US TSYS: Front-End Edges Lower In Quiet Session
Aug-22 04:18
The TYU5 range has been 111-15 to 111-20 during the Asia-Pacific session. It last changed hands at 111-18, up 0-00+ from the previous close.
- The US 2-year yield has edged lower trading around 3.783%, down 0.01 from its close.
- The US 10-year yield is trading around 4.325%.
- 10-Year Yields are still firmly within its wider 4.10%-4.65% range. The 4.35% pivot area continues to hold for now, the market will now be waiting for any clues from Powell's upcoming Jackson Hole speech.
- In the US, all eyes are on Jackson Hole. Known WSJ Fed Watcher Nick Timiraos has published an article titled, "Divisions Grow Inside Fed Ahead of Decision on September Rate Cut - WSJ via BBG". The article presents contrasting views on the Fed outlook, with Cleveland Fed President Beth Hammack stating: ""I see an inflation picture that is too high and rising, and moving in the wrong direction," while adding: " The labor market remains "reasonably good," she said, creating no reason to lower interest rates at the Sept. 16-17 policy meeting."
- Zerohedge on X: “UBS: "All eyes are on Fed Chair Powell’s speech at the Jackson Hole Symposium. While markets are hoping for forward guidance on rate cuts, there’s a growing sense that Powell may deliver a retrospective “exit” speech, potentially disappointing those looking for dovish signals."
- Otavio Costa on X: “The probability of rate cuts has already fallen by nearly 30 percentage points, yet still hovers around 70%. In my view, expectations are likely to shift further — from near-certainty of cuts to none at all. To be clear, this is not supportive for risk assets.”
Fig 1: 10-Year US Yield 2H Chart
Source: MNI - Market News/Bloomberg Finance L.P
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US TSYS: Asia Wrap - Yields Move Higher, Led By The Long-End
Jul-23 04:17
The TYU5 range has been 111-06 to 111-10+ during the Asia-Pacific session. It last changed hands at 111-07, down 0-06 from the previous close.
- The US 2-year yield has edged higher trading around 3.844%, up 0.01 from its close.
- The US 10-year yield has moved higher trading around 4.365%, up 0.02 from its close.
- The 10-year yield has moved back towards its pivot within the wider range 4.10% - 4.65%, expect supply around 4.30/35% first up. A close back below 4.30% would begin to get the bulls excited once more and the chopfest within the range will continue.
- Nick Timiraos on X: Goldman: "Market participants seem to agree that the risk to Fed independence is rising, as 5-year 5-year forward inflation swaps have recently decoupled higher from their prior close relationship with the 2-year note yield."
- Bloomberg - “Lawrence Summers backed Scott Bessent’s questioning of the Fed’s non-monetary policy activities, saying that there were some areas that are distinct from the broader issue of central bank independence.”
- Jeff Weniger on X: “Understand this and you'll be ahead of 99% of the public on official inflation dynamics. Similar to work by my WisdomTree colleague @JeremyDSchwartz, we see that the CPI for rent is still playing catch-up after the Covid money splash. The CPI reports of 2025 are overstating rent and will continue to do so until the catch-up is complete.” See Graph Below.
Data/Events: MBA Mortgage Applications, Existing Home Sales
Fig 1: CPI Vs CPI For Rent
Source: MNI/@JeffWeniger/Refinitiv
CHINA: Bond Futures Down Heavily in Morning Session
Jul-23 04:16
- China bond futures are down in the morning session with the 10-year having its largest one day fall since May.
- The 10-year is down -0.20 at 108.43 and has traded below all major moving averages which it had not done since late May.
- The PBOC withdrew liquidity during this morning's OMO marking three consecutive days of withdrawals.
- The 2-year future is also down, by -0.04 to 102.36 and remains below all major moving averages. The nearest being the 20-day EMA of 102.43.
- The 10YR CGB is higher by +1.5bp to 1.71%
GOLD: US-Japan Trade Deal Boosts Risk Appetite Weighing On Gold
Jul-23 04:12
Gold prices have trended moderately lower today following the conclusion of a trade deal between Japan and the US lifting optimism that others, especially the EU and China, may also be able to reach an agreement before August 1. Bullion had a strong start to the week rising almost 2.5% over Monday/Tuesday. Today it is down 0.2% to $3423.6/oz but off the intraday low of $3419.27 with the BBDXY USD index and US yields slightly higher.
- Gold continues to be supported by concerns over Fed independence.
- Silver is also lower at -0.1% to $39.25 after rising to $39.38 but off today’s low of $39.13. It was up almost 3% over Monday/Tuesday.
- US imports from Japan, including autos, will face a 15% tariff down from the 24% announced in April but higher than the current average below 5%. This lower rate is in exchange for $550bn of Japanese investment in the US.
- Treasury Secretary Bessent is scheduled to meet China officials in Stockholm next week with the aim of extending the current hold on tariffs.
- The US-Japan trade deal has driven an improvement in risk appetite with equities higher (Nikkei +3.2%, Hang Seng +1.1% & S&P e-mini +0.2%). Oil prices are higher with WTI +0.3% to $65.48/bbl and copper up 0.9%.
- Later June US existing home sales and preliminary July euro area consumer confidence print.
