US TSYS: Powell Sell-Off Consolidated, Claims And Bills Ahead
Oct-30 10:52
- Treasuries consolidate yesterday’s shift lower, which had started below the FOMC decision before accelerating on a hawkish Powell – see the MNI Fed Review here.
- As part of Trump’s “12 out of 10” meeting with China’s Xi, the U.S. has agreed to remove a 10% fentanyl tariff imposed on Chinese goods, while its 24% reciprocal tariff will continue to be suspended for one year.
- QT will end on Dec 1, with the date chosen to give market participants time to adjust. MBS reinvestments will be made into Treasury bills as opposed to across the Treasury curve - an area of uncertainty ahead of the meeting.
- Cash yields are between 0-0.5bp lower on the day.
- 2Y yields trade at 3.596% after yesterday’s high of 3.610%. It comfortably cleared the 50d moving average we highlighted yesterday but the near- and medium-term chart is still interesting with next resistance at 3.6676% before the 100d MA rounded up to 3.70%
- TYZ5 trades at 112-25+ (-03+), consolidating yesterday’s slide and with healthy volumes of 430k as Asia and European investors react to Powell.
- An overnight low of 112-22+ built on clearance of latest support at 112-27 (50-day EMA), opening 112-16+ (Oct 10 low). The pullback extending has highlighted potential for a deeper retracement near-term.
- Today’s local docket is headlined by state-level jobless claims data in the afternoon (as has been the case under this government shutdown). Powell yesterday: “The fact we are not seeing an uptick in claims or a downtick in openings suggests that you are seeing maybe continued gradual cooling, but nothing more than that, so that does give you some comfort.”
- Data: Dallas Fed weekly economic index (1130ET), State-level jobless claims released during the afternoon
- Fedspeak: Bowman (0955ET) and Logan (1315ET) are both speaking but won’t touch on monetary policy with the FOMC blackout in place until tonight.
- Bill issuance: US Tsy $110B 4-wk bills, $95B 8-wk bills (1130ET)
- Politics: Trump flying back from Korea, arrives at the White House 1505ET
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US TSYS: Month End, Military Heads to Quantico, Data, US Govt Shutdown Looming
Sep-30 10:51
- A lot happening heading into month end in addition to looming US govt shutdown at midnight (barring last minute resolution), Pres Trump and Sec of War Hegseth to address senior military leaders at Quantico while data picks up with housing prices, Consumer Confidence, MNI Chicago PMI, JOLTS.
- The BLS plans to postpone key economic releases in the event of a shutdown: "BLS will suspend all operations. Economic data that are scheduled to be released during the lapse will not be released. All active data collection activities for BLS surveys will cease. The BLS website will not be updated with new content or restored in the event of a technical failure during a lapse." LINK
- Treasuries are trading modestly mixed w/ Bonds lagging 2s-10s: Tsy Dec'25 10Y contract (TYZ5) currently trades at 112-19 (+2.5) on moderate cumulative volumes of 220k. 10Y yield at 4.1309% (-.0078). Curves twist steeper: 2s10s +.236 at 51.852, 5s30s +1.404 at 98.214.
- A short-term bear cycle in Treasury futures remains in play. Last Thursday’s sell-off resulted in a print below the 50-day EMA, currently at 112-10+. A clear break of this average would undermine a bull theme and signal scope for a deeper retracement. This would open 111-13+, the Aug 18 low and the next key support. On the upside, initial firm resistance to watch is 113-00, the Sep 24 high.
- Economic Data: FHFA & S&P Cotality House Price Indexes (0900ET), MNI Chicago PMI (0945ET), JOLTS Jobs data (1000ET), Consumer Confidence (1000ET) and Dallas Fed Services Activity (1030ET).
- Treasury Auctions: $85B 6W & $50B 52W bills at 1130ET.
- Fedspeak: Fed VC Jefferson keynote speech earlier at 0600ET, Boston Fed Collins Council on Foreign Relations (0900ET), Dallas Fed Logan wraps up with a moderated discussion later this evening (1910ET).
- Politics: President Trump delivers remarks to the Department of War, Quantico (0900ET), returns to White House to make announcements (1100ET), executive orders signing (1500ET).
EGB FLOWS: A lot of activity in Block trades
Sep-30 10:41
A lot of activity in EGB Block trade, more than usual:
- RXZ5 ~2.91k at 128.60.
- UBZ5 ~1.28k at 114.50.
- IKZ5 950 at 119.87.
- IKZ5 518 at 119.84.
OUTLOOK: Price Signal Summary - Monitoring Support In USDJPY
Sep-30 10:40
- In FX, the trend theme in EURUSD remains bullish and the recent pullback appears corrective. Attention is on support at 1.1682. the 50-day EMA. It has been pierced, a clear break of this average would signal scope for a deeper retracement and expose 1.1574 initially, the Aug 27 low. For bulls, a clear resumption of gains would refocus attention on 1.1923, a 2.0 projection of Feb 28 - Mar 18-27 swing. Initial firm resistance to watch is 1.1820, the Sep 23 high.
- The bear cycle in GBPUSD that started Sep 17, remains in play. Recent weakness resulted in a break of 1.3491, a trendline support drawn from the Aug 1 low. This undermines a recent bullish theme. Note too that 1.3333, the Sep 3 low and a key support, has been pierced, opening 1.3282 next, the Aug 6 low. Initial key resistance to watch is 1.3537, the Sep 23 high. A break of this hurdle would signal a reversal.
- USDJPY has pulled back from last week’s high print. The move down - for now - appears corrective. Moving average studies are in a bull-mode position, highlighting a dominant uptrend. Support to watch lies at 147.59, the 50-day EMA. Pivot support has been defined at 145.49, the Sep 17 low. A resumption of gains would signal scope for a climb towards key resistance at 150.92, the Aug 1 high.
