US TSYS: A Little Richer In Asia
Tsys richened overnight, with desks flagging an apparent regional interest in fading Thursday’s cheapening & steepening given the lack of overt game changing drivers evident yesterday (with position squaring and block flow-driven moves evident in NY hours, as well 30-Year auction concession/reaction).
- Upside options expressions in the form of FVU2 113.00 & TYU2 119.50 calls aided the direction of travel, as did a couple of rounds of screen lifts in TY futures.
- That leaves TYU2 printing +0-05 at 119-08 ahead of London hours, 0-03 off the peak of its 0-12 Asia-Pac range, although volume isn’t particularly firm, running at ~80K lots.
- Cash Tsys sit 1.5-3.5bp richer across the curve, with 20s leading the rally.
- San Francisco Fed President Daly (’24 voter) reiterated her baseline view of a 50bp hike at the September FOMC, although she once again failed to rule out the idea of a 75bp rate hike, stressing the data-dependent nature of monetary policy alongside a need to assess the inflation and labour market data that will cross between now and then.
- Looking ahead, NY hours will see the latest round of UoM sentiment data (with the inflation expectation components eyed) and Fedspeak from Richmond Fed President Barkin (’24 voter).
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GILT TECHS: (U2) Trend Needle Still Points North
- RES 4: 118.63 High May 24
- RES 3: 118.16 1.382 proj of the Jun 16 - 24- 29 price swing
- RES 2: 117.48 1.236 proj of the Jun 16 - 24- 29 price swing
- RES 1: 117.09 High Jul 6 and the bull trigger
- PRICE: 116.05 @ Close Jul 12
- SUP 1: 114.08/113.03 Low Jul 8 / Low Jun 30
- SUP 2: 111.72 Low Jun 29 and key near-term support
- SUP 3: 110.57 Low Jun 21
- SUP 4: 109.89 Low Jun 16 and the bear trigger
The short-term outlook in Gilt futures is unchanged and remains bullish. The latest pullback is considered corrective. Recent gains confirmed a resumption of the bull cycle that started Jun 16 - price has cleared resistance at 114.55, the Jun 24 high. A resumption of gains would open 117.48 next, a Fibonacci projection. On the downside, key short-term support has been defined at 111.72, the Jun 29 low. A break of this level would be bearish.
US TSY OPTIONS: FVU2 112.75 Calls Blocked
Latest block trade lodged at 05:33:00 London/00:33:00 NY:
- FVU2 112.75 calls 5.0K lots blocked at 0-55, looks like a buyer. Delta +43%.
- Fourth block buy of that size on the day.
SCHATZ TECHS: (U2) Short-Term Bull Cycle Still In Play
- RES 4: 110.412 1.382 proj of the May 16 - 24 - 28 price swing
- RES 3: 110.256 1.382 proj of the May 16 - 24 - 28 price swing
- RES 2: 110.063 1.236 proj of the May 16 - 24 - 28 price swing
- RES 1: 110.005 High Jul 6 and the bull trigger
- PRICE: 109.805 @ 05:28 BST Jul 13
- SUP 1: 109.219 20-day EMA
- SUP 2: 108.760/425 Low Jun 30 / Low Jun 28 and a key support
- SUP 3: 108.025 Low Jun 21
- SUP 4: 107.705 Low Jun 16 and the bear trigger
Short-term trend conditions in Schatz futures are unchanged and the outlook is bullish. Resistance at 109.030, Jun 24 high, has recently been cleared. This marked an extension of a corrective cycle and price has established a bullish sequence of higher highs and higher lows. Scope is seen for a climb towards 110.063, a Fibonacci projection. On the downside, key short-term support has been defined at 108.425, the Jun 28 low.
