US TSYS: Extending Lows

Global energy cues have dominated for much of the day, with the pullback from highs allowing gilts to find a base during the latter rounds of London morning trade.

• Futures -17 at 84.01. Key support at the September 14 low (83.72) remains intact, albeit with bears in technical control.
• Yields 3-7bp higher, prior cycle highs untested across the curve.
• A reminder that weekend media reports aired a potential end of the pension triple lock mechanism in a bid to fund social care for the elderly.
• Elsewhere, PM Burnham stressed the country’s defence plan will be “fully funded”, while comments from BoE Deputy Governor Ramsden flagged some of the intricacies of the BoE’s QT scheme (in addition to outlining higher inflationary risk).
• 30-Year swap spreads are little changed on the day, suggesting no real shift in UK risk premia on the back of the above stories.
• BoE-dated OIS has stabilised around pricing ~100bp of tightening through June vs. recent hawkish extremes of 120+bp.
• Ongoing snippets from the Labour Party conference will be eyed for the remainder of the day, along with cross-market inputs

The far-right Rassemblement National (National Rally, RN) is set to form a formal group in the Senate for the first time in the party's history following indirect elections held on 27 September. The RN and its allies will hold at least 15 seats in the 348-member Senate, above the 10 seats required to form an official group. 

• This will entitle the RN and its allies to hold seats on the Conference of Presidents, which organises the chamber's work; receive an annual subsidy; be awarded more speaking time in debates, and gain seats on standing committees.
• Half of the Senate is up for election every three years, with senators serving a six-year term. The elections take place in constituencies based on the departments of France, with ~150,000 grands electueurs (mainly councillors and their appointed delegates) casting ballots. Due to the bias of rural over urban constituencies, conservatives have long dominated the Senate.
• The change in group sizes was relatively minimal. The gains for the far-right came largely at the expense of the conservative Republicans (down six) and the Radical Left group (down four).
• The far-left La France Insoumise (France Unbowed, LFI), led by Jean-Luc Mélenchon, won its first-ever seat in the Senate.
• Despite the losses, the Republicans remain the largest single group by a significant margin, with Senate President Gerard Larcher likely to retain his position.
• The result will not change the policy outlook for France. However, it will sustain momentum for the RN  ahead of a busy legislative season and next year's presidential election. 

• No obvious headline driver sees Tsys extending lows: TYZ6 104-12 (-15.5). Yield +.0925 at 5.2529%
• WTI crude is climbing higher again ($94.62/Bbl last)
• The recent sell-off has opened 104-10+ next, a Fibonacci projection, ahead of the 104-00 handle. Note that momentum studies - looking at the 14-day RSI, highlights an oversold trend condition.