US TSYS: Off Highs But Bull Steeper Amidst Broad Risk-Off
- Treasuries have traded bull steeper overnight, supported by broad risk-off moves with equity and crude oil futures under pressure throughout the session.
- Today sees a thin docket, headlined by Fed VC Supervision Bowman and a weekly retail sales indicator update. There is likely continued attention on corporate issuance after recent heavy supply from major names including Alphabet and Meta.
- Government shutdown proceedings will also be watched closely after leading Senate Republicans and Democrats talked of a possible off-ramp yesterday.
- Yesterday saw Treasury borrowing estimates below MNI expectations and at the lower end of most estimates seen. Current quarter borrowing requirements were lowered to $569B from August's $590B estimate and the initial estimate of Jan-Mar requirements saw a slight further uptick to $578B. The full QRA will as usual follow tomorrow (MNI preview here).
- Cash yields are 1.5-3bp lower, led by 2s. 2Y yields at 3.576% are off a session low of 3.564% but that still only pared about half of the push higher after a hawkish Powell last Wednesday.
- 2s10s at 51.7bp (+1bp) continues to lift off last week’s low of 46.4bp at what was its lowest since early August.
- TYZ5 trades at 112-25+ (+04) on solid cumulative volumes of 335k, off an overnight high of 112-28+.
- The earlier increase pushed it closer to resistance at 113-03 (20-day EMA) after which lies 113-18+ (Oct 28 high) but markets are likely still attentive to further declines with support seen at 112-16 (Oct 30 low).
- Data: Redbook retail sales the sole data release today. Trade, JOLTS and factory orders are all postponed under the government shutdown.
- Fedspeak: Bowman (0635ET)
- Bill issuance: US Tsy $95B 6W bill auction (1130ET)
- Politics: Trump has no public events scheduled. Press briefing by WH Press Sec Leavitt (1300ET)
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USDCAD TECHS: Fresh Cycle High
- RES 4: 1.4111 High Apr 10
- RES 3: 1.4045 3.0% Upper Bollinger Band
- RES 2: 1.4019 38.2% retracement of the Feb 3 - Jun 16 bear leg
- RES 1: 1.3989 200-dma
- PRICE: 1.3953 @ 16:02 BST Oct 3
- SUP 1: 1.3897/3825 Low Sep 30 / 50-day EMA
- SUP 2: 1.3727 Low Aug 29 and a bear trigger
- SUP 3: 1.3689 Low Jul 28
- SUP 4: 1.3637 Low Jul 25
A bull cycle in USDCAD remains intact and yesterday’s break above the late September’s high, firms the bullish theme. This move higher also maintains the bullish price sequence of higher highs and higher lows. Note too that moving average studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 1.4019, a Fibonacci retracement point. On the downside, first key support lies at 1.3825, the 50-day EMA.
AUDUSD TECHS: Support Remains Intact For Now
- RES 4: 0.6763 1.382 proj of the Jun 23 - Jul 24 - Aug 21 price swing
- RES 3: 0.6726 1.236 proj of the Jun 23 - Jul 24 - Aug 21 price swing
- RES 2: 0.6660/6707 High Sep 18 / 17 and key resistance
- RES 1: 0.6629 High Sep 30 & Oct 01
- PRICE: 0.6603 @ 16:01 BST Oct 3
- SUP 1: 0.6527/21 61.8% of the Aug 21 - Sep 17 bull leg / Low Sep 26
- SUP 2: 0.6484 76.4% retracement of the Aug 21 - Sep 17 bull leg
- SUP 3: 0.6463/6415 Low Aug 27 / Low Aug 21 / 22 and a bear trigger
- SUP 4: 0.6373 Low Jun 23
The AUDUSD uptrend remains intact and recent weakness appears to have been a correction. Support to watch lies at the 50-day EMA, at 0.6558. A clear break of this average would signal scope for a deeper retracement and expose 0.6527 once again, a Fibonacci retracement. For bulls, a stronger reversal higher would refocus attention on 0.6707, the Sep 17 high. Initial resistance to watch is 0.6629, the Sep 30 and Oct 1 high.
US TSYS/SUPPLY: September's Coupon Auctions Were Generally Solid (2/2)
September’s coupon auctions were generally solid, with three lines trading through, two coming out on the screws and two tailing slightly.
- Looking through the lens of MNI’s Relative Strength Indicator (RSI), five lines saw positive readings while two saw negative readings.
- The 3-year sale was the strongest auction of the month according to MNI’s RSI. The 3-year line traded through 0.7bps, the largest stop through in seven months. Meanwhile, the primary dealer take-up was just 8.4%, the lowest on record (data going back to 2003).
- The weakest sale of the month was the last – the 7-year line. This line saw the second consecutive 0.5bp tail, with the 12.0% primary dealer take-up above August’s 9.8% and July’s record low 4.1%.
September Auction Review:
- 2Y Note on-the-screws: 3.571% vs. 3.571% WI.
- 2Y FRN: 0.200% high margin vs. 0.195% prior
- 3Y Note trade-through: 3.485% vs. 3.492% WI.
- 5Y Note tail: 3.710% vs 3.709% WI.
- 7Y Note tail: 3.953% vs. 3.948% WI.
- 10Y Note trade-through: 4.033% vs. 4.047% WI.
- 10Y TIPS: 1.734% high yield vs. 1.985% prior
- 20Y Bond trade-through: 4.613% vs 4.615% WI.
- 30Y Bond on-the-screws: 4.651% vs. 4.651% WI.
