FED: Instant Answers: Powell-Shifting Risks May Warrant Adjusting Policy Stance
- Does Powell say a rate cut will likely be appropriate at "an upcoming meeting" or "soon"? NO. "With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance."
- Does Powell indicate that a larger (50bp) cut could be considered at the next FOMC meeting? NO
- Does Powell say policy is currently "well positioned to respond to developments" or "remains appropriate"? NO
- Does Powell indicate downside risks to employment have risen faster relative to risks to inflation? YES. "The balance of risks appears to be shifting."
- Does Powell describe labor market conditions as weaker than previous characterization (solid, broadly in balance, close to maximum employment)? YES. "Overall, while the labor market appears to be in balance, it is a curious kind of balance that results from a marked slowing in both the supply of and demand for workers. This unusual situation suggests that downside risks to employment are rising."
- Does Powell say the recent increase in inflation could prove more persistent? (must directly reference the recent inflation data)" NO
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US TSYS/SUPPLY: Preview 20Y Bond Auction Re-Open
Tsy futures remain weaker/near session lows (TYU5 at 111-04.5, -8.5) ahead of the $13B 20Y bond auction re-open (912810UL0) at 1300ET, WI is currently at 4.931%, 1.1bp rich to last month's (small) tail. Today's results will be available shortly after the competitive auctions closes at 1300ET.
- June auction recap: Treasury futures showed little reaction (TYU5 110-20.5, +1) after the $13B 20Y Bond auction re-open (912810UL0) drew a high yield of 4.942% vs 4.940% when-issued yield; 2.68x bid-to-cover vs. 2.46x prior.
- Peripheral stats: indirect take-up retreated to 66.74% vs. 69.02% prior; direct bidder take-up 19.88% from 14.07% prior; primary dealer take-up of 13.37% vs. 16.91% prior.
GILTS: Holding Lower & Steeper On The Day
Gilts trade back from session highs that were registered around midday London time, with the previously covered downtick in Tsys providing some light pressure in more recent trade.
- That came after a downtick in crude oil prices and solid demand at this morning’s gilt auction factored into a recovery from lows.
- The rally from low in futures failed to get anywhere near closing the opening gap lower, which has negated some of the recent bullish momentum.
- Contract last -48 at 91.64, with yesterday’s boundaries continuing to provide initial support and resistance.
- Intraday bear steepening theme intact, yields 3-6bp higher. 5s30s remains on track for a fresh cycle closing high, last ~143bp.
- Flash PMI data headlines the UK calendar on Thursday.
EQUITY TECHS: E-MINI S&P: (U5) Northbound
- RES 4: 6439.88 1.500 proj of the May 23 - Jun 11 - 23 price swing
- RES 3: 6402.44 1.382 proj of the May 23 - Jun 11 - 23 price swing
- RES 2: 6381.50 1.764 proj of the Apr 7 - 10 - 21 price swing
- RES 1: 6374.00 High Jul 21
- PRICE: 6366.00 @ 14:31 BST Jul 23
- SUP 1: 6288.25 Low Jul 17
- SUP 2: 6264.70/6120.59 20- and 50-day EMA values
- SUP 3: 6075.25 Low Jun 24
- SUP 4: 5959.00 Low Jun 23
S&P E-Minis have traded to a fresh cycle high this week. The climb confirms a resumption of the uptrend and maintains the price sequence of higher highs and higher lows. Note that moving average studies are in a bull-mode position highlighting a clear dominant uptrend. Sights are on 6381.50, a Fibonacci projection. Key support is at the 50-day EMA, at 6120.59. Support at the 20-day EMA is at 6264.70.
