US TSYS: Broadly Consolidating Yesterday’s CPI-Induced Breach Of TYA Support
Jul-16 10:50
- Treasuries trade modestly twist flatter on the day although broadly speaking consolidate yesterday’s sell-off on the June CPI report with its signs of increased tariff passthrough.
- Treasuries outperform Gilts across the curve owing to stronger than expected UK CPI, whilst they underperform EGBs at the front end but track in line further out the curve.
- Cash yields are 0.7bp higher (2s) to 1.8bp lower (30s).
- The 10Y yield, currently at 4.473%, saw an overnight high of 4.493%, having last cleared 4.50% on Jun 11.
- TYU5 trades at 110-11+ (+ 02+) on solid cumulative volumes of 375k, albeit keeping to narrowing ranges of 110-08+ to 110-13+.
- It consolidates yesterday’s push lower to that 110-08+, seen multiple times since then, in a move that breached an important support at 110-17 (61.8% of May 22 – Jul 1 bull leg). It has also traded through trendline support at 110-23+, strengthening a bearish theme and opening 110-03 (76.4% retrace of the same bull leg).
- Data: MBA mortgage applications (0700ET), PPI Jun (0830ET), NY Fed services Jul (0830ET), IP/Cap util Jun (0915ET)
- Fedspeak: Barkin repeats speech (0830ET, text + Q&A), Hammack on community development (0915ET, text only), Gov. Barr on financial regulation (1000ET, text + Q&A), Beige Book (1400ET), Bostic on fox business network (1530ET), NY Fed's Williams on economic outlook and policy (1830ET, text + Q&A).
- Bill issuance: US Tsy to sell $65bn 17-W bills (1130ET)
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OPTIONS: Expiries for Jun16 NY cut 1000ET (Source DTCC)
Jun-16 10:47
- EUR/USD: $1.1400(E1.3bln), $1.1450-65(E2.0bln), $1.1500(E1.9bln), $1.1565-80(E1.6bln), $1.1600(E1.5bln), $1.1700(E4.6bln)
- USD/JPY: Y145.00($4.9bln)
- AUD/USD: $0.6503-05(A$500mln), $0.6560-63(A$1.0bln)
US TSYS: Post-Weekend Losses Held; G7 Talks and 20Y Supply Watched Near-Term
Jun-16 10:47
- Treasuries have pared losses but remain lower on the day as part of broader moves consistent with a slight easing in Israel-Iran escalation fears compared to levels heading into the weekend.
- Aside from G7 deliberations, today sees the first regional Fed manufacturing survey for June and we also note a rare Monday 20Y auction due to a compressed week ahead of the Juneteenth holiday.
- Last week saw some reasonable duration demand. The 10Y stopped through by 0.9bp albeit with the bid-to-cover slipping from 2.60x to 2.52x whilst the 30Y stopped through by 1.5bps and the bid-to-cover increased from 2.31x to 2.43x. Last month’s 20Y auction was weak however, tailing by 1.2bps.
- Cash yields are 1.5-3bp higher on the day, with increases led by 7s.
- TYU5 trades near unchanged at 110-19 (- 00+) off an earlier low of 110-10+, on reasonable overnight volumes of 305k.
- The earlier low didn’t trouble support at 109-28 (Jun 6/11 low) whilst resistance also remains intact for now, with 111-13 (Jun 13 high) before 111-14+ (Jun 5 high and 61.8% retrace of May 1-22 downleg).
- Data: Empire mfg Jun (0830ET)
- Coupon issuance: US Tsy $13B 20Y Bond auction re-open - 912810UL0 (1300ET)
- Bill issuance: US Tsy $76B 13W & $68B 26W bill auctions (1130ET)
- Tariffs: Handelsblatt reports that the EU Commission is prepared to accept a flat-rate US tariff of 10% as part of trade talks in hopes to avoid higher tariffs on autos, pharma products and electronics.
OUTLOOK: Price Signal Summary - Gold Trend Needle Points North
Jun-16 10:45
- On the commodity front, a bullish theme in Gold remains intact and this week’s gains reinforce current conditions. Medium-term trend signals are bullish too - moving average studies are in a bull-mode position, highlighting a dominant uptrend. Resistance at $3435.6, the May 7 high, has been pierced. A clear break of this level would strengthen the uptrend and open $3500.1, the Apr 22 all-time high. Initial key support to monitor is $3262.2, the 50-day EMA. The 20-day EMA is at 3335.5.
- In the oil space, WTI futures traded sharply higher last week and Friday’s early rally marked an acceleration of the current bull phase. Price action is likely to remain volatile and from a technical standpoint, the trend is currently in an extreme overbought position. A continuation higher would expose the $80.00 handle. A firm support is noted $68.49, the Jun 13 low. A breach of this level would signal scope for a deeper retracement.
