US TSYS: Modest Sell-Off On Trade Deal Optimism Extends, TYA Back Near Support
Jul-24 10:40
- Treasuries have slowly extended yesterday’s sell-off, which was aided by reports that a US-EU trade deal was getting closer despite White House adviser Navarro saying to take the reports with a "grain of salt".
- Treasuries lagged the sell-off in EGBs at the time of those reports and continue to do so today.
- Yesterday’s well-received 20Y auction could also have fed into outperformance although 20s lead losses today.
- Today sees weekly jobless claims including a payrolls reference period for continuing claims, flash July PMIs and President Trump visiting the Fed. There is also potential spillover from the ECB if Lagarde surprises on the balance of risks.
- Cash yields are 1.3-3.0bp higher on the day, with 2s lagging increases.
- Curves are mildly steeper on the day after a sizeable flattening yesterday: 2s10s at 51.3bps (last week’s high 62.7bp), 5s30s at 101.5bp (108.5bp).
- TYU5 trades at 110-29 (-03+) off an earlier low of 110-28+ on thin cumulative volumes of 220k.
- It returns close to support at 110-24 (Jul 21 low) after which lies 110-08+ (Jul 14/16 lows), continuing a pullback from Tuesday’s high of 111-14+ (now initial resistance).
- Data: Weekly jobless claims (0830ET), Chicago Fed national activity Jun (0830ET), S&P Global US flash PMIs Jul (0945ET), New home sales Jun (1000ET), KC Fed mfg Jul (1100ET)
- Coupon issuance: US Tsy $21B 10Y TIPS auction - 91282CNS6 (1300ET)
- Bill issuance: US Tsy $95B 4W & $85B 8W bill auctions (1130ET)
- Politics: Trump signs Executive Orders and Congressional Bills, closed press (1500ET), Trump visits the Federal Reserve after recent criticism including $2.5bn renovation (1600ET)
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STIR: Holding Shift To Next Fed Cut Around Sep Rather Than Oct
Jun-24 10:37
- Fed Funds implied rates are up to 2bp lower on the day, helped by crude oil futures (WTI -2.9%, mostly at the open) on US-Iran ceasefire headlines, although are off yesterday’s dovish extremes.
- Oil saw heavy declines yesterday on limited Iranian retaliation to US strikes and Fed VC for Supervision Bowman gave a surprisingly dovish pivot as she eyes a July cut.
- Cumulative cuts from 4.33% effective: 5.5bp Jul, 24.5bp Sep, 38.5bp Oct, 57bp Dec and 66.5bp Jan.
- SOFR implied yields meanwhile are 1-2bp higher across contracts out to 2027 after heavy declines yesterday.
- For example, the terminal of 3.165% (SFRZ6, +2bp) sees a small increase after yesterday’s 9.5bp drop to its lowest close since May 7, i.e. prior to US-China trade de-escalation on May 12 after weekend talks in Geneva.
- Fed Chair Powell leads today’s docket (with text likely released at 0830ET) but with some notable other FOMC appearances as well – see the earlier FED bullet.
BOE: Greene Q&A concludes
Jun-24 10:34
- Greene Q&A concluded. Not much more on monpol that she hasn't said before and not much more than her comments in the prepared text.
- More semi-technical Qs on the the balance sheet and QT (but which aren't really view-based - more explaining the process).
LOOK AHEAD: Tuesday Data Calendar: Fed Full Court Press, Chair Powell Testimony
Jun-24 10:33
- US Data/Speaker Calendar (prior, estimate)
- 06/24 0830 Philadelphia Fed Non-Manufacturing Activity (-41.9, --)
- 06/24 0830 Current Account Balance (-$303.9B, -$445.5B)
- 06/24 0900 FHFA House Price Index MoM (-0.1%, 0.0%)
- 06/24 0900 S&P CoreLogic CS 20-City MoM SA (-0.12%, 0.0%), YoY (4.07%, 3.94%)
- 06/24 0915 Cleveland Fed Hammack on monetary policy (text, Q&A)
- 06/24 1000 Fed Ch Powell Semiannual Testimony to House
- 06/24 1000 Richmond Fed Manufact. Index (-9, -10)
- 06/24 1000 Conf. Board Consumer Confidence (98.0, 99.8)
- 06/24 1130 US Tsy $55B 6W Bill auction
- 06/24 1230 NY Fed Williams keynote remarks (text, Q&A)
- 06/24 1300 US Tsy $69B 2Y note auction (91282CNL1)
- 06/24 1345 MN Fed Kashkari live town hall event (no text, Q&A)
- 06/24 1400 Boston Fed Collins on nation's housing (text, no Q&A)
- 06/24 1600 Fed Gov Barr welcoming remarks (text, no Q&A)
- 06/24 2015 KC Fed Schmid economic outlook (text, Q&A)
- Source: Bloomberg Finance L.P. / MNI
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