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- Greenback through last week's lows as equity recovery extends
- US 10y yields back above 3.15%
- Pending home sales, prelim durable goods on the docket
- Cash Treasuries bear steepen as they continue to claw back some of last week’s gains on poor data but see sizeable outperformance to European sovereigns on the day. Volumes are light ahead of important central bank speak later this week, whilst the curve remains within its relatively flat post-FOMC range, with 2s10s at 9bps.
- 2YY +2.4bps at 3.087%, 5YY +3.7bps at 3.223%, 10YY +4.1bps at 3.171% and 30YY +4.8bps at 3.305%.
- TYU2 trades 12 ticks lower at 116-31, moving back towards the middle of last week’s wide range amidst low volumes. Initial support is eyed at 116-25+ (Jun 23 low) clearance of which could open a 115 handle, whilst initial resistance remains 118-08 (Jun 23 high).
- Data: Preliminary durable goods for May (0830ET), pending home sales for May (1000ET) and Dallas Fed manufacturing activity for June (1030ET).
- Bond issuance: US Tsy $46B 2Y Note (91282CEX5) at 1130ET and US Tsy $47B 5Y Note (91282CEW7) at 1300ET
- Bill issuance: US Tsy $42B 26W bill (1130ET) and US Tsy $45B 13W (1300ET)
- FOMC-dated Fed Funds implied hikes have shifted higher early in the European morning to 71bps for July back towards the higher end of last week’s range of 67-73bps.
- Subsequent meetings have also increased but are near the mid to lower end of the recent range, with a cumulative 129bps to Sep (two meetings, 125bp on Fri) and 185bps to Dec (four meetings, 181bp), on the way to peaking in the Mar’23 meeting at an implied rate of 3.56%.
- No Fedspeak scheduled for today with SF Fed’s Daly (’24 voter) next up tomorrow. She was the last FOMC member to speak late on Fri, seeing a 75bp hike in July as looking likely but still data dependent.
Cumulative hikes in FOMC-dated Fed Funds futures Source: Bloomberg
European sovereign bonds have sold off this morning alongside gains for equities.
- Gilts have traded weaker with the curve slightly steepening. Cash yields are up 9-10bp.
- Bunds have underperformed gilts, particularly in the belly of the curve. Yields are now up 7-14bp.
- The OAT curve has bear flattened. Yields are up 8-16bp while the 2s30s spread has narrowed 6bp.
- BTPs have traded lower across the curve with yields up 6-13bp..
- G7 leaders met over the weekend to discuss tougher sanctions against Russia and the provision of military assets to Ukraine.
- Supply this morning came from Germany (Bubills, EUR4.915bn allotted) and the EU (NGEU bond, EUR2.494bn). Later today France will offer EUR4.1-5.7bn of BTFs).
- The ECB earlier announced changes to the timing of its monetary policy releases and press conferences, while retaining the existing dates for policy meetings.
- The European data calendar was light today. Focus shifts to US durable goods orders for May.
EUROPE ISSUANCE UPDATE
EU sells E2.494bln 0% Jul-26 EU NGEU, E2.5bln, Avg yield 1.550% (Prev. 0.161%), Bid-to-cover 1.35x (Prev. 1.33x)
EUROPE OPTION FLOW SUMMARY
RXQ2 144.00/143.00 ps vs 151.50/152.00 cs, bought the ps for 10 up to 12 in 3k
SFIU2 97.50/97.40 ps with 97.45/97.35 ps strip, sold both down to 6 in 8k (ref 97.62)
Tnotes Wk 2 114/113ps, bought for 3 in 30kTYQ2 115/114ps, bought for 10 in 6k
- Equity markets remain in a corrective cycle, and trade higher again Monday, underpinning a calmer outlook to currency markets so far this week. As a result, the greenback is softer and the USD Index is through last week's lows. The main beneficiaries so far have been the EUR and SEK, with both currencies posturing ahead of the Riksbank decision on Thursday and the ECB's Sintra policy forum across the week.
- AUD, NZD are the weakest performers so far Monday, but both currencies hold within recent ranges and are yet to test any material downside levels. AUDUSD continues to trade above 0.6851, the Jun 14 low. This support however remains exposed and trend signals are bearish. A resumption of weakness would also signal scope for a test of key support and the bear trigger at 0.6829, the May 12 low. Clearance of this support would confirm a resumption of the downtrend and open 0.6805, the Jun 22 2020 low.
- Data releases due Monday include prelim May durable goods as well as pending home sales. ECB's Lagarde is due to speak as she marks the opening of the ECB's central banking forum in Sintra. Markets watch for any update on the progress of the anti-fragmentation tool expected to be unveiled in the coming policy meetings.
- EUR/USD: $1.0445-55(E1.5bln)
- USD/JPY: Y135.00($603mln), Y137.00($550mln)
- USD/CAD: C$1.2920($835mln)
- In the equity space, S&P E-Minis maintain a short-term bullish theme as price extends the recent bounce from 3639.00, Jun 17 low. The break of the 20-day EMA last week, signals scope for a move higher towards the 50-day EMA, at 4042.61. EUROSTOXX 50 futures have traded higher today and moved above the 20-day EMA. A continuation would confirm an extension of the current corrective cycle and open 3638.50, the 50-day EMA.
- In FX, EURUSD is slightly firmer. Short-term gains are considered corrective - for now - and the primary trend direction is down. The focus is on weakness towards 1.0350, May 13 low and the bear trigger. Key channel resistance intersects at 1.0637 today - the channel is drawn from the Feb 10 high and still represents a key short-term resistance. GBPUSD is unchanged and still in consolidation mode. Key support and the bear trigger lies at 1.1934, Jun 14 low. Resistance to watch is 1.2406, the Jun 16 high. Both 1.1934 and 1.2406 are seen as important short-term directional triggers. USDJPY remains bullish and last week’s gains confirmed a resumption of the primary uptrend. The focus is on 136.88 next, the Oct 30 1998 high. Short-term pullbacks are considered corrective, support to watch is at 133.41, the 20-day EMA.
- On the commodity front, the near-term outlook in Gold is bearish. The focus is on $1787.0, May 16 low, where a break would resume the downtrend. Key trendline resistance to watch is at $1874.1. The trendline is drawn from the Mar 8 high and a break would signal a short-term reversal. In the Oil space, WTI futures remain vulnerable following last week’s break lower and despite the recovery from last Wednesday’s low of $101.53. A resumption of weakness would open $100.66, the May 19 low.
- In the FI space, Bund futures traded higher last week and cleared the 20-day EMA. The break has strengthened short-term bullish conditions and signals scope for a recovery towards 150.06, 61.8% retracement of the May 12 - Jun 16 bear leg. Gains are still considered corrective, first support is at 144.81, the Jun 23 low. Gilts rallied last Thursday and cleared the 20-day EMA. This signals scope for a stronger short-term recovery, and has opened 155.55, the Jun 6 high. Watch support at 111.93, the Jun 23 low.
- Asian markets closed stronger in a follow-through from the US equity rally late last week: Japan's NIKKEI up 379.3 pts or +1.43% at 26871.27 and the TOPIX up 20.7 pts or +1.11% at 1887.42. China's SHANGHAI closed up 29.438 pts or +0.88% at 3379.185 and the HANG SENG ended 510.46 pts higher or +2.35% at 22229.52.
- European equities are stronger, with consumer discretionary and tech names leading the way: German Dax up 149.5 pts or +1.14% at 13267.83, FTSE 100 up 53.63 pts or +0.74% at 7262.4, CAC 40 up 42.12 pts or +0.69% at 6115.68 and Euro Stoxx 50 up 32.91 pts or +0.93% at 3566.6.
- U.S. futures continue to rise, with the Dow Jones mini up 98 pts or +0.31% at 31585, S&P 500 mini up 17.75 pts or +0.45% at 3934, NASDAQ mini up 73.5 pts or +0.61% at 12214.5.
- WTI Crude down $0.48 or -0.45% at $107.07
- Natural Gas down $0.15 or -2.4% at $6.071
- Gold spot up $11.08 or +0.61% at $1837.96
- Copper up $2.65 or +0.71% at $376.95
- Silver up $0.35 or +1.64% at $21.5125
- Platinum up $3.47 or +0.38% at $914.55
|27/06/2022||1230/0830||**||US||durable goods new orders|
|27/06/2022||1400/1000||**||US||NAR pending home sales|
|27/06/2022||1430/1030||**||US||Dallas Fed manufacturing survey|
|27/06/2022||1530/1130||*||US||US Treasury Auction Result for 2 Year Note|
|27/06/2022||1530/1130||*||US||US Treasury Auction Result for 26 Week Bill|
|27/06/2022||1700/1300||*||US||US Treasury Auction Result for 13 Week Bill|
|27/06/2022||1700/1300||*||US||US Treasury Auction Result for 5 Year Note|
|27/06/2022||1830/2030||EU||ECB Lagarde Opens ECB Forum|
|27/06/2022||1900/2100||EU||ECB Schnabel on Financial Stability at ECB Forum|
|27/06/2022||2230/1830||US||New York Fed President John Williams|
|28/06/2022||0600/0800||*||DE||GFK Consumer Climate|
|28/06/2022||0800/1000||EU||ECB Lagarde Intro at ECB Forum|
|28/06/2022||0830/1030||EU||ECB Lane on Globalisation & Labour Markets at ECB Forum|
|28/06/2022||0900/1000||*||UK||Index Linked Gilt Outright Auction Result|
|28/06/2022||0930/1130||EU||ECB Elderson on Energy Prices & Sources at ECB Forum|
|28/06/2022||1100/1300||EU||ECB Panetta on Digital Currencies at ECB Forum|
|28/06/2022||1100/1200||UK||BOE Cunliffe Panels ECB Forum|
|28/06/2022||1200/0800||US||Richmond Fed President Tom Barkin|
|28/06/2022||1230/0830||**||US||Advance Trade, Advance Business Inventories|
|28/06/2022||1255/0855||**||US||Redbook Retail Sales Index|
|28/06/2022||1300/0900||**||US||S&P Case-Shiller Home Price Index|
|28/06/2022||1300/0900||**||US||FHFA Home Price Index|
|28/06/2022||1400/1000||***||US||Conference Board Consumer Confidence|
|28/06/2022||1400/1000||**||US||Richmond Fed Survey|
|28/06/2022||1630/1230||US||San Francisco Fed's Mary Daly|
|28/06/2022||1700/1300||**||US||US Treasury Auction Result for 7 Year Note|
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