FED: Beige Book: Economic Activity Dynamics Mixed (1/3)

The February Refunding round starts at 1500ET today with the US Treasury’s update on financing requirements for the current (Jan-Mar) and next (Apr-Jun) quarters, at which is expected to largely maintain its borrowing projections for the current quarter.

• MNI’s expectations are in the table below. We would say that risks to our estimates are largely to the downside, i.e. Treasury expects to borrow/finance less than we have penciled in.
• Oct-Dec marketable borrowing will have been around $600B, not far from the original $569B estimate made in the November refunding round, and that is set to fall to around $575B in the Jan-Mar quarter (basically unchanged from the previous estimate; we’ve seen estimates ranging from $450-650B).
• The April-June quarter sees the lowest borrowing of the year as usual, which we estimate to come in at $75B (we’ve seen ranges from slightly negative, to over $200B).
• These figures assume that Treasury continues to target a $850B end-quarter TGA cash pile.
• Below are some sell-side expectations.
• CIBC: $640B borrowing requirement Jan-Mar, $96B Apr-Jun (assuming $850B end-quarter TGA).
• Deutsche: Net borrowing of $555B in Jan-Mar, $25B in Apr-Jun (assuming $850B cash end quarter TGA).
• Goldman Sachs: marketable borrowing of $640bn for Q1. Assuming a $850bn TGA target, for Q2 expect marketable borrowing of $290bn
• JPMorgan: $498B in marketable borrowing in Q1, $102B in Q2, assuming $850B TGA
• TD: $561bn in marketable borrowing for Q1 and $19bn in Q2. We assume a TGA target at $850bn for both quarters.
• Wells Fargo: Marketable borrowing $609B in Q1, $228B in Q2

RRP usage inches up to $10.415B with 8 counterparties this afternoon vs. $9.629B Friday. Compares to December 12 low of $0.838B (lowest level since mid-March 2021); this years highest excess liquidity measure: $460.731B on June 30.

• RES 4: 0.8813 76.4% retracement of the Nov 14 - Jan 6 bear leg   
• RES 3: 0.8797 High Dec 17   
• RES 2: 0.8781 61.8% retracement of the Nov 14 - Jan 6 bear leg
• RES 1: 0.8708/46 50-day EMA / High Dec 31 & Jan 21
• PRICE: 0.8650 @ 16:11 GMT Feb 2
• SUP 1: 0.8644 Low Jan 6 and the bear trigger
• SUP 2: 0.8633 Low Sep 15
• SUP 3: 0.8620 38.2% retracement of the Dec ‘24 - Nov ‘25 bull cycle 
• SUP 4: 0.8597 Low Aug 14

EURGBP is trading closer to its recent lows. A bear threat remains intact and recent weakness signals the end of a corrective phase between Jan 6 - 21. MA studies are in a bear-mode set-up and this highlights a dominant bear cycle. Key support and the bear trigger lies at 0.8644, the Jan 6 low. A break of this level would confirm a resumption of the trend and open 0.8620, a Fibonacci retracement. Key resistance is 0.8746, the Jan 21 high.