MNI US Morning FI Analysis: Vaccine Euphoria Dies Down

US TSYS SUMMARY: Early Flattening Reverses As 10-Yr Supply, Fed Speakers Await

Tsys have moved off overnight highs in European trading, though nothing like Monday's sharp vaccine news-led drop. Plenty of Fed speakers today, and 10-Yr supply in focus later in the session.

• Curve has reversed some early flattening: the 2-Yr yield is up 0.6bps at 0.1767%, 5-Yr is up 1.1bps at 0.4394%, 10-Yr is up 1.7bps at 0.9407%, and 30-Yr is up 1.6bps at 1.7245%.
• Dec 10-Yr futures (TY) up 1.5/32 at 137-20 (L: 137-17 / H: 137-29.5) heavy volumes so far (TYZ0 ~560k traded).
• S&P eminis are trading sideways, but the move out of tech continues, with Nasdaq futs sharply down (-1.5%).
• A lengthy FOMC speaker lineup: Dallas' Kaplan (3x, at 0830ET, 1000ET, and 1200ET), Boston's Rosengren (2x, at 1000ET and 1600ET), Atlanta's Bostic (1230ET), VC Quarles (1400ET before Senate banking panel), and Gov Brainard (1700ET).
• NFIB small biz optimism for Oct was in line w expectations (104.0 vs 104.1 surv). JOLTS the only other release of any note today (1000ET).
• The lone auction today is $41B in 10-Yr Notes at 1300ET. NY Fed buys ~$2.42B of 1-7.5Y TIPS.

BOND SUMMARY: EGB/GILT

Following yesterday's vaccine-driven risk-on shift, price action has been more contained this morning. Equities and oil are inching higher alongside mixed trading in sovereign bonds.

• Gilts are trading weaker the short end, while the very long end has firmed. Much of the curve trade close to unch on the day. Last yields: 2-year -0.0085%, 5-year 0.0255%, 10-year 0.3716%, 30-year 0.954%.
• Bunds have similarly traded lower, but with cash yields within 1bp of yesterday's close.
• BTPs have firmed, with the short-end slightly outperforming. The 2-year benchmark yield is down 2bp on the day.
• Supply this morning came from Belgium (TCs, EUR2.62bn) , Finland (Bills, EUR1.986bn) and the ESM (Bills, EUR1.49bn).
• UK employment change data for September was worse than expected (-164k 3m/3m vs -150k survey), although the unemployment rate was flat at 4.8%. The French unemployment rate for the same period jumped to 9.0% from 7.1% the previous month. Elsewhere, French and Italian industrial production for September were worse than expected in Y/Y terms (-6.0% and -5.1%, respectively).

DEBT SUPPLY

BELGIUM AUCTION RESULTS: Belgium Sells E2.62bn of TCs Vs E2.4-2.8bn Target

• E0.60bn of the Mar 11, 2021 TC: Average yield -0.662%, bid-to-cover 2.6x
• E2.016bn of the Nov 11, 2021 TC: Average yield -0.638%, bid-to-cover 1.7x

FINLAND AUCTION RESULTS: Finland Sells E1.986bn of Bills

• E0.985bn of May 11, 2021 bills: Average yield -0.620%, bid-to-cover 1.61x
• E1.001bn of Aug 10, 2021 bills: Average yield -0.620%, bid-to-cover 1.63x

ESM AUCTION RESULTS: Allots E1.49bln 12-month bills

• Average yield -0.5955%, cover 3.8x

OPTIONS

EGB OPTIONS: BTP call spread seller

IKZ0 146/148cs 1x2, sold between 13 and 20 in 1.7k

SHORT STERLING OPTIONS: Outright call seller

LH1 100.00c, sold at 3 in 6.5k

SHORT STERLING OPTIONS: Bullish structure

0LH1 100./100.125cs, bought for 2 in 2.5k

EGB OPTIONS: Schatz put fly

DUZ0 112.40/30/20p fly, sold at 4 in 2k

TECHS

US 5YR FUTURE TECHS: (Z0) Broader Downtrend Resumes

• RES 4: 125-31 High Oct 15 and a key near-term resistance
• RES 3: 125-29+ High Nov 5 and the bull trigger
• RES 2: 125-24 High Nov 9
• RES 1: 125-126 Intraday high
• PRICE: 125-092 @ 11:38 GMT Nov 10
• SUP 1: 125-06 Low Nov 9
• SUP 2: 125-04+ 1.50 proj of Aug 4 - 28 sell-off from Sep 3 high
• SUP 3: 125-016 1.618 proj of Aug 4 - 28 sell-off from Sep 3 high
• SUP 4: 125-00 Round number support

5yr futures sold off sharply yesterday. The break lower resulted in a move through key support at 125-122, Nov 4 low and negated the Nov 4 bullish - a bullish engulfing candle. The break lower instead confirms a resumption of the downtrend that has been in place since early August and maintains the bearish price sequence of lower lows and lower highs. The focus is on 125-04+ next, a Fibonacci projection. Resistance is at 125-24.

US 10YR FUTURE TECHS: (Z0)‌ Bears Return

• RES 4: 139-13 Bear channel top drawn off the Aug 4 high
• RES 3: 139-08+ High Nov 5
• RES 2: 138-24+ High Nov 9
• RES 1: 137-29+ Intraday high
• PRICE: 137-20+ @ 11:48 GMT Nov 10
• SUP 1: 137-13 Low Nov 9
• SUP 2: 137-08 1.500 proj of Aug 4 - 28 decline from Sep 3 high
• SUP 3: 137-01+ 1.618 proj of Aug 4 - 28 decline from Sep 3 high
• SUP 4: 137-00 Round number support

Treasuries sold off sharply yesterday. The break lower resulted in a move through key support at 137-20+, Nov 4 low and negated the Nov 4 bullish - a bullish engulfing candle. The break lower instead confirms a resumption of the downtrend that has been in place since early August and maintains the bearish price sequence of lower lows and lower highs. The focus is on 137-08 next, a Fibonacci projection. Resistance is at 138-24+.

US 30YR FUTURE TECHS: (Z0) Fails To Hold Recent Gains

• RES 4: 176-10 High Oct 15 and a key resistance
• RES 3: 175-27 High Nov 5 and the bull trigger
• RES 2: 173-24 High Nov 9
• RES 1: 171-14 Intraday high
• PRICE: 170-18 @ 11:55 GMT Nov 10
• SUP 1: 169-29 Low Nov 9
• SUP 2: 168-19 1.236 proj of Aug 6 - 28 sell-off from Sep 3 high
• SUP 3: 168-00 Round number support
• SUP 4: 167-14 1.382 proj of Aug 6 - 28 sell-off from Sep 3 high

30yr futures sold off sharply yesterday. The break lower resulted in a move through key support at 170-07, Nov 4 low and negated the Nov 4 bullish - a bullish engulfing candle. The break lower instead confirms a resumption of the downtrend that has been in place since early August and maintains the bearish price sequence of lower lows and lower highs. The focus is on 168-19 next, a Fibonacci projection. Resistance is at 173-24.