MNI US MARKETS ANALYSIS - Yields Stabilise in Thin Trade

Highlights:

• Yields stabilise, but focus remains on Weds/Thurs inflation numbers
• MNI ECB Preview - Sept Cut, Oct Pause
• JPY erases modest overnight weakness, shrugging off BoJ sources report

US TSYS: Yields Gaining, Focus Remains on Wednesday CPI, PPI on Thursday

• Treasuries are looking modestly lower at the moment, lower half of narrow overnight range as 30s unwind Monday's support. Early overnight 5Y vs. 30Y ultra-bond steepener block (+9,250 FVZ4 vs. -1,940 WNZ4) helped get the ball rolling.
• Dec'24 10Y futures currently trade -4 at 114-29.5 vs. 114-27.5 low, well above initial technical support at 114-02.5 (20D-EMA), 10Y yield +.0112 at 3.7117%. Curves mildly flatter after disinverting last Friday (climbing to highest level since June 2022 early Monday at 7.405), 2s10s currently -.312 at +2.648.
• No economic data on today's docket, markets await Wednesday's CPI, PPI inflation measure on Thursday. US Tsy $60B 42D CMB bill auction at 1130ET.
• While the Fed is in policy blackout through next week Wednesday's FOMC rate annc, Fed VC Barr will discuss Basel III at Brookings event (text, Q&A) at 1000ET followed by Fed Gov Bowman on bank stress testing & capital buffers (text, Q&A) at 1215ET.

MNI ECB Preview - September 2024: September Cut, October Pause

• The ECB will cut the deposit rate by 25bp at this week's meeting.
• Having previously indicated that the trajectory for policy rates is lower provided that incoming data supports the baseline scenario, the weakening growth outlook and signs of moderating wage pressure provide sufficient cover for the ECB to cut.
• We would not expect any signs of the ECB pre-committing to another cut in October as with inflation close to target there is no urgency to do so. Moreover, indications of back-to-back cuts would undermine President Lagarde's previous assertion that policy rates will not necessarily move lower in a linear fashion, in turn triggering a dovish re-pricing that would be at odds with the ECBs cautious approach to normalisation.

For the full publication, please see here:
https://roar-assets-auto.rbl.ms/files/67296/ECB%20Preview%20September%202024.pdf

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

OI data points to short setting dominating through SFRU6 on Monday, while long setting was more prominent beyond that point on the strip.

US TSY FUTURES: OI Points To Long Setting Further Out The Curve On Monday

OI data points to a mix of short setting (TU), long cover (FV) and long setting (TY through WN) on Monday, with the latter dominating in net curve terms.

• While Friday’s NFP report and Fedspeak has reduced odds of a 50bp cut at this month’s FOMC, participants seemingly used Monday’s pre-NY sell off as an opportunity to build fresh longs further out the curve.

EUROPE ISSUANCE UPDATE:

EU Dual-Tranche Syndication: Size Set

• E5bln (MNI expected E5-6bln) of the new long 7-year Dec-31, Books in excess of E45bln, spread set at MS+24bps (guidance was: MS+26 bps area).
• E5bln (up from initial guidance of E4bln; MNI expected E3-4bln) tap of the 3.25% Oct-50 Green. Books in excess of E70bln, spread set at MS+90bps (guidance was: MS+92 bps area).

Italy Syndication: Launched

• E8bln (MNI had originally expected E5bln) of the new 30-year Oct-54 BTP. Books in excess of E130bln, spread set at 4.50% Oct-53 BTP + 13bps (guidance was + 15bps area).

Dutch auction results

• E1.96bln of the 0% Jan-52 DSL. Avg yield 2.581%.

UK auction results

• Linker gilt supply was smoothly absorbed after some mild pre-auction concession.
• GBP900mln of the 0.625% Mar-45 linker. Avg yield 1.2% (bid-to-cover 3.44x).

FOREX: JPY Edges Lower While GBP Looks Through Jobs Numbers

• JPY trades poorly on light volumes mid-European morning, however cross-buying via EUR/JPY and GBP/JPY has so far been capped by yesterday's highs.
• GBP largely shrugged off a set of softer-than-expected jobs and wages numbers, with the details of the data providing little extra detail to change the trajectory of BoE policy, keeping a 25bps rate cut at the September meeting only an outside chance. Overall volumes are below average for this time of day. That will likely remain the case across the morning with a relatively light data schedule and primary focus on tomorrow's US inflation print - which provides the last look at inflation ahead of the FOMC meeting next week.
• BoJ officials are reportedly seeing little need to raise rates further next week, according to Bloomberg sources. The piece writes that they're still "monitoring lingering volatility in financial markets and the impact of the July hike." JPY looked through the report as being largely inline with consensus, keeping higher stock markets and global yields
  they key driver.
• CAD and AUD are the poorest performers so far Tuesday, however pullbacks remain shallow and conviction light ahead of the raft of risk events later this week, including the ECB rate decision, the US CPI print and the first Presidential debate held between candidates Trump and Harris. CB speakers later today include Fed's Barr and Bowman - however neither are expected to address the US economy or monetary policy.

OPTIONS: Expiries for Sep10 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0915-20(E1.0bln), $1.1000(E1.6bln), $1.1040-60(E1.3bln), $1.1100(E678mln), $1.1125(E1.4bln), $1.1175(E676mln), $1.1200(E1.1bln)
• USD/JPY: Y142.80-00($739mln), Y145.70-80($2.8bln)
• AUD/USD: $0.6680-00(A$1.1bln), $0.6800(A$1.5bln)
• EUR/GBP: Gbp0.8470(E613mln)
• EUR/JPY: Y160.00(E750mln)
• USD/CAD: C$1.3510($876mln)
• USD/CNY: Cny7.0450($1.3bln)

EQUITIES: E-Mini S&P Conditions Still Bearish Despite Monday's Partial Recovery

• Eurostoxx 50 futures traded lower last week and a bearish tone - a correction - remains intact for now. The latest move down has resulted in a break of both the 20- and 50-day EMAs. Friday’s sharp sell-off signals scope for an extension lower and sights are on 4686.53, a Fibonacci retracement point.  Initial key short-term resistance has been defined at 4998.00, the Sep 3 high. First resistance is at 4876.96, the 50-day EMA.
• Recent weakness in S&P E-Minis highlighted the start of a corrective cycle. The contract remains in a bear-mode condition for now and scope is seen for a deeper retracement near-term. An extension lower would open 5330.00, 61.8% retracement of the Aug 5 - Sep 3 bull leg. Key resistance has been defined at 5669.75, the Sep 3 high. Initial firm resistance to watch is 5538.47, the 20-day EMA.    

COMMODITIES: Gold Remains in Consolidation Mode Close to Recent Highs

• WTI futures remain in a bearish condition and last week’s impulsive sell-off reinforces this theme. The move down resulted in a breach of key support at $70.88, the Aug 5 low. The clear break of this level confirms a resumption of the downtrend that started Apr 12 and opens $66.66, a Fibonacci projection. MA studies are in a bear-mode position highlighting a clear downtrend. Initial firm resistance is at $72.67, the 20-day EMA.
• Gold is in consolidation mode and remains closer to its recent highs. The trend condition is unchanged and the primary direction remains up. Note too that moving average studies are in a bull-mode set-up, highlighting a dominant uptrend. Sights are on $2536.4 next, a Fibonacci projection. The 20-day EMA has recently been pierced. The next firm support to watch is $2448.3, the 50-day EMA. Short-term weakness is considered corrective.

MNI (LONDON)

Date	GMT/Local	Impact	Country	Event
10/09/2024	1100/1200		GB	BOE's Breeden remarks from Wharton-IMF Dialogue - Text release
10/09/2024	1210/0810		CA	BOC Governor Macklem speech in London UK
10/09/2024	1255/0855	**	US	Redbook Retail Sales Index
10/09/2024	1400/1000		US	Fed Vice Chair Michael Barr
10/09/2024	1530/1130	*	US	US Treasury Auction Result for Cash Management Bill
10/09/2024	1615/1215		US	Fed Governor Michelle Bowman
10/09/2024	1700/1300	***	US	US Note 03 Year Treasury Auction Result
11/09/2024	0600/0700	**	GB	UK Monthly GDP
11/09/2024	0600/0700	**	GB	Trade Balance
11/09/2024	0600/0700	**	GB	Index of Services
11/09/2024	0600/0700	***	GB	Index of Production
11/09/2024	0600/0700	**	GB	Output in the Construction Industry
11/09/2024	0900/1000	**	GB	Gilt Outright Auction Result
11/09/2024	1100/0700	**	US	MBA Weekly Applications Index
11/09/2024	-	***	CN	Money Supply
11/09/2024	-	***	CN	New Loans
11/09/2024	-	***	CN	Social Financing
11/09/2024	1230/0830	***	US	CPI
11/09/2024	1230/0830	*	CA	Intl Investment Position
11/09/2024	1400/1000	*	US	Services Revenues
11/09/2024	1400/1000		US	MNI Connect Video Conference on ‘Fed Balance Sheet – Comparison with Other Central Banks’
11/09/2024	1430/1030	**	US	DOE Weekly Crude Oil Stocks
11/09/2024	1700/1300	**	US	US Note 10 Year Treasury Auction Result