EM LATAM CREDIT: Argentina: Obstacle to Budget Restraint - Negative

Futures-implied Fed funds rates were little changed Monday. Despite a decent move further down the curve (10Y yields -4bp), the short-end remained relatively anchored as the prevailing narrative remained of the FOMC maintaining its projected course of roughly 2 rate cuts by year-end (Dec pricing = 46bp, unch from Friday). There's about 100bp of cuts still priced through the next year.

• There's still understandably almost no chance of a July rate cut (under 4% priced) with the biggest drama probably being whether there are zero, one, or two dissents to a hold; the first cut i still not seen coming until October (28bp, unch).
• Last week's drama over whether President Trump would fire Fed Chair Powell in the near future appears to have abated - the White House reiterated today that Powell wouldn't be fired, and as MNI's Policy Team reported, "Federal Reserve Chair Jerome Powell would likely prevail in court and get to serve out his term even if President Donald Trump goes through with threats of firing him, former Fed lawyer Cornelius Hurley told MNI." (MNI INTERVIEW: Powell Would Win In Court If Trump Fires Him).
• We get Fed speakers Tuesday (Powell and Bowman) but they are not permitted to deliver monetary policy comment, rather appearing as part of a conference on banking regulation.

• RES 4: 1.3920 High May 21  
• RES 3: 1.3862 High May 29 
• RES 2: 1.3798 High Jun 23  
• RES 1: 1.3746/74 50-day EMA / High Jul 17 
• PRICE: 1.3687 @ 17:15 BST Jul 21
• SUP 1: 1.3639/3557 Low Jul 08 / 03
• SUP 2: 1.3540 Low Jun 16 and the bear trigger
• SUP 3: 1.3503 1.618 proj of the Feb 3 - 14 - Mar 4 price swing
• SUP 4: 1.3473 Low Oct 2 2024

USDCAD traded lower Monday, fading off recent highs. Nonetheless, attention is on resistance at 1.3746, the 50-day EMA. It has been pierced. A clear break of it is required to highlight a possible stronger S/T reversal. This would open 1.3798, Jun 23 high. For now, a bear trend remains in place. A resumption of weakness would refocus attention on key support at 1.3540, the Jun 16 low. Clearance of this level would confirm a resumption of the downtrend.  

The cash Treasury curve bull flattened Monday.

• Multiple factors helped cash Treasuries extend their rally into a 4th day, though a survey of multiple desks suggested a specific catalyst couldn't really be identified, with no tier 1 data or FOMC speakers (pre-meeting blackout period) on the docket.
• A decline in oil prices helped bring breakevens lower, with reports of a potential Russia-Ukraine meeting applying downside pressure.
• Some cited reports of potential trade tension between the US and EU ahead of the White House-imposed Aug 1 deadline for a deal. This appeared to boost EGBs in early trade, and later Treasuries may have benefited from a flight to quality, though the broader move couldn't quite be squared with the pickup in equities and the Euro.
• Additionally the Japanese House Of Councillors Election had a roughly as-expected outcome, helping global core FI in a relief rally (though we will know more when Japanese bond markets return from holiday).
• In the end it may have been a case of fading /profit taking of last week's curve steepening. Short-end yields remained relatively anchored ahead of the FOMC next week, with no change firmly expected.
• Latest levels: the 2-Yr yield is down 2.1bps at 3.8481%, 5-Yr is down 4.2bps at 3.9044%, 10-Yr is down 4.8bps at 4.3678%, and 30-Yr is down 5.1bps at 4.9368%. Sep 10-Yr futures (TY) up 13/32  at 111-06 (L: 110-24 / H: 111-9.5)
• Tuesday's data is largely second-tier, with Redbook retail sales, and Philadelphia and Richmond Fed regional activity surveys. Fed Chair Powell and Gov Bowman speak Tuesday but not on monetary policy - they are part of a regulatory conference ("Integrated Review of the Capital Framework for Large Banks Conference").
• The scheduled highlights come later in the week, starting with Thursday's jobless claims and PMI data.