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Impulsive Rally Extends

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Off Lows Ahead Wed's Retail Sales, July FOMC Minutes

US TSYS

Tsys remain weaker, but well off midmorning lows after mixed data: Housing starts weaker for third consecutive month (1.446M), Building Permits down 1.3% on the month still better than expected for second consecutive month (1.674M).

  • Bonds extended lows yet again (30YY tapping 3.1703% high) after Industrial Production (+0.6% vs. 0.3% est), Capacity Utilization (80.3% vs. 80.2% est) both stronger than expected.
  • Rates spent the rest of the session gradually scaling back from lows amid two-way flow session data out of the way, participants migrating to the sidelines ahead Wed's Retail Sales (0.1% est vs. 1.0% prior) not to mention July FOMC minutes release later in the session.
  • Technicals for TYU2 currently trading 119-13 (-9.5) sustained losses through midmorning as prices fail to make any headway on 120-00 handle and 120-22 post-CPI high. Weakness at tail-end of last wk put contract through trendline support: 119-16 (Jun 16 low). Sales still considered corrective, however, the trendline break suggests a deeper retracement is likely near-term. This has opened 118-05, a Fibonacci retracement. Initial resistance to watch is 120-22, the Aug 10 high. A break would signal a possible bullish reversal.
  • Additional trade tied to corporate debt issuance ($4.5B ADB 5Y SOFR+40 priced, several others including $3B KFW WNG 2Y SOFR and Goldman Sachs) generating two-way hedging/unwinds. Gradual pick-up in Sep/Dec roll volume as well.
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Tsys remain weaker, but well off midmorning lows after mixed data: Housing starts weaker for third consecutive month (1.446M), Building Permits down 1.3% on the month still better than expected for second consecutive month (1.674M).

  • Bonds extended lows yet again (30YY tapping 3.1703% high) after Industrial Production (+0.6% vs. 0.3% est), Capacity Utilization (80.3% vs. 80.2% est) both stronger than expected.
  • Rates spent the rest of the session gradually scaling back from lows amid two-way flow session data out of the way, participants migrating to the sidelines ahead Wed's Retail Sales (0.1% est vs. 1.0% prior) not to mention July FOMC minutes release later in the session.
  • Technicals for TYU2 currently trading 119-13 (-9.5) sustained losses through midmorning as prices fail to make any headway on 120-00 handle and 120-22 post-CPI high. Weakness at tail-end of last wk put contract through trendline support: 119-16 (Jun 16 low). Sales still considered corrective, however, the trendline break suggests a deeper retracement is likely near-term. This has opened 118-05, a Fibonacci retracement. Initial resistance to watch is 120-22, the Aug 10 high. A break would signal a possible bullish reversal.
  • Additional trade tied to corporate debt issuance ($4.5B ADB 5Y SOFR+40 priced, several others including $3B KFW WNG 2Y SOFR and Goldman Sachs) generating two-way hedging/unwinds. Gradual pick-up in Sep/Dec roll volume as well.