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USDCAD TECHS

Heading North

GLOBAL POLITICAL RISK

Modi, AMLO Top Major Economy Leader Poll, Macron Last

AUDUSD TECHS

Under Pressure

EURJPY TECHS

Trend Condition Remains Bearish

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Core FI markets have regained some poise in recent dealing after a bit of a drift lower in early Asia-Pac trade. The initial drift lower perhaps focused on yesterday's cheapening in the long end of the Tsy curve & ACGB dynamics.

  • The bid seemingly came in after little-known news provider REDD noted that Evergrande Group secured an extension on the maturity of a $260mn bond issued by Jumbo Fortune Enterprises, the JV it is involved in and guarantees the bonds for. The article suggested that the extension period will last more than 3 months, citing sources. The defensive tone may just be a case of the market not liking the continued uncertainty that the 3-month+ grace period indicated in article may create, as it isn't an ultimate fix to the issues at hand.
  • TYZ1 last -0-05+ at 130-15, with some very modest twist flattening witnessed on the cash Tsy curve, although the major benchmarks sit within -/+0.5bp of Wednesday's closing levels. A 10K block buyer of TYZ1 129.50 puts headlined on the flow side overnight.
  • To recap, TYZ1 finished Wednesday trade around the middle of its daily range. The curve twist steepened on Wednesday, with 2s richening by ~1bp as a little of the recently embedded Fed rate hike premium faded out of pricing, while the weakness in the long end extended on the back of a soft round of 20-Year Tsy supply. 30s led that weakness, cheapening by 5bp on the day. The 20-Year auction saw the largest tail on record for such supply, with the cover ratio slipping below its recent averages, while dealer takedown edged back up to its own recent average. The Fed's beige book noted that most districts reported significantly elevated prices, while labour shortages weighed on growth, with worker turnover elevated. Fiscal jousting continued on the Hill, with various source reports hitting late in the day on that matter.
  • Weekly jobless claims data, the latest Philly Fed business outlook survey, 5-Year TIPS supply, the Tsy's month-end supply announcement and another address from Fed Governor Waller are all due on Thursday.