US TSYS: Futures Softer At Re-open, Above Thursday’s Lows
A downtick for TYM2 at the re-open as Asia-Pac participants react to Thursday’s Tsy weakness. The contract last trades -0-04 at 118-20, 0-06 off of Thursday’s low.
- To recap, Tsys were cheaper on Thursday, with the major cash benchmark yields across the curve rising by 5-11bp come the bell. The curve bear flattened as 5s led the sell off, briefly showing above 3.00%, before falling back and closing below that level as Tsys finished off of intraday cheeps.
- Firmer than expected domestic data had little in the way of direct impact on Tsys, with global central bank speak applying more decisive pressure to core global FI markets.
- Hawkish ECB speak from de Guindos (Vice President and usually dovish) and Wunsch provided a catalyst in early European hours, although President Lagarde was a little more balanced (albeit more than willing to flag upside inflationary risks) in her own communique.
- Fedspeak saw Chair Powell point to an unsustainably hot labour market, while he reiterated that a 50bp rate hike could come at the May FOMC meeting, indicating a preference for a degree of frontloading when it comes to policy normalisation. Meanwhile, St. Louis Fed President Bullard (’22 voter) continued to beat the drum for a 75bp rate hike, playing down the ultimate impact of such a move, while noting that “the bond market is not a safe place to be.” San Francisco Fed President Daly (’24 voter) reaffirmed the need for expeditious tightening towards neutral, noting the likelihood of 50bp rate hikes at a couple of meetings in ’22, with open questions remaining re: how restrictive policy ultimately needs to be, while indicating hope that the U.S. will be able to avoid a recession as the Fed tightens. FOMC dated OIS priced in over 150bp of cumulative tightening across the next 3 meetings at one point on Thursday i.e. 3x 50bp rate hikes were more than fully priced, before paring back from extremes to price a cumulative 146bp over that horizon at typing.
- There isn’t much when it comes to tier 1 market moving data due during Asia-Pac hours, while Friday’s wider docket will be headlined by flash PMI data from across the globe.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
USDCAD TECHS: Trades Below Key Support
- RES 4: 1.2964 High Dec 20 and a key resistance
- RES 3: 1.2924 High Dec 22
- RES 2: 1.2871/2901 High Mar 15 / High Mar 8 and a key resistance
- RES 1: 1.2710 20-day EMA
- PRICE: 1.2592 @ 17:11 GMT Mar 22
- SUP 1: 1.2565 Low Mar 21 and a near-term bear trigger
- SUP 2: 1.2552 76.4% retracement of the Jan 19 - Feb 24 rally
- SUP 3: 1.2499 Low Jan 21
- SUP 4: 1.2454 Low Jan 19 and a key support
USDCAD remains soft, following last week’s reversal from 1.2871, the Mar 15 high. The USD has breached the Mar 3 low of 1.2587. This strengthens the current bearish theme and signals scope for a deeper pullback near-tem. Attention is on 1.2552 next, the 76.4% retracement of the Jan 19 - Feb 24 rally and a key short-term support. On the upside, initial resistance is seen at 1.2710, the 20-day EMA.
US TSYS: Fed Taking Inflation Seriously
Rates finish broadly weaker yet again, 30YY climbs to late session high of 2.6153% +0.0988, highest lvl since July 2019. Markets less whippy than Monday opener, better volumes, market depth w/Japan back from extended holiday weekend.
- Tsy sell-off accelerated early after StL Fed Pres Bullard comments on Bbg TV urged Fed to "move aggressively to curb inflation .. faster is better" to get "policy back to neutral", adding 50bp hike "would definitely be in the mix."
- Slight delayed reaction to hawkish StL Fed Bullard comments, lead quarterly Eurodollar futures reversed after going bid on lower 3M LIBOR settle (-0.00386 to 0.95371%, +0.01971/wk). Balance of Whites-Reds (EDU2-EDH4) weaker but off lows as markets priced in increased chances for 50bps hike in May and/or June.
- Trading desks report moderate domestic real$ buying in 3s around comment from SF Fed Pres Daly re: inflation expectations "well anchored". U.S. economy can probably escape a 1970s-style bout of stagflation Daly explained because America has emerged as an oil exporter since then and because economic growth will likely remain around its long-run trend rate.
- More Fed-speak on tap Wednesday, limited data:
- 0800ET: Fed Chair Powell, BIS Innovation panel event, moderated Q&A
- 1000ET: New Home Sales (801k, 810k); MoM (-4.5%, +1.1%)
- 1145ET: SF Fed Daly, moderated discussion Bbg equality summit
- 1300ET: US Tsy $16B 20Y Bond auction re-open (912810TF5)
- 1500ET: StL Fed Bullard economic outlook, no text, moderated Q&A
- 2105ET: StL Fed Bullard pre-recorded economic outlook, Credit Suisse conf
AUDUSD TECHS: Key Resistance Topped
- RES 4: 0.7556 High Oct 28 and a key resistance
- RES 3: 0.7532 High Nov 2, 2021
- RES 2: 0.7474 2.0% 10-dma envelope
- RES 1: 0.7448 High Mar 22
- PRICE: 0.7440 @ 17:07 GMT Mar 22
- SUP 1: 0.7290/43 20-day EMA / 50-day EMA
- SUP 2: 0.7165 Low Mar 15 and a key support
- SUP 3: 0.7095 Low Feb 24
- SUP 4: 0.7080 76.4% retracement of the Jan 28 - Mar 7 upleg
The near-term AUDUSD outlook strengthened further Tuesday, with the pair showing at new YTD and multi-month highs. The pair defined a key short-term support last week at 0.7165, the Mar 15 low. The strong reversal from this low signalled a potential resumption of the uptrend that started Jan 28 with moving averages also in a bull mode, highlighting an uptrend. Prices topped 0.7441, the Mar 7 high and bull trigger. This shifts sights to the Nov 2, 2021 high of 0.7532.
