US TSYS: Marking Late Session Lows, Chair Powell's No Hurry Comment Settles In
- Treasury futures have gradually extended session lows since Chairman Powell left the podium. Powell said the Fed is paying close attention to a recent spike in some measures of inflation expectations. Powell reiterated the Fed can take its time before considering any further changes to interest rates as inflation is still above target and policy uncertainty out of Washington remains high.
- The Jun'25 10Y contract currently trades -9.5 at 110-16 - session low, with focus on technical support at 110-12.5/110-00 (Intraday low / High Feb 7); resistance above at 111-15 (Wed's high) followed by 112-01/02 (High Mar 4 / 1.382 proj of Jan 13-Feb 7-12 swing).
- Curves mildly flatter: 2s10s -0.674 at 30.848, 5s30s -0.768 at 51.433. As such, projected rate cuts through mid-2025 cooled significantly vs. morning levels (*) as follows: Mar'25 at -1bp (-2.7bp), May'25 at -9.4bp (-13bp), Jun'25 at -26.3bp (-31.1bp), Jul'25 at -37bp (-42.2bp). Dec'25 had priced in three 25bp cuts this morning now show -69.1bp.
- Cross asset update: stocks have recovered and posting modest late session gains (SPX Eminis +17.0 at 5763.0); Crude firmer but off highs (WTI +.63 at 66.99); Bbg US$ index off morning lows (BBDXY -1.22 at 1268.84).
- Reminder, The Federal Reserve enters policy Blackout at midnight tonight through March 20, the day after the next FOMC annc.
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EURGBP TECHS: Support Remains Exposed
- RES 4: 0.8474 High Jan 20 and a key resistance
- RES 3: 0.8421 High Jan 27
- RES 2: 0.8363/69 High Jan 3 / 20-day EMA
- RES 1: 0.8336 76.4% retracement of the Feb 3 high-low range
- PRICE: 0.8326 @ 16:03 GMT Feb 5
- SUP 1: 0.8248 Low Feb 3
- SUP 2: 0.8223 Low Dec 19 and a key support
- SUP 3: 0.8203 Low Mar 7 ‘22 and a lowest point of a multi-year range
- SUP 4: 0.8163 123.6% retracement of the Dec 19 - Jan 20 bull leg
EURGBP traded in a volatile manner on Monday and for now remains above this week’s low. The bear cycle that started Jan 20 is in play and Monday’s initial sell-off strengthens a bearish threat. A resumption of weakness would open the first key support at 0.8223, the Dec 19 low. On the upside, the 20-day EMA is seen as a key short-term resistance - at 0.8369. A breach of the average would be a bullish development.
US: FED Reverse Repo Operation: Second Consecutive New Low
RRP usage extends to new low of $78.788B this afternoon from $85.654B Tuesday. Today's usage compares to previous low of $92.863B on Monday, January 27 - the lowest level since mid-April 2021. The number of counterparties falls to 28 from 34 prior.
PIPELINE: Corporate Bond Issuance Update: $3.5B PepsiCo Launch, Waiting for IBM
Total $3.5B PepsiCo 4pt debt launched recently. Still waiting on IBM 5pt to launch. For comparison, IBM had issued $5.5B back in January 2024 covering 7 tranches: $600M 2Y +45, $500M 3Y +55, $500M 5Y +65, $500M 7Y +75, $1B 10Y +85, $1B 20Y +85, $1.4B 30Y +100
- Date $MM Issuer (Priced *, Launch #)
- 02/05 $5.5B #Republic of Poland $2.75B 5Y +75, $2.75B 10Y +105
- 02/05 $3.5B #PepsiCo $500M 2Y +22, $750M 3Y +27, $1B 5Y +40, $1.25B 10Y +60
- 02/05 $3B #UBS $1.5B PerpNC5.5 7%, $1.5B PerpNC10 7.125%
- 02/05 $2.5B #US Bancorp $1.3B 6NC5 +80, $1.2B 11NC10 +100
- 02/05 $2.5B #IDA 10Y SOFR+61
- 02/05 $2B #Citigroup PerpNC5 6.95%
- 02/05 $1B #Minera Mexico 7Y +140
- 02/05 $1B #Citadel Finance 5Y +170
- 02/05 $1B *KFW 4% 2026 TAP SOFR+20
- 02/05 $1B #BBVA Mexico 10NC5 7.625%
- 02/05 $500M #Healthpeak LLC 10Y +102
- 02/05 $Benchmark IBM 3Y +45, 5Y +60, 7Y +70, 10Y +80, 30Y +105
- 02/05 $Benchmark Pacific Life 5Y +80a
- 02/05 $2.5B Republic of Turkiye 7Y 7.2%
- Expected Thursday:
- 02/06 $Benchmark IFC 4.5Y SOFR+36a
