US TSYS: Extending Late Session Lows, Curves Bear Steepen Ahead Next Wed's FOMC
Dec-13 20:40
- Treasuries traded steadily lower throughout Friday's session, initially mirroring weak action in Bunds and Gilts. By the close, the Mar'25 10Y contract slipped to 109-26 (-18) the lowest level since November 22, 10Y yield rising to 4.4046% high (+.0768).
- Initial technical support at 109-22 (76.4% Nov 15 - Dec 6 Upleg) followed by 109-20 (Low Nov 20/21).
- Curves bear steepened: 2s10s +2.272 at 15.568 as short end rates outperformed ahead of next week's FOMC policy announcement where another 25bp rate cut was expected but not certain amid current macro and political uncertainty. That said, the latest unemployment and inflation data have kept the FOMC on track to cut the federal funds rate by 25bp (to 4.25-4.50%) next Wednesday.
- Projected rate cuts into early 2025 look near steady to lower vs. this morning levels (*) as follows: Dec'24 cumulative -24.3bp (-23.7bp), Jan'25 -28.6bp (-29.6bp), Mar'25 -42.2bp (-43.9bp), May'25 -48.4bp (-50.5bp).
- No reaction to this morning's import/export prices, Monday brings flash S&P Global PMIs, Retail Sales, IP & Cap-U on Tuesday.
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AUDUSD TECHS: Bear Trigger Remains Exposed
Nov-13 20:30
- RES 4: 0.6762 High Oct 9
- RES 3: 0.6727 50.0% retracement of the Sep 30 - Nov 6 bear leg
- RES 2: 0.6671/88 50-day EMA / High Nov 7
- RES 1: 0.6622 20-day EMA
- PRICE: 0.6485 @ 16:43 GMT Nov 13
- SUP 1: 0.6480 Low Nov 13 and the bear trigger
- SUP 2: 0.6508 Low Aug 8
- SUP 3: 0.6490 76.4% retracement of the Aug 5 - Sep 30 bull leg
- SUP 4: 0.6472 Low Aug 6
A bear cycle in AUDUSD remains intact and recent gains appear to have been a correction. The latest sell-off signals the end of the Nov 6 - 7 corrective bounce and attention is on key support and the bear trigger at 0.6513, the Nov 6 low. A breach of this support would confirm a resumption of the downtrend and open 0.6490, a Fibonacci retracement point. Firm resistance is at 0.6671, the 50-day EMA (pierced).
US TSYS: Curves Reverse Course After In-Line October CPI, Supercore Softer
Nov-13 20:28
- Treasuries reversed course early Wednesday as in-line October CPI inflation data rekindled dovish policy expectations into early 2025. Curves twisted steeper, 2s10s bouncing off early low of 5.586 to 16.573 (+8.254) in late trade.
- Tsy Dec'24 10Y futures are currently steady at 109-13.5 in late trade after initially climbing to 109-30.5 high this morning. Short end rates outperformed as projected rate cuts into early 2025 gained vs. early Wednesday levels (*) : Dec'24 cumulative -20.6bp (-15.5bp), Jan'25 -29.1bp (-23.0bp), Mar'25 -43.5bp (-35.1bp), May'25 -50.4bp (-41.3bp).
- Core CPI was exactly as expected at 0.35%, and basically unchanged from September (0.35%). However, supercore (core services ex housing) came in on the soft side at 0.31% vs 0.39% expected, 0.40% prior. While most of the contributions to PCE come from the CPI report, the bulk of the remainder (including healthcare services, airfares, and portfolio mgmt) will come from Thu's PPI report.
- More Fed speak: St. Louis Fed President Alberto Musalem said Wednesday he supports further interest rate cuts if inflation keeps falling, but added the risks that it doesn't have risen even as the labor market stays healthy.
- Dallas Fed Logan on said the central bank will most likely need more rate cuts to finish the journey to sustainably deliver both maximum employment and stable prices, but it’s difficult to be sure how many cuts may be needed and how soon they may need to happen.
US INFLATION: Regional Fed Metrics Show Incremental Disinflationary Progress
Nov-13 20:10
Regional Fed inflation metrics showed continued disinflationary progress for the most part following the October CPI release:
- Atlanta Fed Sticky CPI ("a weighted basket of items that change price relatively slowly") fell to 3.6% on an annualized basis (3.9% prior), with flexible prices ("a weighted basket of items that change price relatively frequently") negative for the 5th consecutive month (-1.4%).The 12-month sticky measure fell to the the lowest in October since December 2021, continuing its recent downside progress.
- The Cleveland Fed's median measures showed less no real progress though: Y/Y median came in at 4.09% (4.08% prior), with 16% trimmed mean at 3.20% (3.17% prior). The M/M median of 0.30% was very close to the core CPI reading of 0.28%, but marked a deceleration from a 0.34% median in September.
- Though these metrics continue to trend downward overall, they remain above levels seen pre-pandemic when inflation was at/below the 2% target.
