SOFR: Mix Of Short Setting & Long Cover Seen In Most Futures On Tuesday

Goldman Sachs note that “long-end yields are marginally off the highs, but these higher rates are consistent with generalised weakness in 30-Year bond markets across the G4. Our spillover framework suggests that spillovers from the U.S., Germany and Japan are responsible for most of the move higher in UK yields since the end of June”.

• They go on to note that “this is corroborated by our ‘country risk’ measure, which has been benign for the UK over recent weeks. 30-Year gilts have also outperformed vs. other measures of duration risk”.
• Goldman view the “outperformance vs. peers as evidence that the improved macro outlook will stabilise markets and reduce volatility, and our macro valuation framework suggests UK yields are slightly elevated vs. macro factors”.
• They do not expect any concrete news on BoE QT this week.

• Bund and wider Treasuries are finding some buying interest, volumes in the 10s, 5s, and 2s part of the US Curve are quite impressive for this time of the Day, but to be expected given the huge moves in Bonds following the dire US NFP two Months Revisions.
• TYU5 found resistance right on the July high of 112.12+, printed a 112.12 high on Friday.
• A clear break through the latter, would see risk towards 112.23, May's high.
• Looking at Yield Terms for the 10yr, May's low is circa 4.12%, and this would equate to 112.28+ Today.
• USDJPY fades off the high on the back of the latest Govie flows.

• The USD is moderating early Monday, prompting the ICE USD Index to head into NY hours holding the bulk of the Friday pullback - but stopping short of any further weakness. The reaction seen since Friday's poor payrolls print (as well as Trump's subsequent firing of the head of the BLS) has held - keeping markets well priced for a more activist Fed later in 2025.
• Greenback consolidation has aided a bounce for GBP, keeping GBP/USD either side of the 1.33 handle and within range of 1.3345, the 100-dma. Despite this, the bearish theme in GBPUSD remains intact for now. Last week’s sell-off resulted in a breach of the bear trigger at 1.3365, the Jul 16 low. These levels could be of greater consequence later this week on the BoE rate decision. The MPC are uniformly expected to cut rates by 25bps, however the vote split among the board will be carefully watched.  
• The short-term bullish corrective phase in USDCAD remains in play despite sharp weakness Friday. On the recent run higher, price traded through the 50-day EMA at 1.3739 and this has been followed by a break of resistance at 1.3798, the Jun 23 high. A bullish trend condition in EURJPY remains intact and for now the recent move down is considered corrective. Key support to watch lies at the 50-day EMA at 169.17. A clear break of the EMA is required to highlight a stronger short-term bearish threat.
• Factory orders and durable goods orders are the scheduled highlights Monday. There are no scheduled Fed appearances today, however any comments or speculation will come under close scrutiny given Kugler's resignation over the weekend.