US TSYS: Modest Belly-Led Losses Ahead Of Labor-Focused Docket
Dec-04 11:55
Treasuries have seen modest belly-led losses overnight in spillover from latest JGB weakness on gaining BOJ hike traction. It’s ahead of multiple labor releases that provide useful updates before next week’s FOMC meeting (Challenger job cuts, weekly claims, Revelio labor statistics and latest Chicago Fed u/e rate tracking) plus the shutdown-delayed factory orders report for September.
- Cash yields are 0.5-2.5bp higher on the day, with increases led by the belly.
- The flattening sees 5s30s at 108bps after yesterday’s 111bp marked its steepest since the first half of September.
- TYH6 trades at 112-28+ (-07) on modest volumes of 255k, towards the lower end of the week’s range after continuing to give back intraday gains prior to a somewhat solid ISM services report.
- The technical backdrop points to a bearish tone with support at 112-22 (Dec 2 low) before 112-10+ (Nov 20 low) and a key 112-07 (Nov 5 low). Resistance meanwhile is seen at 113-11 (Dec 1 high) and 113-22+ (Nov 25 high).
- Data: Challenger report Nov (0730ET), Weekly jobless claims (0830ET), Revelio labor statistics Nov (0830ET), Chicago Fed labor indicators (0830ET), Factory orders Sep (1000ET), Dallas Fed weekly economic index (1130ET)
- Fedspeak: Bowman on bank supervision (1230ET) – in FOMC blackout
- Bill issuance: US Tsy $90B 4W, $80B 8W bill auctions (1130ET)
- Politics: Trump in a trilateral greeting with Rwanda and DR Congo presidents (1120ET) before signing ceremony (1210ET)
- Bloomberg reports (link) that “Donald Trump’s aides and allies are discussing the possibility of making Treasury Secretary Scott Bessent the top White House economic adviser — in addition to his current job — should the president pick Kevin Hassett as the next chair of the Federal Reserve, according to people familiar with the matter.”
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PIPELINE: Corporate Bond Roundup: Supra Sovereigns on Tap Tuesday
Nov-04 11:54
- Date $MM Issuer (Priced *, Launch #)
- 11/04 $800M Breakwater Energy 5NC2 9%a
- 11/04 $500M #Sharjah Islamic Bank5Y Sukuk +95a
- 11/04 $Benchmark Hashemite Kingdom of Jordan 7Y 6.375%a
- 11/04 $Benchmark Lao People's Democratic Rep 5Y 11.25%a
- 11/04 $Benchmark Standard Chartered Perp NC10 7.375%
- 11/04 $Benchmark QBE Insurance 12NC7 +170a
- $40.7B Priced Monday, driven by Alphabet's $17.5B over 8 tranches and Novartis $6B over 7 tranches:
- 11/03 $17.5B *Alphabet: $1B 3Y +30, $500M 3Y SOFR+52, $2.5B +5Y +40, $1.25B 7Y +50, $3.5B 10Y +62, $2B 20Y +72, $4B 30Y +82, $2.75B 50Y +107 (massive debt issuance includes $6.5B over 6 tranches: 3Y, 6Y, 7Y, 13Y, 19Y and 39Y).
OUTLOOK: Price Signal Summary - Corrective Cycle In Oil Futures Still In Play
Nov-04 11:53
- On the commodity front, Gold is unchanged. A fresh cycle low last week highlights an extension of the bear cycle that started Oct 20. The retracement since Oct 20 has allowed an overbought trend condition to unwind. The 20-day EMA has been breached, signalling scope for a test of the 50-day EMA, at $3864.7. Clearance of this EMA would strengthen a short-term bear theme. Initial resistance is at $4161.4, the Oct 22 high.
- WTI futures remain in a corrective cycle for now. Note that price has recently traded through the 50-day EMA, currently at $61.05. The breach of this EMA signals scope for a stronger recovery. Note too that a resistance at $62.34, the Oct 8 high, has also been pierced. A clear move through it would expose key resistance at $65.77, the Sep 26 high. First key support and the bear trigger is unchanged at $55.96, the Oct 20 low.
FOREX: EURUSD Testing Below 1.15 as Current Bear Leg Extends
Nov-04 11:51
- EURUSD has been edging lower on Tuesday, extending the pair’s selloff following the breach of important 1.1542 support last Friday. Current price action signals scope for a more protracted move south, towards key support at 1.1392, the Aug 1 low.
- Price action has likely been assisted by the sharp reversal for EURJPY overnight, with the cross threatening a close below the 20-day EMA (intersects at 176.65). The 50-day EMA remains key for EURJPY, having not closed below the average since late May. It intersects today at 175.00.
- The single currency trades on a firmer footing against the likes of AUD and NZD, owing to the strong risk-off impetus across global markets today.
- SocGen think EURUSD would ‘run with’ any break below 1.15 or above 1.17, although their updated forecasts show they believe an upside move is more likely.
- Meanwhile, ING have noted that despite the hawkish repricing in the USD curve, the EUR/USD drop looks a bit overdone. They add that their short-term fair value model is now showing a 1% undervaluation, and with positioning now much more balanced, the pair can enjoy faster rallies on poor US jobs market news. ING remain optimistic on a rally into year-end to 1.18-1.20.
