US TSYS: Extending The Week’s Decline Ahead Of CPI Report
Dec-11 11:52
- Treasuries have modestly extended the week’s push lower today, following yesterday’s further round of long cover, amidst particularly low volumes ahead of today's CPI report.
- The recent sell-off has diluted the potential magnitude of reaction to a hawkish CPI print if driven by stickier items although there is likely still high sensitivity there. Consensus eyes what would be a fourth core CPI print around 0.3% M/M (unrounded 0.27/0.28%) for a sizeable acceleration, although surprises will depend on core PCE tracking with early estimates on average looking for 0.21% M/M which would leave a same four-month average around 0.225% M/M.
- MNI US CPI Preview: https://media.marketnews.com/USCPI_Prev_Dec2024_b72e14af0a.pdf
- Cash yields are 1-2bps higher with increases led by the front end.
- 2s10s has dipped to 7.8bps (-0.7bp) as it pulls back further from yesterday’s post-Bessent pick high of 9.9bps.
- TYH5 trades close to session lows of 110-27 (-05) on exceptionally low volumes of 170k. It’s just above yesterday’s low of 110-26 and with support is seen at 110-18 (Dec 4 low), but the recent bull cycle is seen in play with resistance at 111-20+ (Dec 6 high).
- Data: MBA mortgage data Dec 6 (0700ET), CPI Nov (0830ET), Real earnings Nov (0830ET), Federal budget balance Nov (1400ET)
- Note/bond issuance: US Tsy $39B 10Y Note re-open - 91282CLW9 (1300ET)
- Bill issuance: US Tsy $64B 17W Bill auction (1130ET)
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US TSYS: Veterans Day Holiday, FI Futures Drifting Lower, Focus on CPI/PPI
Nov-11 11:44
- No data Monday in observance of Veterans Day holiday. Cash FI markets closed but futures are open on Globex; NYSE and Nasdaq are open. Focus is on CPI and PPI inflation data this Wednesday and Thursday respectively.
- Treasury futures are currently trading weaker, lower half of narrow overnight ranges on modest volumes: Dec'24 10Y futures trade 110-00 last (-9) vs. 110-00 low on volume of just over 245,000.
- Initial technical support below at 109-07 (Low Nov 6 and the bear trigger) followed by 109-05 (76.4% retracement of the Apr - Sep bull cycle (cont)) and 109-00 round number support.
- Curves twisted fatter as short end rates underperformed Friday, Dec24 not fully pricing another 25bp cut: Projected rate cuts into early 2025 compared to late Friday levels (*): Dec'24 cumulative -17.1bp (-18.7bp), Jan'25 -25.7bp (-25.8bp), Mar'25 -38.9bp (-40.1bp), May'25 -46.9bp (-48.0bp).
- Cross market roundup: crude trades weaker (WTI -1.23 at 69.15, Gold -18.50 at 2,666.27, USD gaining - extending highs vs. EUR, GBP, ZAR, CHF, CNH, CAD, NOK and SEK.
US TSY FUTURES: OI Shows Exposure Building In Most Contracts On Friday
Nov-11 11:42
OI points to a mix of net short setting (TU & FV), long setting (TY, UXY & WN) and short cover (US) during Friday’s twist flattening of the curve.
- The establishment of fresh positions in the wings (TU & WN) dominated from a net DV01 equivalent perspective.
| 08-Nov-24 | 07-Nov-24 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 4,521,836 | 4,460,360 | +61,476 | +2,214,360 |
FV | 6,336,419 | 6,315,224 | +21,195 | +882,850 |
TY | 4,580,073 | 4,565,508 | +14,565 | +920,256 |
UXY | 2,205,897 | 2,195,213 | +10,684 | +935,730 |
US | 1,833,572 | 1,842,472 | -8,900 | -1,147,252 |
WN | 1,753,373 | 1,740,207 | +13,166 | +2,640,623 |
|
| Total | +112,186 | +6,446,567 |
OUTLOOK: Bear Threat In Oil Futures Remains Present
Nov-11 11:39
- On the commodity front, the trend condition in Gold is unchanged, it remains bullish and the latest pullback appears corrective. The yellow metal has cleared the 20-day EMA and this highlights potential for an extension of the corrective cycle. Attention is on a key support at $2647.4, the 50-day EMA. A clear break of this average would expose $2604.9, the Oct 8 low. For bulls a reversal higher would refocus attention on the bull trigger at $2790.1, the Oct 31 high.
- In the oil space, a bearish theme in WTI futures remains intact and the latest recovery, including last week’s gains, appear corrective. A stronger resumption of weakness would expose $65.99, the Oct 1 low, and $64.16, the Sep 10 low and key support. For bulls, a clear reversal higher would instead refocus attention on the key short-term resistance at $77.70, the Oct 8 high. Clearance of this level would resume the recent uptrend. Initial resistance is $72.88, the Nov 7 high.
