US LABOR MARKET: MNI US Payrolls Preview: Expecting A "Quite Stable" Report

Treasury's financing requirements for the Jul-Sep and Oct-Dec quarters were broadly in line with expectations, with the most significant surprise being a reduction in the end-year TGA cash target to $850B, vs the current target of $950B.

• For Jul-Sep MNI had estimated that the net borrowing requirement would be raised to around $700B from the May Refunding estimate of $671B; Treasury's August Refunding estimate shows a higher figure, at $739B. Analyst estimates were somewhat split here on whether there would be an increase or a decrease, ranging from around $590B to $800B, with Treasury going toward the high end of that range.
• As Treasury notes for the current quarter, "The borrowing estimate is $68 billion higher than announced in May 2026, primarily due to lower projected net cash flows, partially offset by the higher-than-assumed beginning-of-quarter cash balance.  Excluding the higher-than-assumed beginning-of-quarter cash balance, the current quarter borrowing estimate is $87 billion higher than announced in May."
• Treasury's initial estimate for Oct-Dec marketable borrowing is $628B; we penciled in $650B (and sell-side ranged from around $590B to $690B so again within the middle of estimated) though we and most analysts had mostly anticipated an unchanged $950B TGA target.
• We will likely get more color on the TGA target reduction at Wednesday's Refunding announcement.

SOFR & Treasury options trade outlined below: Mixed trade after better carry-over put flow. SOFR options look mixed with underlying futures still bid/off post data lows. Attn firmly on lower crude (WTI -4.21 at $80.46/bbl) after Pres Trump held off on striking Iran over weekend (again) pledging a Hormuz Strait deal is close while Iran denies any such deal. Projected rate hike pricing has bounced off morning lows to near late Friday levels (*): Sep'26 at +16.8bp (+16.7bp), Oct'26 at 24.4bp (24bp), Dec'26 36.1bp (+35.9bp), Jan'27 40.1bp (41.5bp).

• SOFR Options:
  • 5,000 SFRZ6 96.18/96.31 call spds ref 95.93
  • +5,000 2QU6 96.06 calls, 7.5 vs. 95.945/0.36%
  • +3,000 SFRZ6 95.81/96.31 strangle, 15-15.25 vs. 95.95
  • +2,000 SFRU6 96.12/96.25/96.37 call flys, 3.75 ref 96.125
  • -3,000 SFRQ6 95.97 puts, cab ref 96.125
  • +5,000 SFRH7 95.87/96.25 2x1 put spds, 4.5 ref 95.85
  • +5,000 SFRH8 99.00/99.50 call spds, 1.25
  • 5,000 0QQ6 95.93 calls, 6.0 ref 95.885
  • 3,500 SFRV6 95.62 puts, 3.75 ref 95.965
  • 1,000 0QZ6 96.25/96.62 1x2 call spds vs. 2QU6 96.18/96.43 1x2 call spds
  • Block, 5,000 0QU6 95.50/95.75/96.00 put flys, 7.0 ref 95.805
  • 1,700 0QU6 95.5/95.75/96.00 put flys ref 95.875
  • 1,000 TYU6 108.5 straddles, ref 108-15
  • 5,000 SFRU6 96.06/96.31 put spds, 15.75 ref 96.125
  • 3,000 SFRU6 95.81/95.87/95.93 put flys, cab ref 96.125
• Treasury Options:
  • 40,000 TYU6 108.25/109.25 call spds, 27 ref 108-11.5
  • Block/screen -50,000 TYU6 108.5/109.5 call spds, 22-23 vs. 108-12.5/0.30%
  • 10,000 USV6 106 puts, 54 ref 108-21
  • Block, 8,000 USX6 106 puts, 1-12 ref 108-21
  • 4,500 WNU6 110 puts, 57 
  • 3,000 FVZ6 105 puts, 28 ref 106-04.25
  • Block, -15,000 FVU6 106.25 puts, 23 vs. 106-07/0.50%
  • 12,000 FVU6 106.5 calls, 15.5 ref 106-07
  • 10,000 TYU6 108 puts, 24 ref 108-05 (total volume just over 23.1k)
  • 2,000 TYU6 108 straddles, 1-11 
  • +1,000 TYU6 108.5 straddles, 1-04
  • over 10,400 wk1 TY 108 puts, 10 ref 108-14.5 (exp 8/7)
  • -20,000 FVU6 106 puts, 17 ref 106-07.5
  • Block, -4,000 TYU6 111 calls, 1 ref 108-13
  • 1,500 TYU6/TYV6 112 call spds
  • over 18,900 wk1 TY 109 calls, 4 ref 108-12
  • -2,000 wk1 TY 108.25 calls, 24 ref 108-11.5 (exp 8/7)
  • -2,000 TYU6 108/108.5 put spds, 13 ref 108-12.5
  • +2,000 TYU6 107/108 put spds, 16 ref 108-12
  • +2,000 TYV6 107 puts, 34 ref 108-02.5
  • +5,000 TYU6 109/109.5/109.75 1x3x2 broken call flys, 4 ref 108-13.5 

• RES 4: 161.98 20-day EMA
• RES 3: 161.32 50-day EMA
• RES 2: 159.61 50.0% retracement of the Jul 23 - Aug 3 bear leg
• RES 1: 158.58 38.2% retracement of the Jul 23 - Aug 3 bear leg 
• PRICE: 156.81 @ 19:50 BST Aug 3
• SUP 1: 155.23 Low Aug 3
• SUP 2: 155.04 Low May 6 and a key support
• SUP 3: 154.00 Low Feb 23 
• SUP 4: 152.10 Low Jan 27 and a key M/T support 

USDJPY traded sharply lower last week and started the week on a bearish note. The pair has breached the 20- and 50-day EMAs suggesting potential for a deeper retracement of the May 6 - Jul 23 bull cycle. 158.04, the base of a bull channel drawn from the Feb 12 low, has also been cleared, strengthening a bear threat. A continuation lower would open 155.04, the May 6 low. 161.32, the 50-day EMA is the first key resistance.