MNI US Morning FI Analysis: Focus On European Growth

US TSYS SUMMARY: Data Eyed As Candidates Hit The Midwest

Weakness in tech stocks post-earnings after the bell Thursday carried on into the overnight session, with Tsys moving off Thursday's lows. But equities found a footing in early European trade and Tsys have retreated in sympathy, now in the middle of the overnight range.

• Some data out later this morning, but with little else scheduled, market participants could be forgiven for taking a breather before next week's heavy slate of events (FOMC meeting, nonfarm payrolls, refunding announcement, and of course, the election).
• Dec 10-Yr futures (TY) up 2.5/32 at 138-15.5 (L: 138-13 / H: 138-19.5); w volume on the strong side, ~355k.
• The 2-Yr yield is unchanged at 0.1466%, 5-Yr is down 0.6bps at 0.3638%, 10-Yr is down 0.2bps at 0.8215%, and 30-Yr is down 0.1bps at 1.6006%.
• Dollar has fluctuated but basically trading sideways: despite strong Q3 GDP prints in Europe, the Euro shrugged as more attention on lockdowns to come, and ECB easing.
• Another solid data slate today: 0830ET sees Sep personal income / core PCE prices, with Oct MNI Chicago PMI at 0945ET and Oct UMich sentiment at 1000ET.
• With four days to the election, Pres Trump visits Michigan, Minnesota and Wisconsin, while Biden overlaps, in Minnesota, Wisconsin and Iowa.
• No supply today; NY Fed buys ~$1.225B of 7.5-30Y TIPS.

BOND SUMMARY: EGB/GILT - GDP Surprises And Digesting The ECB

Price action in European govies have been relatively contained thus far.

• There has been no follow-through from yesterday's ECB meeting, which played out largely as expected: no change in policy, but a signal of intent that further stimulus will likely be added in December.
• This morning's euro area preliminary GDP prints for the third quarter came in above expectations (Eurozone 12.7% Q/Q vs 9.6% survey, Germany 8.2% vs 7.3% survey, France 18.2% vs 15.0%, Italy 16.1% 11.1%, Spain 16.7% vs 13.5%) , but come at a time when social restrictions are being tightened across the region which risks undermining economic activity in Q4.
• Bunds traded weaker earlier in the session but have pulled back towards yesterday's close.
• The OAT curve has steepened slightly with the 2s30s spread 1bp wider.
• BTPs have trade weaker with cash yields 1-2bp higher on the day.
• Gilts trade close to unch. Last yields: 2-year -0.0623%, 5-year -0.065%, 10-year 0.2277%, 30-year 0.7666%.

OPTIONS

EGB OPTIONS: Bobl Ratio Put Fly Seller

0EZ0 135.50/135.25/135.00 put fly sold at 3 in 4k x 6k x 1k

EURIBOR OPTIONS: Calendar Call Spread

0RH1 100.625/100.75 call spread v 3RH1 100.625/100.75 call spread, pays 1 for the mid in 2k

TECHS:

US 5YR FUTURE TECHS: (Z0) Trendline Resistance Capps Gains

• RES 4: 126-00 76.4% retracement of the Sep 30 - Oct 23 sell-off
• RES 3: 125-31 High Oct 15 and a key near-term resistance
• RES 2: 125-29 61.8% retracement of the Sep 30 - Oct 23 sell-off
• RES 1: 125-272 High Oct 28 and the bull trigger
• PRICE: 125-22 @ 10:29 GMT Oct 30
• SUP 1: 125-196 Low Oct 29
• SUP 2: 125-16+ Low Oct 22 and 23 and the bear trigger
• SUP 3: 125-156 1.00 proj of Aug 4 - 28 sell-off from Sep 3 high
• SUP 4: 125-112 Low Jun 10 (cont)

5yr futures stalled at trendline resistance yesterday drawn off the Sep 30 high. The trendline intersects at 125-252. A break, reinforced by a move above Wednesday's 125-272 high would signal a reversal of the recent downleg and pave the way for a climb towards 125-31, Oct 15 high. While the trendline holds, support at 125-16+, Oct 22 and 23 low remains exposed. Clearance of this level would confirm a resumption of bearish activity.

US 10YR FUTURE TECHS: (Z0)‌ Stalls At Trendline Resistance

• RES 4: 139-16 Bear channel resistance drawn off the Aug 4 high
• RES 3: 139-14 High Oct 15 and a key resistance
• RES 2: 139-07+ High Oct 16
• RES 1: 139-03 High Oct 28 and the bull trigger
• PRICE: 138-16 @ 10:42 GMT Oct 30
• SUP 1: 138-11+ Low Oct 29
• SUP 2: 138-05 Low Oct 23
• SUP 3: 138-04+ 1.00 proj of Aug 4 - 28 decline from Sep 3 high
• SUP 4: 137-31+ Bear channel base drawn off the Aug 4 high

Treasuries are lower following yesterday's sell-off. The pullback follows Wednesday's failure at trendline resistance drawn off the Oct 2 high. The trendline intersects at 139-00+. A break of the line, reinforced by a move above 139-03, Oct 28 high would confirm a reversal of the recent downleg and open 139-14, Oct 15 high. While price remains below the trendline though, support at 138-05 remains exposed. A break resumes the downtrend.

US 30YR FUTURE TECHS: (Z0) Support Remains Exposed

• RES 4: 177-00 High Oct 2
• RES 3: 176-10 High Oct 15 and a key resistance
• RES 2: 175-11 50-day EMA
• RES 1: 173-25/29 High Oct 28 / Trendline drawn off the Aug 6 high
• PRICE: 173-08 @ 10:52 GMT Oct 30
• SUP 1: 172-20 Low Oct 29
• SUP 2: 171-22 Low Oct 23 and the bear trigger
• SUP 3: 171-00 Round number support
• SUP 4: 170-16 1.00 proj of Aug 6 - 28 sell-off from Sep 3 high

30yr futures are lower following yesterday's sell-off. The pullback follows an inability this week to clear trendline resistance drawn off the Aug 6 high. The trendline intersects at 174-25. A break, reinforced by a move above 174-29, Oct 28 high would confirm a reversal of the recent downleg and open 176-10, Oct 15 high. While price trades below the trendline, support at 171-22, Oct 23 remains exposed. A break would resume the downtrend.