OIL: China’s Oil Stocks Begin Drawing: Kpler
Oct-01 17:18
China's oil stocks are more likely to draw by year-end, rather than continue building, Kpler said. ...
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US TSYS: Mildly Cheaper At The Labor Day Early Close
Sep-01 17:07
- Treasury futures dealt mildly cheaper at the early close for Labor Day after an unsurprisingly quiet session. There was no cash trading due to the holiday.
- Sell-off cues were taken from some mild weakness in EGBs on supply grounds.
- TYZ5 at 112-11+ (-04+) on cumulative volumes of 208k. An earlier low of 112-09+ saw lows since Aug 27, but as opposed to some support clearance in EGBs it didn’t come close to troubling support at 111-31 (20-day EMA).
- Technicals suggest the trend structure remains bullish with resistance at 112-20+ (Aug 28 high).
- At the front end, Fed Funds futures were mixed for near-term meetings, with Sept cut pricing building very slightly to 22.5bp priced vs a 0.5bp trimming for Dec with a cumulative 55.5bp.
- SOFR futures implied yields were up to 2.5bp higher from Friday’s close, with increases led by the SFRH7 which continues to see a terminal yield of sub-3% at 2.97% for ~135bp of cuts from current levels.
- President Trump’s Truth Social activity has also been light so far today, saying India’s offer to cut tariff rates to zero is getting late, hinting at pushes to tackle crime in Chicago, LA, NY and Baltimore and pushing “Pfizer and others” to show Covid drug success.
- US Tsy Sec Bessent meanwhile suggests that Trump may declare a “national housing emergency” this fall to address rising house prices, something last seen in 2008.
- Tomorrow is headlined by ISM mfg for August before labor data starts to take over in the usual build-up to the nonfarm payrolls report for August on Friday.
FOREX: USD Index Tilts Modestly Lower, GBPJPY Rises 0.4%
Sep-01 16:59
- Early price action on Monday saw the USD index fall to a fresh one-month low of 97.54, briefly printing below the post Jackson Hole lows from Sep 22. This continues the theme from late last week where broadly resilient major equity benchmarks have allowed risk sentiment to stabilise, keeping the short-term path of least resistance lower for the US dollar.
- As expected, currency market momentum was lacking, owing to the US Labor Day holiday and the associated dampened liquidity and volumes. This helped the dollar off its worst levels as we approach the APAC crossover.
- Scandinavian FX performed strongly to start the week, clearly outperforming across the G10. USDSEK (-0.67) traded down to a fresh 3-year low of 9.3796 ahead of Thursday’s key inflation data. In similar vein, USDNOK (-0.66%) exhibited similar weakness but remains well shy of the 9.86 lows posted in June.
- Among the majors, GBPUSD rose 0.3% to edge back towards 1.3550. The moves come amid UK Prime Minister Keir Starmer announcing changes to his team to reset his government and give him more influence over economic policy. This helped propel GBPJPY back to 199.50, approaching a key psychological barrier of 200, which has provided pivotal significance over the last year.
- EURUSD had an early leg higher to 1.1736 but remained short of initial resistance at 1.1743 (Sep 22 high). Since then, the pair has edged back to the 1.17 mark as markets await the plethora of US data due this week, which culminates with the US employment report Friday. Key EURUSD resistance and the bull trigger remain at 1.1829, the Jul 1 high. Eurozone inflation data is scheduled tomorrow.
- The Japanese yen bucks the trend very slightly, weaker over the session and USDJPY back at 147.25. Overall, a bear threat in USDJPY remains present and the short-term bear trigger lies at 146.21, the Aug 14 low. US ISM manufacturing PMI data is due Tuesday.
EGBS: -GILTS CASH CLOSE: Modest Pressure From Supply Sees Supports Tested
Sep-01 16:49
- Main EGB 10Y yields closed between 2.1-2.5bp higher today, extending Friday’s modest sell-off.
- OATs marginally led today’s sell-off, with fiscal uncertainty still weighing but OAT-Bund spreads at 79bps (just +0.2bp on the day) off last week’s highs of ~82.6bps.
- French PM Bayrou over the weekend looked to gain support ahead of the Sept. 8 confidence vote but acknowledged that talks with political parties may fail to save his government.
- BTPs meanwhile clawed back some of their earlier underperformance, having led losses into the mandate announcement for the dual 7- & 30-Year BTP syndication.
- Closing the gap, BTPs closed 0.1bp tighter vs Bunds (85.8bps). The syndication was well within the realm of possibilities, as outlined in our daily/weekly issuance documents, explaining the lack of meaningful subsequent market move.
- RXU5 trades at 129.26 (-29) off earlier lows of 129.07 that probed support at 129.15 (Aug 26 low), potentially opening a test of the bear trigger at 128.64 (Aug 15 low).
- Bear steepening seen on the German curve, with yields 1.1-2.2bp higher. 5s30s saw a fresh cycle closing high of 108.6bps. The March '19 high (111.78bp) presents the next upside target of note.
- This week's uptick in EGB supply, and the impending pricing of the EFSF syndication, provide headwinds for regional bonds.
- Gilts led losses in European hours meanwhile, with 10Y yields closing +3bps.
- Slightly softer-than-flash final manufacturing PMI data did little for the market, but probably helped prevent a breach of early London lows.
- Futures last -26 at 90.26 off lows of 90.20 (both early on and again at 1612BST), breaching initial support (90.22) but leaving key support at late May lows (90.11) untested. Bears remain in technical control.
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