US TSYS: Treasuries Reverse Midmorning Knee-Jerk Dive, 10Y Note Sale Tailed
Aug-06 19:37
- Treasuries look to finish near steady (FVU5 -.25) to mixed, curves steeper (2s10s +3.084 at 51.452) with the short end outperforming. Rates had gapped lower midmorning: TYU5 tapped 111-26.5 low before rebounding almost as quickly, not headline or Block driven though some 60k TYU traded over short period - deemed likely error driven.
- The Sep'25 10Y futures contract currently trades 112-07 (-2.5). Treasury futures remain strong on the back of the post-NFP rally having cleared resistance into the bull trigger at 112-12+, the Jul 1 high. This opens the May 1 high for direction at 112-23, a multi-month high. Clearance here opens retracement levels layered between 113-07 and 113-23.
- Speculation over whether Pres Trump will announce new Russia sanctions or nominees for Fed governor or BLS head, however, tethered risk appetites somewhat. Trump reportedly wants to meet with Putin and Zelenskiy next week sometime.
- Treasury futures retreated slightly (TYU5 -7 at 112-07.5, 4.2375% yld) after the $42B 10Y note auction (91282CNT4) tailed 1bp: drawing 4.255% high yield vs. 4.245% WI; 2.35x bid-to-cover vs. 2.61x prior.
- Limited midweek data, focus turns to ECB's economic bulletin tomorrow, US weekly jobless claims & unit labor costs, and latest Chinese trade balance numbers. Fed's Bostic expected to address monetary policy shortly after BoE rate decision.
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FED: Reserves Set To Continue Pulling Back As TGA Rebuilds (2/2)
Jul-07 19:31
Reserves fell $91B in the latest week to $3.26T, and continue to pull back from the early June high of $3.43T.
- This came alongside a $47B rise in reverse repo takeup, which in turn looks to be quarter/month-end related. It also came as the Treasury General Account rose $38B.
- With the debt limit having been lifted last week, Treasury is expected to ramp up bill issuance for the next couple of months to rebuild cash reserves.
- A TGA target of $800+B implies net bill issuance north of $400B by end-September.
- Outside of the rise in TGA amid net bill issuance, it should surge in mid-September amid coupon settlements and tax payments, bringing reserves down with it, making that the next true test of reserve "abundance".
AUDUSD TECHS: Pullback Appears Corrective
Jul-07 19:30
- RES 4: 0.6700 76.4% retracement of the Sep 30 ‘24 - Apr 9 bear leg
- RES 3: 0.6688 High Nov 7 ‘24
- RES 2: 0.6603 High Nov 11 ‘24
- RES 1: 0.6590 High Jul 01
- PRICE: 0.6514 @ 16:03 BST Jul 07
- SUP 1: 0.6486 Low Jul 07
- SUP 2: 0.6471/6373 50-day EMA / Low Jun 23 and a reversal trigger
- SUP 3: 0.6357 Low May 12
- SUP 4: 0.6275 Low Apr 14
The trend set-up in AUDUSD remains bullish and the latest pullback appears corrective - for now. Recent gains maintain the bullish price sequence of higher highs and higher lows, the definition of an uptrend. Note too that moving average studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 0.6603 next, the Nov 11 2024 high. Initial firm support to watch is 0.6471, the 50-day EMA.
FED: Discount Window Takeup Steadies In Latest Week (1/2)
Jul-07 19:27
The latest Federal Reserve H.4.1 release showed limited changes in the size of the Fed's assets and liabilities in the week to Wednesday July 2, with a small drop led by Treasury runoff.
- The latest week saw nominal Treasury holdings fall by around $7B, though the value of TIPS holdings rose $2.3B (presumably due to reflect revaluation on inflation compensation). SOMA runoff over the most recent 4-week period was just under $25B, above the longer-run expected average of $20B ($15B MBS, $5B Tsy).
- Discount window borrowing rose just under $0.5B to $6.4B for a fresh post-July 2024 high, though we don't see the rise as consistent with any sort of meaningful banking sector stress. Pandemic 13-3 program takeup fell $0.2B.
