US TSYS: Modestly Firmer Ahead Of JOLTS, Conference Board and 7Y Supply
- Treasuries have reversed losses in the opposite turn of events to yesterday’s US crossover.
- It leaves benchmark tenors mildly firmer across the curve ahead of a session with multiple points of interest such as JOLTS and Conference Board data before 7Y issuance. These will assessed with Refunding, the Fed, GDP, PCE and payrolls all looming ahead through Wed-Fri.
- Yesterday's Treasury borrowing estimates were almost exactly in line with MNI's estimates. We would characterize the current quarter as slightly on the high side of the median analyst expectation, with the latter quarter fairly close to expectations given what is usually a wide range for the further-out quarter. It should have little to no impact on expectations for Wednesday's Refunding announcement.
- Cash yields are 0.5-2bp lower, with 20s and 30s leading declines.
- TYU5 trades at session highs of 110-29 (+ 04+) on particularly thin cumulative volumes of just 180k.
- It has mostly remained within yesterday’s range overnight with a low of 110-24. Support is being monitored at 110-19+ (Jul 24 low) after which lies 110-08+ (Jul 14/15 lows), whilst resistance is seen at 111-14+ (Jul 22 high)
- Data: Advance trade balance Jun (0830ET), Wholesale/retail inventories Jun P/Jun (0830ET), FHFA and S&P CoreLogic May (0900ET), JOLTS Jun (1000ET), Conference Board consumer survey Jul (1000ET)
- Politics: President Trump has departed Scotland heading to The White House, set to arrive at 1920ET but with scope for updates along the way.
- Coupon issuance: US Tsy $30B 2Y FRN Note - 91282CNQ0 (1130ET), US Tsy $44B 7Y Note auction - 91282CNR8 (1300ET)
- Yesterday’s 2Y stopped through by 0.5bp before the 5Y tailed by 1bp. Peripheral stats were notably weak for the 5Y, with indirect take falling from 64.7% to 58.3% and primary dealer take jumping from 10.9% to 22.2%.
- Bill issuance: US Tsy $80B 6W bill auction (1130ET)
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US FISCAL: Available "Extraordinary" Measures To Ward Off X-Date Pick Up
Treasury reported Friday that as of Jun 25 it had $130B in remaining "extraordinary" measures (of a total $378B available) to ward off an "x-date" of running out of resources before defaulting. That's the highest in 2 weeks.
- Combined with $334B cash as of Jun 25 (after a bit of a buildup after the mid-June tax deadline), that's a total of roughly $465B in total resources available.
- We noted earlier this week that Treasury told Congress that it was required to extend its debt issuance suspension period from Jun 27 to Jul 24, in effect prolonging the use of extraordinary measures while we await a resolution to the debt limit impasse, probably through the fiscal legislation currently going through Congress.
- Realistically, fiscal dynamics so far this year point to potential for Treasury to get into September without running out of cash + extraordinary measures. That seems to be the broad market expectation.
US DATA: Cleveland, Dallas Fed PCE Medians Show Progress But Still Above-Target
The Cleveland and Dallas Fed's median PCE metrics showed a notable drop in May. All indices suggest PCE inflation running above 2%, and higher than the actual core and headline PCE measures, but pressures appear to have cooled from a pickup in the early months of the year.
- The Cleveland Fed's median PCE measure came in at 0.22% M/M, a 10-month low after April's 15-month high 0.31%. This left median PCE at 3.01% on a Y/Y basis, down from 3.06% prior for a the joint-lowest (with Feb) since September 2021.
- The Dallas Fed's annualized median rate fell to 2.01%, from 2.65% prior for a 10-month low. The 6-month annualized rate edged lower to 2.74% (2.76% prior), a 4-month low, with the Y/Y rate ticking down to 2.55% from 2.56%, echoing the Cleveland Fed for the lowest reading since September 2021.
USDCAD TECHS: Pivot Resistance Remains Intact
- RES 4: 1.4111 High Apr 4
- RES 3: 1.4016 High May 12 and 13 and a key resistance
- RES 2: 1.3920 High May 21
- RES 1: 1.2710/3803 20- and 50-day EMA values
- PRICE: 1.3658 @ 16:23 BST Jun 27
- SUP 1: 1.3618 Low Jun 26
- SUP 2: 1.3540 Low Jun 16 and the bear trigger
- SUP 3: 1.3503 1.618 proj of the Feb 3 - 14 - Mar 4 price swing
- SUP 4: 1.3473 Low Oct 2 2024
USDCAD has pulled back from its recent highs. The primary downtrend remains intact and short-term gains appear to have been corrective. Key support and the bear trigger has been defined at 1.3540, the Jun 16 low. Clearance of this price point would resume the downtrend. Any reversal higher would instead signal scope for a stronger retracement. Pivot resistance to monitor is at the 50-day EMA, at 1.3803.
