US TSYS: Modest Earlier Rally Consolidated Under Lights Volumes
Sep-15 19:13
- Treasuries are holding onto a rally that came earlier in the session, with the wings lagging.
- There was little in the way of meaningful fresh drivers but with pre-FOMC positioning and Trump’s continued call for rate cuts (“bigger” than Powell “had in mind”) possibly at play.
- The move started beforehand but won’t have been hindered by a soft Empire manufacturing survey which saw new orders fall 35 points to their lowest since Apr 2024.
- Cash yields are 2.3-3.3bp lower on the day.
- TYZ5 trades at 113-14+ (+05+) having established gains early in the US session, on tepid cumulative volumes of 905k.
- Resistance is seen at 113-29 (Sep 5 high) with a bullish trend sequence intact, whilst support is seen at 112-23+ (20-day EMA).
- J.P.Morgan recommended adding shorts in 10s late on Friday. They "think the decline in long-term yields has been overdone, and we recommend tactically fading the move for a number of reasons.” That includes seeing a soft floor on 10Y yields at 4% in the near-term, the sector appearing significantly rich relative to the wings and there’s scope for “both higher medium-term growth expectations and wider TIPS breakevens”.
- Goldman Sachs in contrast "for now, the belly richness will be difficult to unseat given its low vol/carry friendly properties but can underperform in the tails. We continue to think that meaningfully lower yields from here rely on labor market news more convincingly opening up left tail worries".
- Miran vote and Cook suit headlines are still to come before tomorrow sees retail sales and import prices for August in focus, all ahead of the FOMC decision on Wednesday.
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AUSSIE 10-YEAR TECHS: (U5) Follows Fade in Treasuries
Aug-15 22:15
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.960 - High Apr 7
- PRICE: 95.710 @ 15:17 BST Aug 15
- SUP 1: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.707 - 1.0% 10-dma envelope
Aussie 10-yr futures received a boost from the US Treasury rally that followed both the recent poor NFP print as well as Tuesday’s inflation number. While this impact faded into the close of the week, 10-year futures remain toward the top end of the recent range. To the upside, next resistance is at 96.207, a Fibonacci retracement point. Next support undercuts at 95.420 (pierced), the Feb 13 low, ahead of 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
FOREX: USD Index Pinned to 50-dma as Putin Shakes Hands with Trump
Aug-15 20:49
- USD slipped against all others Friday, with a poor set of retail sales and Uni of Michigan sentiment numbers meeting a higher-than-expected import price index to further stimulate concerns over a stagflarionary phase in the US economy. The USD Index trades either side of the 50-dma which, notably, has begun to flatten out after maintaining a solid downtrend throughout 2025.
- JPY is the strongest currency in G10, extending the breakout and bearish conclusion of the consolidation phase in USD/JPY. Recent weakness puts the price through support drawn off the early August lows as well as 146.71, a key retracement. Price action this week marks a full reversal of the previously overbought condition, keeping the downside argument in focus.
- Anticipation ahead of the Putin-Trump meeting has reached fever pitch. Footage showing the Presidents shaking hands in Alaska has helped ease concerns over a hostile meeting, but it's the outcomes that will matter to markets - particularly as equities hold at alltime highs. Any signs of progress toward a ceasefire would be warmly received by risk sentiment - although both Trump and Putin cautioned against a optimistic outcome in comments to press.
- We noted earlier in the week the pressure building on USD/HKD, with price action not matching the pattern of HKMA intervention. That move extended overnight, and is still building at typing, putting spot down to new pullback lows of 7.8119 shortly after the European open. Overnight swap rates have surged further still Friday (hitting 1.7% at typing), well ahead of the 0.3% prevailing rate mid-week and should continue to support a recovery in HIBOR fixes ahead. Today's 1m HIBOR fixed higher by 41bps, hitting 1.45% for the highest fix since mid-May. It's these factors that should work against the HKD carry trade (selling HKD, buying USD), evident in the further tightening of the HKD forward discount today: down 975 points from as high as 1270 this month.
- Focus in the coming week shifts to Jackson Hole and Powell's comments on Friday. With the September meeting still in flux - any conviction toward tipping the board toward a rate cut at the next FOMC will be carefully watched, but it's a hawkish outturn that could be more consequential for markets, as OIS prices a near 90% chance of easing on September 17th.
MNI: US TSY TICS NET FLOWS IN JUN +$77.8B
Aug-15 20:00
- MNI: US TSY TICS NET FLOWS IN JUN +$77.8B
- US TSY TICS NET L-T FLOWS IN JUN +$150.8B
