UK: Rayner Expected To Leave Govt, Trigger Cabinet Reshuffle - Times

• Treasuries are cheaper and steeper with similar moves seen in EGBs. It’s a quiet docket ahead, with likely added attention on 10Y supply at 1300ET.
• WTI futures are +1.7% whilst S&P 500 futures are +0.2% having halved earlier gains (along with fixed income moving off lows).
• President Trump is set to make an announcement from the Oval Office at 1630ET according to Roll Call, topic unknown. He yesterday said he will decide on Fed Governor Kugler’s replacement by the end of the week, which could rule that out, but potential topics include a decision on Russian secondary sanctions or the appointee of new BLS commissioner.
• Cash yields are 0.6-3.2bp higher, with increases led by 30s.
• The steepening sees only a partial retracement of Mon/Tue flattening away from Friday’s post-payrolls steeps. 5s30s have seen the more pronounced moves, currently at 102.5bp (+2bp) having hit joint ytd highs of circa 108.5bps with Monday’s Asia open.
• TYU5 trades at 112-02+ (-07), close to session lows of 112-00 on another overnight with subdued cumulative volumes of 230k.
• It pulls back further from what is now latest resistance at 112-15+ from the Aug4/5 overnight high (after which lies 112-23, May 1 high)). Support is some way lower at 110-19+ (Jul 24 low).  
• Data: MBA mortgage applications (0700ET)
• Fedspeak: Cook & Collins (1400ET), Daly (1610ET, incl text) – see STIR bullet
• Coupon issuance: US Tsy $42B 10Y Note auction - 91282CNT4 (1300ET). Last months’ 10Y saw a small 0.3bp stop along with mixed internals including bid-to-cover rising from 2.52 to 2.61 but indirect take retreating from 70.6% to 65.4%.
• Bill issuance: US Tsy $65B 17W bill auction (1130ET)

• Some spillovers in the Dollar following the spike noted earlier in the EURUSD, aside from the order flow we have mentioned at the Time we have not seen a new driver.
• US Equities have pared some gains, but the moves are minimal, and US Tnotes is still hovering closer to its session low.
• It's a new intraday low for the Dollar against the CAD, AUD, NOK, GBP, NZD, ZAR, CNY and CNH.
• The Kiwi is still leading within G10 FX, and targets 0.5937 next.
• The EURUSD is testing 1.1607 20-day EMA, although it did print a 1.1611 high, and recall that there's 1.33bn worth of Option expiry for Today at 1.1600.

Analysts draw a bit mixed conclusions from today's German manufacturing orders data (our commentary here: June Factory Orders Constitute A Move Sideways On Weak Levels), with Commerzbank screening a little more pessimistic than JP Morgan:

• Commerzbank: "Overall, order intake excluding major orders is thus back at the level seen at the beginning of the year, once again dashing hopes for a sustained recovery in German industry. Early indicators such as the purchasing managers' index in the manufacturing sector and the Ifo business climate index had pointed to a slight recovery in the second quarter. However, these positive expectations are clearly not yet reflected in hard order figures. This underlines our assumption that the German economy will only grow moderately this year."
  • "There is now a risk that US tariffs will create further headwinds for German industry. In June, orders from abroad fell by 3.0%. This is exclusively attributable to trade with countries outside the eurozone. This could already be an indication of the damaging effect of US tariffs on German exports."
• JP Morgan: "factory sales and VDA car production showed broad stability, although with some noise [...] Domestic orders are still not really turning higher, which is disappointing, but the fiscal shift is likely to provide support going forward. As a cross-check on the data, the new orders index of the German manufacturing PMI is signalling broadly stable orders at present, rather than positive growth. But even that is an improvement from where the PMI has been a few months ago."