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STIR

Effective Fed Funds Rate

US EURODLR FUTURES

BLOCK, Lead Quarterly

CORN TECHS

(H2) Bullish Focus

BRAZIL

Central Government Budget Balance Due

Fig 1. UK CBI Retailing Reported Sales


Source: MNI/Bloomberg

US TSYS SUMMARY: Earnings Reports Boost Stocks, Tsys Unmoved

Tsys are off overnight lows but mostly within late Monday's ranges, alongside equities which have consolidated from yesterday's rout. Data and 2-Yr supply eyed.

  • Fairly limited volumes, under 200k traded so far for Dec TYs, which are down 0.5/32 at 138-20 (L: 138-18.5/ H: 138-22).
  • Very modest curve steepening: the 2-Yr yield is down 0.2bps at 0.1474%, 5-Yr is down 0.3bps at 0.3477%, 10-Yr is up 0bps at 0.8011%, and 30-Yr is up 0.4bps at 1.595%.
  • With pre-election stimulus prospects all but over, market attention remains on the election itself, and COVID case increases globally.
  • Strong quarterly earnings reports highlighted by Caterpillar helped boost S&P futures to session highs, but little reaction in Tsys seen so far.
  • 0830ET sees prelim Sep durable goods data, with Oct consumer confidence / Richmond Fed Mfg reports at 1000ET.
  • In supply, the highlight is $54B 2-Y-Note sale at 1300ET; we get $60B of 42-/119-day bill sales at 1130ET as well. NY Fed buys ~$1.75B of 20-30Yr Tsys.

BOND SUMMARY: AWAITING THE ECB

It has been a relatively uneventful session so far with focus on this week's ECB meeting.

  • Gilts have lack momentum this morning and trade close to unch on the day. The Dec-20 gilt future trades at 135.22, in line with yesterday's close.
  • Bunds have firmed but gains have been limited. Last yields: 2-year -0.7659%, 5-year -0.7802%, 10-year -0.5864%, 30-year -0.1701%.
  • OATs have traded in line with bunds at the longer end. Cash yields are 1bp lower on the day.
  • BTPs have rallied and the curve has bull flattened. The 2s30s spread is 3bp narrower
  • Supply this morning came from the UK (Gilt, GBP3.25bn) Italy (CTZ/BTPEi, EUR3.25bn) and Greece (Bills, EUR812.5mn). The DMO will also sell GBP1.0bn of the 1.625% Oct-71 Gilt.
  • The data calendar is light today with just UK CBI Reported Sales data for October at 1100 London time.

DEBT SUPPLY

GILT AUCTION RESULTS: DMO sells GBP3.25bln nominal of 0.125% Jan-24 gilt

  • Avg yld -0.017% (-0.026%), bid-to-cover 2.34x (2.44x), tail 0.2bp (0.2bp), price 100.464 (100.502).
  • Pre-auction mid-price 100.449.
  • An additional GBP812.5mln will be available through the PAOF to successful bidders until 13:00GMT.

ITALY AUCTION RESULTS: Italy Sells E3.25bn of CTZ/BTPEi

  • E2.5bn of the Sep-22 CTZ : Average yield -0.265% (-0.118%) , bid-to-cover 1.56x , allotment price 100.509, pre-auction mid-price 100.50
  • E0.75bn of the 0.65% May-26 BTPEi: Average yield -0.15% (0.56%), bid-to-cover 1.55x (1.56x), allotment price 104.48, pre-auction mid-price 104.49

TECHS

US 5YR FUTURE TECHS: (Z0) Corrective Bounce

  • RES 4: 125-31 High Oct 15
  • RES 3: 125-266/272 Trendline drawn off Sep 30 high / 50-day EMA
  • RES 2: 125-25 20-day EMA
  • RES 1: 125-23 High Oct 26
  • PRICE: 125-22 @ 10:28 GMT Oct 27
  • SUP 1: 125-156 1.00 proj of Aug 4 - 28 sell-off from Sep 3 high
  • SUP 2: 125-112 Low Jun 10 (cont)
  • SUP 3: 125-07 1.382 proj of Aug 4 - 28 sell-off from Sep 3 high
  • SUP 4: 125-06+ Low Jun 6

5yr futures have recovered off recent lows in a move that is for now considered a correction. The Oct 21 breach of support at 125-202, Oct 7 low, confirmed a resumption of the downtrend that has been in place since early August. This paves the way for weakness towards 125-16+ next, a Fibonacci projection and last week's low ahead of 125-112, Jun 10 low (cont). Initial resistance is at 125-22+. Short-term trendline resistance is at 125-266.

‌US 10YR FUTURE TECHS: (Z0)‌ Off Recent Lows

  • RES 4: 139-14 High Oct 15
  • RES 3: 139-04 50-day EMA
  • RES 2: 138-29+ 20-day EMA
  • RES 1: 138-23 High Oct 26
  • PRICE: 138-21 @ 10:49 GMT Oct 27
  • SUP 1: 138-05 Low Oct 23
  • SUP 2: 138-04+ 1.00 proj of Aug 4 - 28 decline from Sep 3 high
  • SUP 3: 138-00+ Bear channel base drawn off the Aug 4 high
  • SUP 4: 137-29 76.4% retracement of the Jun - Aug rally (cont)

Treasuries bounced higher yesterday as a correction unfolds off last week's 138-05 low. A bearish theme was reinforced recently on Oct 21 following the break of 138-20+, Oct 7 low. This confirmed a resumption of the broader reversal that occurred on Aug 4 and clears the way for an extension lower. towards 138-04+ next, a Fibonacci projection ahead of 138-00+, a bear channel base drawn off the Aug 4 high. Firm resistance is seen at 138-29+.

US 30YR FUTURE TECHS: (Z0) Bearish Despite Bounce

  • RES 4: 176-10 High Oct 15
  • RES 3: 175-04 Trendline resistance drawn off the Aug 6 high
  • RES 2: 174-13 20-day EMA
  • RES 1: 173-30 High Oct 27
  • PRICE: 173-18 @ 10:47 GMT Oct 27
  • SUP 1: 171-22 Low Oct 23 and the bear trigger
  • SUP 2: 171-00 Round number support
  • SUP 3: 170-16 1.00 proj of Aug 6 - 28 sell-off from Sep 3 high
  • SUP 4: 170-00 Psychological round number

30yr futures maintain a bearish tone despite the recent corrective recovery. Price on Oct 21 cleared 173-10, Oct 7 low. The break negates recent bullish developments and instead confirms a resumption of the downtrend that has been in place since the Aug 6 reversal. A number of price objectives have already been achieved. Attention is on 170-16 next, a Fibonacci projection. Initial resistance is at 173-24, Oct 21 high. Trendline resistance is at 175-04.

MNI London Bureau | +44 0203-865-3808 | bruce.jeffery@marketnews.com
MNI London Bureau | +44 0203-865-3808 | bruce.jeffery@marketnews.com