PERU: BCRP Buys Further $51mn In Spot Market

Treasury's quarterly Refunding process begins with this afternoon's release (1500ET) of the financing/borrowing estimates for the current and next calendar quarters.

• After borrowing $1T (est) in Jul-Sep in large part to fund the post-debt limit TGA cash rebuild, we anticipate a fairly steady outlook for the Oct-Dec quarter vs Treasury’s August financing estimates.
• MNI pencils in a higher financing need in the current quarter (around $575B vs $494B estimated in the Aug refunding round, and an estimated $450B in the Jul-Sep quarter).
• However, this won’t result In much of a discernable change in expected marketable borrowing (roughly $625B vs $590B in August refunding ests). This is because we assume Treasury will maintain its $850B end-quarter TGA cash target, which implies $41B in cash drawdown -rather than new net borrowing - to meet the financing need.
• The current TGA level is $1T. It’s possible Treasury increases the end-quarter cash target to $900B or even $950B, which would upwardly impact the marketable borrowing requirement proportionally.

• RES 4: 1.3527 High Oct 1     
• RES 3: 1.3471 High Oct 17 and a key short-term resistance    
• RES 2: 1.3393 50-day EMA
• RES 1: 1.3249/3322 Low Oct 14 / 20-day EMA 
• PRICE: 1.3145 @ 16:25 GMT Nov 3
• SUP 1: 1.3097 Low Oct 31
• SUP 2: 1.3041 Low Apr 14
• SUP 3: 1.2971 1.382 proj of the Sep 17 - 25 - Oct 1 price swing
• SUP 4: 1.2945 50.0% retracement of the Jan 13 - Jul 1 bull leg           

A bear cycle in GBPUSD remains intact and last week’s impulsive sell-off strengthens current conditions. The pair has breached key support at 1.3142, the Aug 1 low. The break confirms a resumption of the downtrend that started Sep 17. Sights are on 1.3041 next, the Apr 14 low. Initial firm resistance is 1.3322, the 20-day EMA.  Note that the trend is in oversold territory, a recovery would allow this condition to unwind.               

RRP usage retreats to $23.792B with 18 counterparties going into month end - from $51.802B Friday. Compares to $2.435B on October 24 (lowest level since mid-March 2021) and the year's highest usage of $460.731B on June 30.