US TSYS: 10Y Yields Probe 4.00% In Broad Have Demand
Oct-14 11:06
- Treasuries trade firmer across the curve in further reaction to US-China trade tensions which continued overnight.
- Headlines confirmed that China were ratcheting higher their controls on rare earth exports. On a related note from the WSJ: “People close to the Trump administration say the U.S. side likely will demand that China rescind, not merely delay or water down the rare-earth export rule”.
- Cash trading has resumed after yesterday’s Columbus Day holiday although futures saw a full session.
- Today sees early focus on earnings before Powell’s economic update headlines the session, whilst markets will firmly be on headline watch for US-China trade prospects. Note also the holiday-compressed bill issuance calendar.
- A solid earnings schedule is being digested, with recent results from Blackrock, JPMorgan, Wells Fargo leading financials plus Johnson & Johnson. GS (expected 0730ET) and Citi (expected 0800ET) are still to come.
- Cash yields are 2-4bp lower, with 3s leading declines and 20s lagging.
- 10Y yields currently at 4.003% (-2.9bp) have seen support at 4.00%, briefly hitting 3.9976% having last been sub 4% briefly on Sep 17 and Sep 11. 10Y yields were last more materially sub-4% in early April under reciprocal tariff deliberations.
- TYZ5 trades at 113-16 (+11) on strong cumulative volumes of 550k.
- An earlier high of 113-17+ sits as the latest initial resistance level, building on Friday’s clearance of 113-00 as it increasingly looks to the bull trigger at 113-29 (Sep 11 high). Support meanwhile is seen at 112-15 (50-day EMA).
- Data: NFIB for Sept already published, Weekly Redbook retail sales (0855ET)
- Fedspeak: Bowman (0845ET), Powell (1220ET), Waller (1525ET), Collins (2030ET), Goolsbee (time unknown)
- Bill issuance: US Tsy $86B 13W & $77B 26W bill auctions (1130ET), $95B 6W bill auction (1300ET)
- Politics: Trump in bilateral lunch with Argentina President (1315ET), Trump in Charlie Kirk ceremony (1600ET)
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AUSSIE 3-YEAR TECHS: (U5) Bounces Further Off Support
Sep-12 21:45
- RES 3: 97.190 - High May 5 2023
- RES 2: 96.932 - 76.4% of Mar-Nov ‘23 bear leg
- RES 1: 96.860 - High Apr 07
- PRICE: 96.550 @ 15:36 BST Sep 12
- SUP 1: 96.430/95.900 - Low Sep 3 / Low Jan 14
- SUP 2: 95.760 - Low 14 Nov ‘24
- SUP 3: 95.480 - Low Jan 11 2023 and a major support
Aussie 3-yr futures are trading off recent lows. A resumption of gains from here would further narrow the gap with resistance at 96.730, the Sep 17 ‘24 high, leaving 96.860 as the next key level. Any continuation lower would instead strengthen a bearish threat. This would refocus attention on 95.760, the 14 Nov ‘24 low. Conversely, a reversal higher would open 96.860, the Apr 7 high.
FED: MNI Fed Preview-September 2025: A Reluctant Return To Easing
Sep-12 21:16
We've published our preview of the upcoming FOMC meeting - Download Full Report Here
- The Federal Reserve is set to resume its easing cycle at the September 16-17 meeting with a 25bp cut to the funds rate range to 4.00-4.25%.
- The decision to cut after a 5-meeting pause was well-telegraphed by Chair Powell, whose Jackson Hole speech described a “shifting balance of risks” toward a weaker labor market that “may warrant adjusting our policy stance”.
- The updated quarterly projections aren’t likely to bring many changes to the macroeconomic variables, but as usual the signal sent from the Fed rate “Dot Plot” will garner attention. A Committee split between expecting one or two further cuts this year is likely, keeping each of the remaining meetings of 2025 “live”.
- The Statement will downgrade the description of the labor market to reflect a rise in the unemployment rate and poor payrolls growth, and is likely to include at least one dissent to the rate decision.
- But with a Committee that is fairly divided on the way forward, Powell will be noncommittal on future action, reiterating that policy is not on a preset course, and upcoming decisions will be data-dependent.
- A key undercurrent is an increasingly activist approach to Fed personnel management from the White House, which leaves the composition of the FOMC uncertain not just over the medium-term but also at this meeting.
MNI’s separate preview of sell-side analyst summaries to follow on Monday Sep 15
RATINGS: Fitch: France Cut To A+ From AA, Portugal Up To A From A-
Sep-12 21:07
Fitch has downgraded France's sovereign rating to A+ (with stable outlook) from AA-. Release here.
- Among other factors in the decision, Fitch cites "High and Rising Debt Ratio", "Political Fragmentation Hinders Consolidation", "Weak Fiscal Record", "High 2025 Deficit", "Uncertain Fiscal Consolidation Path", and "Fiscal Rigidities".
- In "Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade", Fitch cites "Public Finances: A sustained increase in government debt/GDP over the medium term, due to failure to implement fiscal consolidation measures and/or a persistent increase in financing costs" and "Macro: Materially lower economic growth prospects and weakened competitiveness." Conversely, potentially leading to positive ratings action would be "Public Finances: Confidence that government debt/GDP will be put on a downward trajectory over the medium term, for example, due to fiscal consolidation and/or stronger economic growth".
- Fitch also raised Portugal to A (stable outlook) from A-, while elsewhere, S&P raised Spain to A+ (stable outlook) from A.
- As MNI wrote earlier, we expected France to be downgraded to A+ and Portugal to be upgraded to A.
