MNI ASIA OPEN: Atl Fed Bostic Sees More Cuts in 2025

US

FED (MNI): Bostic Penciled in Four Cuts For 2025 After Single 2024 Cut
Atlanta Fed’s Bostic (’24 voter) said in an unscheduled release of his quarterly essay that he is keeping to his expectation for one rate cut this year. He then told reporters that he penciled in four cuts for 2025 (from Bloomberg headlines), which puts me consistent with the median FOMC participant from the June SEP. From the prepared remarks (in full here):

• "Taking all the circumstances into account, I continue to believe conditions will likely call for a cut in the federal funds rate in the fourth quarter of this year.”
• Flexible data dependence at the fore: “Still, the pandemic years have brought many surprises, and so I’m not locked in to any particular policy path. There are plausible scenarios in which more cuts, no cuts, or even a raise could be appropriate. I will let the data and conditions on the ground be my guide."

NEWS

US (MNI): Nate Silver's Election Forecast Bullish On Trump
Highly regarded elections analyst, Nate Silver, has released his anticipated 2024 presidential election model, forecasting former President Donald Trump a 66% implied probability of winning the presidential election in November. Silver's model is notably more bullish than the new model created by his former firm 538, which favours Biden on fundamentals like the economy, and rates the race a toss-up.

FRANCE (MNI): Little Change In Latest Ifop Poll, RN Lead But Short Of Majority:
The latest in Ifop's rolling daily opinion poll shows little change on yesterday's numbers. The right-wing nationalist Rassemblement National (RN) lead with 36% support, the same as 26 June. The leftist New Popular Front (NFP) alliance is in second place on 29% (up 0.5% on the day), while the centrist Ensemble alliance of President Emmanuel Macron remains in third place on 21% for the third day in a row.

SECURITY (MNI): Israel-Hezbollah War Likely Within Weeks w/Out Israel-Hamas Ceasefire
Politico reporting that, according to US officials, a "large-scale" confrontation between Israel and Hezbollah is likely to break out, "in the next several weeks" if Israel and Hamas fail to reach a cease-fire deal for Gaza.

US TSYS Off Midweek Lows, Focus Turns to Debate, Friday Data

• Treasury futures see-sawing near midmorning highs after the bell, relatively sedate second half trade as participants migrated to the sidelines to await tonight's presidential debate, Friday's data and next week's July 4th holiday markets.
• Early gap bid followed dovish data: Initial jobless claims near in-line (233k vs. 235k est), continuing claims higher than expected (1.839M vs. 1.828M est). Personal Consumption 1.5% vs. 2.0% est, GDP 3.1% vs. 3.0% est.
• Treasury futures continued to climb off midweek lows, extended gains after Pending Home Sales comes out much lower than expected: MoM -2.1% vs 0.5% est but off prior moth's -7.7%, YoY -6.6% vs. -4.6% est.
• Sep'24 Treasury 10Y session high at 110-11.5 (+9.5) vs. 110-07.5 last, puts the contract above Wednesday's early NY session high - but well below Tuesday's high for the week at 110-25.
• Current 10Y yield at 4.2923% (-.0371), curves mixed: 2s10s -.793 at -42.785, 5s30s +1.125 at 12.866. Technical resistance focus: a resumption of gains and a break of 111-01, the Jun 14 high, would resume the uptrend and open 111-17+, a Fibonacci projection.
• On the flipside, firm short-term support at 109-26, the 50-day EMA. A clear break of this average would signal scope for a deeper retracement, towards 109-00+, the Jun 10 low.
• Look ahead: Presidential debate tonight at 2100ET Friday: Personal Income/Spend, PCE Deflator, UofM sentiment.

OVERNIGHT DATA

US DATA (MNI): Initial Claims In Line But Continuing Push To Highs Since Nov’21
Initial jobless claims mostly in line: 233k (sa, cons 235k) after a slightly upward revised 239k (initial 238k). The four-week average climbs further to 236k (+3k) for a fresh high since Sep’23.

• The non-seasonally adjusted data don’t show anything surprising on a national basis. Note that the largest increase on the week came from New Jersey (+5.3k vs the national -3.6k) but this is entirely in keeping with its usual seasonal pattern.
• Continuing jobless claims however saw a new high since Nov’21: 1839k (sa, cons 1828k) after a downward revised 1821k (1828k). This is also for a payrolls reference week.
• NSA continuing claims continue to drift towards the higher levels for recent ‘typical’ years.

US DATA (MNI): Real GDP Upward Revision Masks Softer Consumption In Q1
Real GDP growth was revised up to 1.41% annualized in the third Q1 release as expected (prior 1.25, cons 1.4) as it pulls back from the particularly strong 4.1% averaged in 2H23.

• The component revisions had a more dovish tone however, especially with personal consumption increasing 1.45% vs the previously thought 1.99%.
• This softer consumption growth dragged 0.36pps from the second estimate of quarterly growth, offset primarily by stronger non-residential investment and a more positive net trade contribution

US DATA (MNI): Core Durables Remain Soft, Reinforcing Subdued Goods Production Outlook
Durable goods orders unexpectedly picked up in May by 0.1% M/M, vs -0.5% survey - though core capital goods (nondefense ex-aircraft) orders were weak at -0.6% (+0.1% expected).

• Revisions were mixed: April's overall durable goods orders growth was revised down to 0.2% from 0.6%, partially accounting for May's unexpected sequential rise, while core capital goods orders were revised up to 0.3% from 0.2%.
• Volatile components played a part in the overall beat versus consensus, with defense aircraft/parts up 22.6% M/M, the biggest monthly jump in over a year to a 9-month high seasonally-adjusted level.
• But the core capital report was soft, as shipments contracted for the 3rd month in the past 4 at -0.5% M/M, erasing April's 0.4% gain.

US DATA (MNI): Pending Home Sales Hit New Series Low
Pending home sales were softer than expected in May with -2.1% M/M (cons 0.5) for little sign of respite after the heavy -7.7% M/M in April.

• It leaves the level of pending sales at a new low for the cycle, and in poking below the Apr’20 low is a new series low for data going back to 2001.
• The pending data have opened a relative gap to existing home sales and imply some downside pressure for home sales is in the pipeline.

CANADA (MNI): Canada April Payroll Wage Growth Slows To 3.7%, Employment -0.1%
April Payroll Employment -0.1% MOM or -23K, the first decrease after 3 prior gains, Statistics Canada says Thurs. Average weekly earnings unchanged MOM for a 3rd consecutive month; +3.7% YOY after +4.1% in March. The BoC has said wage pressures are easing with indicators moving below 4% from the peak of 6%.

• Average weekly hours little changed MOM, +0.9% YOY.
• Job vacancies -5.3% MOM, the third decline in a row. The BoC says job vacancies falling without large shifts in unemployment is a sign the labour market has returned to pre-pandemic levels which align with full employment.
• The May labour force survey pointed to modest job growth while unemployment ticked up to 6.2%.

MARKETS SNAPSHOT

• Key market levels of markets in late NY trade:
• DJIA up 13.61 points (0.03%) at 39144.89
• S&P E-Mini Future down 2.5 points (-0.05%) at 5540.75
• Nasdaq up 37.7 points (0.2%) at 17842.04
• US 10-Yr yield is down 3.9 bps at 4.2903%
• US Sep 10-Yr futures are up 6/32 at 110-8
• EURUSD up 0.0022 (0.21%) at 1.0703
• USDJPY down 0.03 (-0.02%) at 160.78
• WTI Crude Oil (front-month) up $1.05 (1.3%) at $81.96
• Gold is up $28.43 (1.24%) at $2326.75
• European bourses closing levels:
• EuroStoxx 50 down 13.34 points (-0.27%) at 4902.6
• FTSE 100 down 45.65 points (-0.56%) at 8179.68
• German DAX up 55.31 points (0.3%) at 18210.55
• French CAC 40 down 78.43 points (-1.03%) at 7530.72

US TREASURY FUTURES CLOSE

3M10Y -3.046, -108.256 (L: -110.529 / H: -104.481)
2Y10Y -0.793, -42.785 (L: -44.161 / H: -41.049)
2Y30Y -0.051, -28.785 (L: -31.079 / H: -27.277)
5Y30Y +0.856, 12.597 (L: 10.235 / H: 13.003)
Current futures levels:
Sep 2-Yr futures up 1.875/32 at 102-3.625 (L: 102-01 / H: 102-05)
Sep 5-Yr futures up 4.25/32 at 106-21.75 (L: 106-14 / H: 106-24.25)
Sep 10-Yr futures up 6/32 at 110-8 (L: 109-27.5 / H: 110-11.5)
Sep 30-Yr futures up 10/32 at 119-8 (L: 118-13 / H: 119-15)
Sep Ultra futures up 11/32 at 126-29 (L: 125-28 / H: 127-09)

US 10Y FUTURE TECHS: (U4) Approaching Support

• RES 4: 111-31 1.382 proj of the Apr 25 - May 16 - 29 price swing
• RES 3: 111-17+ 1.236 proj of the Apr 25 - May 16 - 29 price swing
• RES 2: 111-13 High Mar 25
• RES 1: 111-01 High Jun 14 and the bull trigger
• PRICE: 109-30+ @ 11:22 BST Jun 27
• SUP 1: 109-26/109-00+ 50-day EMA / Low Jun 10 and key support
• SUP 2: 108-27+ Low Jun 3
• SUP 3: 108-15 Trendline drawn from the Apr low
• SUP 4: 107-31 Low May 29 and a key support

A bull cycle in Treasuries remains in play and the latest pullback appears to be a correction. The contract is approaching a firm short-term support at 109-26, the 50-day EMA. A clear break of this average would signal scope for a deeper retracement, towards 109-00+, the Jun 10 low. For bulls, a resumption of gains and a break of 111-01, the Jun 14 high, would resume the uptrend and open 111-17+, a Fibonacci projection.

SOFR FUTURES CLOSE

• Sep 24 +0.015 at 94.845
• Dec 24 +0.020 at 95.140
• Mar 25 +0.030 at 95.430
• Jun 25 +0.030 at 95.675
• Red Pack (Sep 25-Jun 26) +0.030 to +0.035
• Green Pack (Sep 26-Jun 27) +0.025 to +0.030
• Blue Pack (Sep 27-Jun 28) +0.025 to +0.030
• Gold Pack (Sep 28-Jun 29) +0.030 to +0.030

SOFR FIXES AND PRIOR SESSION REFERENCE RATES

SOFR Benchmark Settlements:

• 1M -0.00089 to 5.34304 (-0.00219/wk)
• 3M -0.00302 to 5.33156 (-0.01099/wk)
• 6M -0.00103 to 5.26295 (-0.01263/wk)
• 12M +0.01744 to 5.05453 (+0.00288/wk)

US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 5.34% (+0.01), volume: $1.897T
• Broad General Collateral Rate (BGCR): 5.33% (+0.01), volume: $740B
• Tri-Party General Collateral Rate (TGCR): 5.33% (+0.01), volume: $725B
• (rate, volume levels reflect prior session)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 5.33% (+0.00), volume: $82B
• Daily Overnight Bank Funding Rate: 5.32% (+0.00), volume: $248B

FED Reverse Repo Operation

NY Federal Reserve/MNI

• RRP usage climbs back over $500B to $531.692B from $466.310B prior; number of counterparties recedes to 75 from 87. Today's usage compares to $327.066B on Monday, April 15 -- the lowest level since mid-May 2021.

PIPELINE $1.5B Mizuho 2Pt Launched

Total $8.1B to price Thursday

• Date $MM Issuer (Priced *, Launch #)
• 6/27 $3B #Takeda $1.1B 10Y +105, $800M 20Y +115, $600M 30Y +125, $500M 40Y +140
• 6/27 $2B #Nomura $500M 3Y +110, $500M 3Y SOFR+125, $1B 10Y +150
• 6/27 $1.5B #Mizuho $800M 6NC5 +108, $700M 11NC10 +130
• 6/27 $1.1B #National Bank of Canada $750M 3NC2 +88, $350M 3NC2 SOFR+103
• 6/27 $500M *Korea Gas 5Y +77

EGBs-GILTS CASH CLOSE: Multiyear OAT/Bund Wides Ahead Of French Elections

European core FI closed Thursday mixed, with semi-core and periphery EGBs underperforming.

• The standout development of the day was the France/Germany 10Y spread widening 1.2bp to a fresh 12-year high close of 77.9bp (was 80bp at session wides) as focus turns to this weekend's first round of legislative elections.
• Periphery EGB spreads widened further still, led by BTPs (+3.7bp), as risk appetite remained subdued.
• Bunds and Gilts started the session weakly, but picked up a bid in early afternoon on soft US data. The German curve bull steepened on the day, with the UK curve mixed.
• In data, the European Commission's business and consumer survey saw overall economic sentiment moderate overall, with services price expectations ticking up. Belgian flash June inflation accelerated, with a pickup in services and core pressures of note.
• Friday's highlight is set to be French/Spanish/Italian flash June inflation data, with final UK Q1 GDP also due.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 1.8bps at 2.807%, 5-Yr is down 1.4bps at 2.442%, 10-Yr is down 0.4bps at 2.448%, and 30-Yr is down 0.3bps at 2.636%.
• UK: The 2-Yr yield is down 0.1bps at 4.236%, 5-Yr is up 0.5bps at 4.011%, 10-Yr is down 0.2bps at 4.13%, and 30-Yr is down 0.7bps at 4.61%.
• Italian BTP spread up 3.7bps at 157.7bps / Spanish up 2.3bps at 90.6bps

FOREX BB DXY Edges Off Cycle Highs as Markets Await Presidential Election Debate

• The Bloomberg USD index edged off multi-month cycle highs on Thursday as markets await the first US presidential election debate and US monthly PCE/incomes report for May on Friday. A mixed set of US data briefly extended the greenback weakness today, although G10 currency activity was overall subdued.
• EURUSD (+0.22%) held a fairly narrow range and holds close to the 1.07 mark as European political risks linger. The trend outlook is bearish despite Thursday’s moderate advance and 50-day EMA resistance remains intact.
• Meanwhile, the front-end of the EUR vol curve remains well supported - 2-week implied has now cleared 8 points for the first time this year as the contract captures both the first, and second round of the French legislative elections.
• Further FX jawboning from both the Japanese FinMin and the Cabinet Secretary was seen on Thursday. Remarks echoed those of Kanda on Wednesday and combining this with stronger-than-expected retail sales overnight, USDJPY has stabilised and holds towards the top of its 50-pip range. Price action late last night fell just short of the next target of 160.92, a Fibonacci projection. Above here, 161.50 is the next level of note.
• Underperforming in G10 has been the Swedish Krona following today’s Riksbank decision. The central bank left its policy rate on hold at 3.75% in June, as was widely expected, but stated that it could cut two or three times in the second half of the year, in a dovish shift from its previous guidance for two cuts.
• As well as aforementioned event risks for the US, inflation data will be released for Spain, Italy and France. Canada GDP and MNI Chicago PMI will also cross.

FRIDAY DATA CALENDAR

28/06/2024	2330/0830	**		JP	Tokyo CPI
28/06/2024	2330/0830	*		JP	Labor Force Survey
28/06/2024	2350/0850	**		JP	Industrial Production
27/06/2024	0100/2100			US	Trump-Biden Debate
28/06/2024	0600/0700	***		UK	GDP Second Estimate
28/06/2024	0600/0700	*		UK	Quarterly current account balance
28/06/2024	0600/0800	**		DE	Import/Export Prices
28/06/2024	0600/0800	**		SE	Retail Sales
28/06/2024	0645/0845	***		FR	HICP (p)
28/06/2024	0645/0845	**		FR	PPI
28/06/2024	0645/0845	**		FR	Consumer Spending
28/06/2024	0700/0900	***		ES	HICP (p)
28/06/2024	0700/0900	**		CH	KOF Economic Barometer
28/06/2024	0755/0955	**		DE	Unemployment
28/06/2024	0800/1000	**		EU	ECB Consumer Expectations Survey
28/06/2024	0900/1100			IT	Flash inflation
28/06/2024	1000/0600			US	Richmond Fed's Tom Barkin
28/06/2024	1230/0830	**		US	Personal Income and Consumption
28/06/2024	1230/0830	***		CA	Gross Domestic Product by Industry
28/06/2024	1345/0945	***		US	MNI Chicago PMI
28/06/2024	1400/1000	**		US	U. Mich. Survey of Consumers
28/06/2024	1500/1100			CA	Finance Dept monthly Fiscal Monitor (expected)
28/06/2024	1600/1200	***		US	USDA Acreage - NASS
28/06/2024	1600/1200	**		US	USDA GrainStock - NASS
28/06/2024	1600/1200			US	Fed Governor Michelle Bowman
28/06/2024	1640/1240			US	San Francisco Fed's Mary Daly
28/06/2024	1700/1300	**		US	Baker Hughes Rig Count Overview - Weekly