US TSYS: Treasuries Bid Ahead FOMC, Strong 7Y Sale, JOLTS Jobs Recede
- Treasuries look to finish near late session highs, TYU futures back at last week's highs on July 22 as markets consolidate ahead of tomorrow's FOMC rate annc.
- A strong 7Y note auction helped rates extend highs after the $44B note sale (91282CNR8) stopped through again: 4.092% high yield vs. WI of 4.120%; bid-to-cover 2.79x from 2.46x prior. Peripheral stats: Indirect take-up retreats to 62.26% vs. 76.74% prior; Direct take-up climbed to new high at 33.68% vs. 11.62% prior; Dealers fell to new low of 4.06% vs. 11.64% prior.
- First half support: Tsys extended highs briefly after lower than expected JOLTS openings, quits level lower (prior down-revised), layoffs broadly lower than expected. Prior to JOLTS, little react to Advance Goods Trade Balance, import decline and less negative goods export. Wholesale inventories slightly higher than expected, retail inventories in-line.
- Tsy Sep'25 10Y contract trades +19 at 111-11.5 vs. 111-12.5 high; nearing initial technical resistance at 111-14.5 (High Jul 22). A clear break would highlight a stronger reversal and open 111-28, the Jul 3 high. Key support remains intact at 110-08+, the Jul 14 and 16 low. A move through this support would reinstate a bearish theme.
- Curves bull flatten: 2s10s -3.051 at 44.734, 5s30s -3.148 at 95.557.
- Cross asset: Bbg US$ index firmer but off highs: BBDXY +1.65 at 1209.76 (1212.47 high); stocks moderately lower (SPX eminis -19.75 at 6403.0); gold firmer +9.30 at 3323.91.
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US FISCAL: Available "Extraordinary" Measures To Ward Off X-Date Pick Up
Treasury reported Friday that as of Jun 25 it had $130B in remaining "extraordinary" measures (of a total $378B available) to ward off an "x-date" of running out of resources before defaulting. That's the highest in 2 weeks.
- Combined with $334B cash as of Jun 25 (after a bit of a buildup after the mid-June tax deadline), that's a total of roughly $465B in total resources available.
- We noted earlier this week that Treasury told Congress that it was required to extend its debt issuance suspension period from Jun 27 to Jul 24, in effect prolonging the use of extraordinary measures while we await a resolution to the debt limit impasse, probably through the fiscal legislation currently going through Congress.
- Realistically, fiscal dynamics so far this year point to potential for Treasury to get into September without running out of cash + extraordinary measures. That seems to be the broad market expectation.
US DATA: Cleveland, Dallas Fed PCE Medians Show Progress But Still Above-Target
The Cleveland and Dallas Fed's median PCE metrics showed a notable drop in May. All indices suggest PCE inflation running above 2%, and higher than the actual core and headline PCE measures, but pressures appear to have cooled from a pickup in the early months of the year.
- The Cleveland Fed's median PCE measure came in at 0.22% M/M, a 10-month low after April's 15-month high 0.31%. This left median PCE at 3.01% on a Y/Y basis, down from 3.06% prior for a the joint-lowest (with Feb) since September 2021.
- The Dallas Fed's annualized median rate fell to 2.01%, from 2.65% prior for a 10-month low. The 6-month annualized rate edged lower to 2.74% (2.76% prior), a 4-month low, with the Y/Y rate ticking down to 2.55% from 2.56%, echoing the Cleveland Fed for the lowest reading since September 2021.
USDCAD TECHS: Pivot Resistance Remains Intact
- RES 4: 1.4111 High Apr 4
- RES 3: 1.4016 High May 12 and 13 and a key resistance
- RES 2: 1.3920 High May 21
- RES 1: 1.2710/3803 20- and 50-day EMA values
- PRICE: 1.3658 @ 16:23 BST Jun 27
- SUP 1: 1.3618 Low Jun 26
- SUP 2: 1.3540 Low Jun 16 and the bear trigger
- SUP 3: 1.3503 1.618 proj of the Feb 3 - 14 - Mar 4 price swing
- SUP 4: 1.3473 Low Oct 2 2024
USDCAD has pulled back from its recent highs. The primary downtrend remains intact and short-term gains appear to have been corrective. Key support and the bear trigger has been defined at 1.3540, the Jun 16 low. Clearance of this price point would resume the downtrend. Any reversal higher would instead signal scope for a stronger retracement. Pivot resistance to monitor is at the 50-day EMA, at 1.3803.
