US TSYS: Modestly Twist Steeper Within Payrolls Driven Ranges
- Treasuries sit twist steeper but within Friday’s payrolls-driven range.
- The JGB curve twist steepened following Sunday’s resignation of LDP leader Ishiba although spillover to Treasuries was limited with the Asia cash open.
- It’s a quieter start to the week with Trump remarks to the White House Religious Liberty Commission at 1010ET possibly the main scheduled event along with the NY Fed's consumer survey including its inflation expectations.
- Greater focus is on preliminary payrolls benchmark revisions, PPI and CPI over Tue-Thu, with previews for those out later today and tomorrow.
- Cash yields are between 0.8bp lower (2s) to 1.8bp higher (30s).
- Curves are off recent steeps, including 2s10s at 58.3bp off Wednesday’s 63.9bp and 5s30s at 119.3bp off 126.9bp post-NFPs (multi-year steeps).
- TYZ5 trades near unchanged at 113-11 (-01+) on modest cumulative volumes of 265k.
- The post-payrolls high of 113-21+ marked another fresh short-term cycle high and points to a bullish structure. It marks resistance after which lies 113-26+ (2.764 proj of Jul 15-22-28 price swing) whilst support is seen at 112-28+ (Sep 5 low).
- Data: NY Fed consumer survey Aug (1100ET), Consumer credit Jul (1500ET)
- Bill issuance: US Tsy $82B 13W & $73B 26W bill auctions (1130ET)
- Politics: Trump delivers remarks (1010ET)
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AUSSIE 10-YEAR TECHS: (U5) Recovers With Treasuries
- 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 @ 14:34 BST Aug 8
- 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 a poor NFP print. This keeps Aussie 10-year futures 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.
SECURITY: Trump To Sign Trilateral Peace Accord With Armenia/Azerbaijan Shortly
US President Donald Trump is shortly due to sign a trilateral peace agreement with Armenian Prime Minister Nikol Pashinyan and Azerbaijani President Ilham Aliyev at the White House. LIVESTREAM The event will provide another opportunity for Trump to style himself as peacemaker, after touting success in brokering peace deals between Rwanda/Congo, Cambodia/Thailand, and India/Pakistan.
- The accord aims to resolve a decade-long dispute over the sovereignty of Nagorno-Karabakh - a breakaway Azerbaijani province that was under de facto Armenian control from the dissolution of the Soviet Union until a 2020 war.
- Trump described the meeting on Truth Social as a “historic peace summit,” noting that the US will also sign “Bilateral Agreements [to] fully unlock the potential of the South Caucasus Region.”
- White House spokeswoman Anna Kelly told reporters that Trump would sign deals with both Armenia and Azerbaijan on energy, technology, economic cooperation, border security, infrastructure and trade.
- A White House official said: "It's about the entire region, and [the leaders] know that that region is known to be safer and more prosperous with President Trump."
- Reuters reports that the US will have development rights to build transportation links in the strategic Zangezur Corridor, a mountainous stretch of Armenian territory between Azerbaijan and its Nakhichevan exclave.
- Politico notes: “But whether this is just a photo opportunity or a lasting end to a conflict that has undermined stability in a region dominated by Russia and Iran will depend on whether the US can address several key challenges.”
FED: Balance Sheet Runoff Continues At Steady $20B/Month Pace (2/2)
Fed asset holdings were little changed in the past week. SOMA runoff totaled $2.8B (composed of $4.2B less nominal Tsy holdings and $1.4B more TIPS), with emergency lending/liquidity facilities $0.7B lower.
- Over the last 4 weeks, the $20B/monthly expected QT pace was roughly adhered to: MBS fell $18B, with Treasury net holdings down around $2B (a fall in TIPS holdings offsetting a slight rise in nominals).
- Discount window usage accounted for the fall in lending facility usage this week; takeup is now down to $4.9B, down $1.3B in the last month and down from the 1-year high of $6.4B set in July which looks to have been a temporary blip higher.
