||
| 23/04/2024 | 1345/0945 | *** | US | IHS Markit Manufacturing Index (flash) | |||||
| 23/04/2024 | 1345/0945 | *** | US | S&P Global Services Index (flash) | |||||
| 23/04/2024 | 1400/1000 | *** | US | New Home Sales | |||||
| 23/04/2024 | 1400/1000 | ** | US | Richmond Fed Survey | |||||
| 23/04/2024 | 1530/1130 | * | US | US Treasury Auction Result for Cash Management Bill | |||||
| 23/04/2024 | 1700/1300 | * | US | US Treasury Auction Result for 2 Year Note | |||||