OIL PRODUCTS: Oil Products End of Day Summary: Cracks Rise 

The Treasury curve bear steepened Monday, aligning with global developments.

• Most of the uptick in yields was on the open, triggered by pressure in long-end JGBs following the surprise win in the LDP leadership election of Sanae Takaichi, who has been a proponent of fiscal expansion to support growth.
• Indeed, political intrigue was a pervasive theme on the day, with the French Prime Minister unexpectedly resigning, trigging a brief risk-off rally in core instruments including Treasuries.
• But apart from another move lower in mid-morning, yields were content to drift higher through most of the rest of the session, set to close near the highs.
• TY futures remain between near-term support/resistance levels - Dec 10-Yr futures (TY) down 9.5/32 at 112-12 (L: 112-11.5 / H: 112-19.5), remaining poised around support at 112-12+/01 50-day EMA / 50.0% of Jul 15 - Sep 11 upleg).
• Latest cash levels: The 2-Yr yield is up 2.1bps at 3.5966%, 5-Yr is up 3.1bps at 3.7462%, 10-Yr is up 4.5bps at 4.1637%, and 30-Yr is up 4.9bps at 4.7605%.
• There was no major data scheduled for publication Monday but the federal government shutdown (which seems not to be close to being resolved) ensures there will be limited releases the rest of the week: Tuesday brings Redbook retail sales, the NY Fed consumer expectations survey, and the Federal Reserve's consumer credit release.
• Additionally, nominal Treasury auction supply resumes with the first sale of the month ($58B in 3Y  Note).
• We hear from KC Fed's Schmid on the economic outlook and monetary policy after the cash close today, with Tuesday bringing Bostic, Bowman, Kashkari, and Miran.

• RES 4: 178.94 1.236 proj of the Jul 31 - Sep 29 - Oct 2 price swing  
• RES 3: 177.67 1.000 proj of the Jul 31 - Sep 29 - Oct 2 price swing 
• RES 2: 177.00 Round number resistance 
• RES 1: 176.25 Intraday high      
• PRICE: 175.73 @ 16:30 BST Oct 6
• SUP 1: 173.92 Intraday low
• SUP 2: 172.27 Low Oct 2 and key support   
• SUP 3: 171.12 Low Aug 28  
• SUP 4: 170.62 Low Aug 6   

The trend in EURJPY is unchanged, it remains bullish. Today’s strong start to this week’s session reinforces current conditions. The cross has cleared resistance at 175.13, the Sep 29 high, to confirm a resumption of the primary uptrend. This maintains the bullish sequence of higher highs and higher lows and opens the 177.00 handle next. On the downside, key short-term support has been defined at 172.27, the Oct 2 low.  

Long-end yields rose across EGB and Gilt curves, with OATs underperforming on renewed political/fiscal concern.

• The surprise resignation of Prime Minister Lecornu saw OAT spreads widen sharply, with President Macron giving his now ex-PM 48 hours to hold final discussions with political parties to see whether the ongoing budget impasse can be overcome.
• Other semi-core and periphery EGB spreads widened, but more modestly, and closed below session wides.
• More broadly, global curves steepened after longer-end JGBs underperformed following the election of a new Japanese PM overnight.
• On the day, the German curve twist steepened, while the UK's bear steepened.
• In data, Eurozone retail sales extended their recent tepid trend in August, while underlying Spanish industrial production momentum remains constructive despite two consecutive monthly falls.
• Tuesday's calendar includes German factory orders, and appearances by ECB's Nagel and Lagarde.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is down 1.2bps at 2.007%, 5-Yr is up 0.3bps at 2.305%, 10-Yr is up 2.1bps at 2.719%, and 30-Yr is up 2.9bps at 3.296%.
• UK: The 2-Yr yield is up 2.6bps at 3.992%, 5-Yr is up 3.5bps at 4.153%, 10-Yr is up 4.6bps at 4.736%, and 30-Yr is up 5.4bps at 5.555%.
• Italian BTP spread up 0.8bps at 82.1bps / French OAT up 3.8bps at 85.1bps