US TSYS: Iran/Israel Ceasefire Holding, Fed Keeps Rate Cut Door Ajar
- US Treasuries look to finish at/near late Tuesday session highs - support twofold: risk sentiment improved as Israel/Iran hostilities appeared to de-escalate (ceasefire pledges watched closely after some morning confusion over timing).
- Secondary: Fed Chairman Powell's policy testimony to the House this morning - while maintaining patient stance regarding rate cuts, Chair Powell conceded he could see inflation not coming in "as strong as expected", however, "inflation is projected to have moved higher due to tariffs". Meanwhile, a "majority" feel it's appropriate to cut interest rates later this year.
- Projected rate cut pricing largely gaining vs. morning levels (*): Jul'25 at -4.7bp (-5.7bp), Sep'25 at -25.3bp (-24.2bp), Oct'25 at -41.2bp (-39.7bp), Dec'25 at -59.6bp (-56.6bp).
- On data, The Philly Fed non-manufacturing survey saw firms dial back particularly negative views on the regional economy to one closer to their own experiences. The Johnson Redbook retail sales index rose by 4.5% Y/Y in the week ending Jun 21, a slowdown from 5.2% the prior week and bringing month-to-date June sales gains to 4.8% Y/Y (vs a 5.7% gain targeted by retailers).
- Greenback weakness will likely have been bolstered by cleaner short-term positioning, weaker-than-expected US consumer confidence and Fed Chair Powell not ruling out the chance of an FOMC rate cut as soon as July.
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JGB TECHS: (M5) Rallies off Lows
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 141.48/142.95 - High May 2 / High Apr 7
- PRICE: 139.40 @ 15:42 GMT May 23
- SUP 1: 138.54 - Low May 22
- SUP 2: 136.57 - 1.382 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
- SUP 3: 134.89 - 2.000 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
JGBs have rallied off recent lows and for now, however a bearish theme remains intact following the reversal that started Apr 7. A continuation lower would signal scope for an extension towards 136.57, a Fibonacci projection. On the upside, a reversal higher would instead refocus attention on 142.95, the Apr 7 high. The first important resistance to watch is 141.48, the May 2 high. A break of this level would be viewed as an early bullish signal.
US FISCAL: Total Tariff Income Jumping In May As New Rates Hit
Treasury reported a record $16.5B in customs/excise taxes on May 22, reflecting the large increase in tariff rates that went into effect in April.
- Today's report is important because it represents the largest tariff collections of the month which are typically on a due date around the 22nd, when most corporate importers make their payments.
- Thursday's one-day collection is a record, and the month has already set a new record. Tariff revenues have totaled $22.3B so far in May, and are came in at $17.4B in April (after averaging $8.1B/month in 2024).
- For the fiscal year as a whole so far, customs duties have totaled just under $93B, per the Treasury Daily Statement.
US FISCAL: Extraordinary Measures Continue To Dissipate Alongside Treasury Cash
Treasury's latest estimate of the size of "extraordinary measures" available to use "in order to prevent the United States from defaulting on its obligations as Congress deliberate[s] on increasing the debt limit" is down to $67B on May 21 (of an available $299B), vs $82B a week earlier.
- The amount hit the 2nd lowest level since the debt limit impasse started, at $46B, on May 20 (the low was $34B on Feb 24).
- With $476B in cash in the Treasury General Account on May 21, that left the total resources available to Treasury at $543B, the least since April 14 - the day before the annual April 15 tax deadline.
- Treasury Sec Bessent warned Congress earlier this month that "there is a reasonable probability that the federal government's cash and extraordinary measures will be exhausted in August while Congress is scheduled to be in recess. Therefore, I respectfully urge Congress to increase or suspend the debt limit by mid-July".
