US TSYS: Solid Session On Eve Of Fed Meeting
Sep-16 19:55
The short end continued to gain ground Tuesday on the eve of the Fed decision, but notably 10Y, 20Y, and 30Y Treasury yields were on course for their lowest close since April 4.
- Morning data saw Treasuries sell off, with August retail sales coming in on the hot side (as did import prices, offset by lower revisions), with the implied strong consumer dynamics later spurring an upgrade in the Atlanta Fed's GDPNow for Q3 growth to 3.41% from 3.09%.
- However, that would mark the low point of the session, with Treasuries finding a foothold as equities faded.
- The 20Y auction saw a small trade through (0.2bp) along with more encouraging internals, including he lowest dealer takeup since mid-2024. While there was little reaction in broader Treasuries, which had already moved to the session's best levels ahead of the auction, the auction cemented a positive tone for the space heading into Wednesday's Fed decision.
- The short-end/belly outperformed in a bull steepening move overall. Fed rate cut expectations extended very mildly on the day (about 1bp through the next 5 FOMC meetings), with a 25bp cut Wednesday a little over 100% priced, and 68bp total through end-year.
- Latest levels: The 2-Yr yield is down 2.5bps at 3.5116%, 5-Yr is down 1.6bp at 3.5900%, 10-Yr is down 0.6bps at 4.0317%, and 30-Yr is down 1bps at 4.6506%. Dec 10-Yr futures (TY) up 1.5/32 at 113-16.5 (L: 113-8.5 / H: 113-18.5)
- Data is on the light side Wednesday (MBA mortgage apps and housing starts/permits), leaving the stage clear for the FOMC decision and projections and Chair Powell's press conference. Besides the expected cut (and outside chance of 50bp), there will be with attention on any shift lower in the 2025 rate "Dots" as well as potential dissents. Much more in our preview here.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
AUSSIE 10-YEAR TECHS: (U5) Follows Fade in Treasuries
Aug-15 22:15
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.960 - High Apr 7
- PRICE: 95.710 @ 15:17 BST Aug 15
- SUP 1: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.707 - 1.0% 10-dma envelope
Aussie 10-yr futures received a boost from the US Treasury rally that followed both the recent poor NFP print as well as Tuesday’s inflation number. While this impact faded into the close of the week, 10-year futures remain toward the top end of the recent range. To the upside, next resistance is at 96.207, a Fibonacci retracement point. Next support undercuts at 95.420 (pierced), the Feb 13 low, ahead of 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
FOREX: USD Index Pinned to 50-dma as Putin Shakes Hands with Trump
Aug-15 20:49
- USD slipped against all others Friday, with a poor set of retail sales and Uni of Michigan sentiment numbers meeting a higher-than-expected import price index to further stimulate concerns over a stagflarionary phase in the US economy. The USD Index trades either side of the 50-dma which, notably, has begun to flatten out after maintaining a solid downtrend throughout 2025.
- JPY is the strongest currency in G10, extending the breakout and bearish conclusion of the consolidation phase in USD/JPY. Recent weakness puts the price through support drawn off the early August lows as well as 146.71, a key retracement. Price action this week marks a full reversal of the previously overbought condition, keeping the downside argument in focus.
- Anticipation ahead of the Putin-Trump meeting has reached fever pitch. Footage showing the Presidents shaking hands in Alaska has helped ease concerns over a hostile meeting, but it's the outcomes that will matter to markets - particularly as equities hold at alltime highs. Any signs of progress toward a ceasefire would be warmly received by risk sentiment - although both Trump and Putin cautioned against a optimistic outcome in comments to press.
- We noted earlier in the week the pressure building on USD/HKD, with price action not matching the pattern of HKMA intervention. That move extended overnight, and is still building at typing, putting spot down to new pullback lows of 7.8119 shortly after the European open. Overnight swap rates have surged further still Friday (hitting 1.7% at typing), well ahead of the 0.3% prevailing rate mid-week and should continue to support a recovery in HIBOR fixes ahead. Today's 1m HIBOR fixed higher by 41bps, hitting 1.45% for the highest fix since mid-May. It's these factors that should work against the HKD carry trade (selling HKD, buying USD), evident in the further tightening of the HKD forward discount today: down 975 points from as high as 1270 this month.
- Focus in the coming week shifts to Jackson Hole and Powell's comments on Friday. With the September meeting still in flux - any conviction toward tipping the board toward a rate cut at the next FOMC will be carefully watched, but it's a hawkish outturn that could be more consequential for markets, as OIS prices a near 90% chance of easing on September 17th.
MNI: US TSY TICS NET FLOWS IN JUN +$77.8B
Aug-15 20:00
- MNI: US TSY TICS NET FLOWS IN JUN +$77.8B
- US TSY TICS NET L-T FLOWS IN JUN +$150.8B
