US TSYS: Challenger Sees Move Off Lows But Key TYA Support Still Exposed
- Treasuries have pared some of yesterday’s sizeable sell-off after a sharp increase in forward-looking Challenger job cut announcements went against yesterday's stronger than expected ADP and ISM Services readings.
- Today sees data focus on further labor indicators, heavy Fedspeak and government shutdown considerations after some recent optimism on a near-term re-opening yesterday.
- There could also be near-term spillover from an undecided BoE decision shortly at 1200ET.
- Cash yields are 1.5-2.8bp lower on the day, led lower by 3s.
- TYZ5 trades at 112-16 (+05+) on solid overnight volumes of over 400k.
- It lifts off yesterday’s low of 112-09+ but a key support remains exposed. It stopped just shy of support at 112-08+ (38.2% retrace of May-Oct upleg) with sights set on a reversal trigger at 112-06 (Sep 25 low and 100-dma).
- Data: Revelio labor statistics (0830ET), Chicago Fed labor indicators (0830ET), Dallas Fed weekly economic index (1130ET), NFIB small business jobs report (1300ET), State-level jobless claims (~1700ET)
- Fedspeak: Goolsbee, Williams, Barr, Hammack, Waller, Paulson and Musalem all speaking today – see our separate guide to it below.
- Bill issuance: US Tsy $110B 4W, $95B 8W bill auctions (1130ET)
- Politics: Trump makes an announcement (1100ET), Trump participates in multilateral meetings with Central Asian Countries (1800ET) before dinner (1900ET)
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PIPELINE: Corporate Bond Roundup: Bank of England 5Y on Tap
- Date $MM Issuer (Priced *, Launch #)
- 10/07 $Benchmark Bank of England 5Y +8a
- 10/07 $Benchmark CPPIB 3Y SOFR+39
- 10/07 $Benchmark Angola +5Y 9.75%a, 10Y 10.5%a
- 10/07 $Benchmark Türkiye Garanti Bankası 10.5NC5.5
- 10/07 $Benchmark JDC Dev Bank Kazakhstan +5Y, KZT 3Y investor calls
- Expected Wednesday
- 10/08 $1B Kommunalbanken Norway WNG 3Y SOFR+37
- $9.9B Priced Monday
EUROZONE DATA: Q2 Savings Rate Exceeds ECB Projections; France Drifting Higher
The ECB expects higher real disposable incomes and a gradually declining savings ratio to strengthen private consumption in the coming years. In Q2, the household savings rate was estimated at 15.4%, above the ECB’s 14.9% projection and up from 15.2% in Q1. While a slow-moving train, a persistently elevated savings ratio is a dovish input for the ECB’s reaction function, both cyclically (i.e. via lower household consumption outturns) and structurally (i.e. via a lower neutral rate). In the near-term, the case for another rate cut to 1.75% will probably need to be motivated by higher frequency data (e.g. PMIs, inflation), but developments in the savings rate may push against early expectations for a rate hike over the next few years (against a backdrop of higher German fiscal spending).
- Across countries, the savings ratio ticked lower in Germany (19.2% vs 19.3% in Q1, 20.1% in Q4 and 20.2% in Q3) and Spain (12.4% vs 12.8% in Q1). Meanwhile, increases were seen in Italy (12.3% vs 12.1% in Q1) and France (18.9% vs 18.6% prior).
- France has displayed the clearest upward drift in the savings rate in recent quarters, an unsurprising development given ongoing political and fiscal uncertainty. With ex-PM Lecornu’s resignation keeping these risks elevated, and more fiscal consolidation required as part of any budget compromise, it’s hard to envisage a meaningful reversal in this trend anytime soon.
- For comparison, the US savings rate of ~5% remains significantly below that of the Eurozone. That’s in fitting with historical precedent, but Eurozone consumers have had plenty of reasons to remain cautious post-covid (e.g. proximity of the Russia/Ukraine conflict and the related spike in energy prices).
- We wrote more on Eurozone consumption, the savings ratio and related ECBspeak a few weeks ago.
OPTIONS: Larger FX Option Pipeline
- EUR/USD: Oct08 $1.1700(E1.1bln), $1.1770-80(E1.2bln), $1.1800(E1.4bln), $1.1850-60(E1.0bln); Oct10 $1.1600(E1.3bln), $1.1650(E1.7bln), $1.1700(E1.6bln), $1.1740-50(E2.5bln), $1.1780-00(E2.8bln)
- USD/JPY: Oct08 Y146.50($1.2bln), Y147.00($1.5bln); Oct09 Y150.00-15($1.9bln)
