US TSYS/SUPPLY: Quarter-End TGA Cash Targets And "X-Date" In Focus (2/2)
Note that the expected 2nd (calendar year 2025) quarter borrowing requirements are much lower than in Q1 - that's typical and reflective of the large tax receipts in April. Treasury's estimated financing needs will largely reflect their forecasting of those receipts. MNI's estimate of $450B marketable borrowing may this be very much on the high side (we wouldn't be shocked by a figure closer to $0-100B).
- The debt limit is expected to be sustained for a few quarters, which means that Treasury will have to burn through some of its Treasury General Account cash pile ($745B at end-2024).
- Having targeted $850B by end-March in the previous refunding, we assume that they will maintain that assumption, with only a small dip in the following quarter.
- However expectations differ widely on this, with at least one analyst (Wrightson ICAP) seeing $500B projected cash at end-quarters. A lower/higher cash balance reduces/increases the number in the financing need column, and vice-versa. A “realistic” number would be closer to $300-400B for both quarters.
- The Fed’s expected (per primary dealers/analysts) conclusion to balance sheet runoff by Q3 could help by moderating net financing requirements, but this is very unlikely to be incorporated in Treasury’s assumptions. That means that the projected net financing requirements will be higher than they are expected to be in reality by private sector analysts.
- We could get more color on Treasury’s approach to dealing with the debt limit with Wednesday’s Refunding documents, including on extraordinary measures and cash management strategy, but any discussion is likely to remain tentative and apolitical.
- Note most analysts see the “x-date” by which Treasury risks running out of cash as being around August, though some see risks/core scenario of a much earlier resolution (ie March). More detail is available in our Refunding Preview.
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JGB TECHS: (H5) Returns Lower
- RES 3: 149.55 - High Mar 22 (cont)
- RES 2: 147.74 - High Jan 15 and bull trigger (cont)
- RES 1: 144.48/146.53 - High Nov 11 / High Aug 6
- PRICE: 142.12 @ 15:01 GMT Jan 03
- SUP 1: 141.65 - Low Dec 30
- SUP 2: 141.56 - 1.764 proj of the Aug 6 - Sep 3 - 9 price swing
- SUP 3: 141.05 - 2.000 proj of the Aug 6 - Sep 3 - 9 price swing
Markets slipped on the hawkish Fed and are yet to fully recover, touching 141.65 on the way lower. Medium-term trend signals on the continuation chart continue to point south. A resumption of the trend would pave the way for a move towards 141.56, a Fibonacci projection point on the continuation chart. A stronger recovery would open 144.48, the Nov 11 high. Further out, key resistance is at 146.53, the Aug 6 high (cont).
USDCAD TECHS: Bull Flag Highlights A Clear Uptrend
- RES 4: 1.4669 2.0% 10-dma envelope
- RES 3: 1.4539 3.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 2: 1.4508 3.236 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4467 High Dec 19
- PRICE: 1.4392 @ 15:50 GMT Jan 3
- SUP 1: 1.4336 Low Dec 20
- SUP 2: 1.4307/4232 20-day EMA / Low Dec 17
- SUP 3: 1.4136 50-day EMA
- SUP 4: 1.4011 Low Dec 5
USDCAD is unchanged and bulls remain in the driver’s seat. The latest pause appears to be a flag formation - a bullish continuation signal. Note too that moving average studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 1.4508 next, a Fibonacci projection level. Initial firm support to watch lies at 1.4307, the 20-day EMA. A pullback would be considered corrective.
AUDUSD TECHS: Southbound
- RES 4: 0.6471 High Dec 9
- RES 3: 0.6408 50-day EMA
- RES 2: 0.6341 High Dec 18
- RES 1: 0.6247/6282 High Dec 30 / 20-day EMA
- PRICE: 0.6204 @ 15:21 GMT Jan 3
- SUP 1: 0.6179 Low Dec 31
- SUP 3: 0.6158 1.236 proj of the Sep 30 - Nov 6 - 7 price swing
- SUP 3: 0.6100 Round number support
- SUP 4: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
A bearish trend condition in AUDUSD remains intact and the pair continues to trade closer to latest lows. Recent weakness maintains the price sequence of lower lows and lower highs. Note that moving average studies are in a bear-mode position too, highlighting a dominant downtrend. Scope is seen for an extension towards 0.6158 next, a Fibonacci projection. Initial firm resistance to monitor is 0.6282, the 20-day EMA.
