AUSSIE BONDS: Bull Flattening
Aussie bonds have backed away from early session highs as the richening impetus from Friday’s move in longer dated U.S. Tsys has moderated (cash Tsys sit marginally cheaper vs. early levels), with little by way of notable macro headline drivers observed. Cash ACGBs run flat to 4.5bp richer across the curve, bull flattening. YM is unchanged, back from best levels after failing to better its overnight high, while XM is +4.0, back from a brief look above its own overnight peak. Bills run flat to 4 ticks cheaper through the reds.
- Aussie bonds blipped higher initially on the release of Japanese GDP that broadly missed expectations (amidst marginal upward revisions to June’s print), but ultimately failed to record anything in the way of a meaningful, lasting move.
- Chinese economic activity data is due in just over an hour (retail sales, industrial production etc.) and may provide a point of interest for Sydney participants amidst a lack of domestic data releases, with focus expected to quickly turn to the release of the RBA’s August meeting minutes tomorrow.
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USDCAD TECHS: Fresh YTD High
- RES 4: 1.3300 High Nov 4 2020
- RES 3: 1.3247 2.0% 10-dma envelope
- RES 2: 1.3224 High Jul 14
- RES 1: 1.3166 3.0% Upper Bollinger Band
- PRICE: 1.3029 @ 16:43 BST Jul 15
- SUP 1: 1.2936/32 Low Jul 8
- SUP 2: 1.2868 50-day EMA
- SUP 3: 1.2819 Low Jun 28 and key support
- SUP 4: 1.2763 Low Jun 13
USDCAD surged Thursday and in the process confirmed a clear break of resistance at 1.3084, the Jul 5 high. The break confirms a resumption of the primary uptrend, paving the way for gains towards a vol band based resistance of 1.3247 and the 1.3300 handle further out. Moving average studies remain a bull mode condition, reinforcing the current positive outlook. Key support has been defined at 1.2936, the Jul 8 low.
US: Late Corporate Credit Update: Near Lows for Week
Investment-grade corporate credit risk cooled Friday, near session lows as stocks looked to finish near highs. Risk appetite improved as Atlanta Fed Bostic, SF Fed Daly helped temper the hawkish post-CPI rhetoric. SPX eminis currently trading +64.5 (1.7%) at 3858.25; DJIA +589.96 (1.93%) at 31224.49; Nasdaq +171.9 (1.5%) at 11424.61.
- Investment grade risk measured by Markit's CDXIG5 index -3.666 to 91.022; CDXHY5 high yield index at 98.699 (+0.895).
- Outperforming credit sectors (tighter or least wide): Communications (-2.7) Consumer Staples and Health Care both -2.5.
- Lagging sectors (wider or least narrow): Materials (-0.8), Industrials, Utilities and Energy all -1.9.
US TSYS: Fed Speak Tempers Hawkish Pricing Ahead Blackout
Tsys trading moderately higher, inside session range as Fed speak appeared to move markets more than economic data. Reminder: Fed enter policy blackout at midnight tonight.
- Tsys reversed early pre-data gains on slightly better than expected June Retail Sales +1.0% MoM vs. 0.9% est, Sales Ex-autos +1.0% MoM vs. 0.7% est. Down-revisions to control group (-0.3% for May vs. 0.0% prior) spurred rebound with futures back to pre-data levels. Overlooked: lower-than-expected import price numbers, including an 0.4% drop in M/M ex-petroleum import prices, the 2nd consecutive contraction. The stronger dollar is starting to feed through into lower import prices
- Fed Speak delivered brief real vol as mkts extended session ranges. Rates moved higher as Atlanta Fed Bostic walked back post-CPI comments that "everything is in play for future policy decisions" that helped spur the 100bp, saying today that the Fed wants "orderly" policy transition, that moving "too drastically" would undermine economy.
- Rates sold off after StL Fed Bullard lived up to his hawk status saying he would not rule out the possibility of 100bp hike at next FOMC, seeing little difference now between 75 and 100bp.
- SF Fed Daly helped temper the hawkish rhetoric as rates pared gains stating she is already "seeing signs inflation is slowing", while concern over recession not high on her list of outcomes.
- Currently, 2-Yr yield is down 0.2bps at 3.1305%, 5-Yr is down 1.2bps at 3.0529%, 10-Yr is down 3.1bps at 2.9281%, and 30-Yr is down 1.4bps at 3.09%.
