US TSYS: Tsys Gap Higher on Weak Jobs Data, Rate Cut Pricing Surges

Aug-01 19:18

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* Treasury futures gapped higher after lower than expected jobs gain for July, June gains sharply ...

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US OUTLOOK/OPINION: U/E Rate Seen Ticking Up To New Recent High In June

Jul-02 19:15
  • In the household survey, the unemployment rate has increased for four consecutive months, albeit at a steady pace in the last three months, with the 4.244% in May its highest since Oct 2021.
  • Analysts broadly expect this to tick higher to a rounded 4.3% in June but it of course doesn’t take much this month.
  • There’s a good chance of a bounce back in employment and the labor force after very large declines in May, with employment falling -696k and the labor force -625k for their largest monthly declines since Dec 2023.
  • That also left the participation rate at 62.37% (lowest since Dec 2022) and the employment to population ratio at 59.72% (lowest unrounded since Jan 2022).
  • The extent of this likely bounce back adds uncertainty to estimates although the trend is expected to show a rising unemployment rate. Indeed, the median FOMC participant at the June SEP lifted their u/e rate forecast for 4Q25 from 4.4% to 4.5% and for 4Q26 from 4.3% to the same 4.5%.
  • As for details, we’ll watch permanent job losers after they were steady in May at 1.92 million (rate of 1.12%) to suggest ongoing deterioration has stalled a little as well as a somewhat contradictory decline in job leavers in a sign of jobs market softness.
  • As usual, there isn’t consensus for the underemployment rate after it was steady at 7.8% in May. Of note within that, those working part-time for economic reasons, a rise in which is typically considered a sign of weakness, dipped for a 2nd consecutive month in May (66k after 90k) to a 4-month low.
A graph of a graph showing the amount of unemployment rate

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US TSYS/SUPPLY: June Auction Review: 5s Weak, 30s Strong

Jul-02 19:06

June’s Treasury coupon auctions were mixed, with four trading through and three tailing.

  • The 30-year auction was the standout on the strong side, trading 1.5bps through. Meanwhile, the weakest auction was the 5-year sale, which tailed by 0.7bps.
  • The 5-year Note tail was associated with a MNI Relative Strength Index (RSI) reading of -1.26, the weakest since October 2024. The primary dealer take-up of 11% was a touch above May’s 9%.
  • Meanwhile, the 30-year Bond attracted an RSI of 1.39, well above May’s 0.15 but still below April’s 1.97 (the April sale saw a 2.5bp tail). Primary dealer take-up in June was nonetheless just 11%, the lowest since November 2024.

June Auction Review: 

  • 2Y Note trade-through: 3.786% vs. 3.788% WI.
  • 2Y FRN: 0.157% high margin vs. 0.144% prior.
  • 3Y Note tail: 3.972% vs. 3.967% WI.
  • 5Y Note tail: 3.879% vs 3.872% WI.
  • 5Y TIPS: 1.650% high yield vs 1.660% prior.
  • 7Y Note trade-through: 4.022% vs. 4.024% WI.
  • 10Y Note trade-through: 4.421% vs. 4.430% WI.
  • 20Y Bond tail: 4.942% vs 4.940% WI.
  • 30Y Bond trade-through: 4.844% vs. 4.859% WI.
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EURJPY TECHS: Trend Set-Up Remains Bullish

Jul-02 19:00
  • RES 4: 171.28 1.382 proj of the Feb 28 - Mar 18 - Apr 7 price swing
  • RES 3: 171.09 High Jul 23 ‘24  
  • RES 2: 170.47 76.4% Fibonacci retracement for Jul - Aug ‘24 downleg
  • RES 1: 169.91 1.236 proj of the Feb 28 - Mar 18 - Apr 7 price swing
  • PRICE: 169.47 @ 16:23 BST Jul 02 
  • SUP 1: 168.46 Low Jul 01 
  • SUP 2: 167.41 20-day EMA 
  • SUP 3: 166.04 Low Jun 19   
  • SUP 4: 165.30 50-day EMA   

The trend set-up in EURJPY remains bullish and the cross is trading just below its latest highs. Recent gains resulted in a break of 166.69, the Oct 31 ‘24 high. Scope is seen for a climb towards 170.47, a key Fibonacci retracement point. Note that the uptrend is in overbought territory, a pullback would unwind this condition. Support to watch lies at 167.41, the 20-day EMA. A break of the EMA would suggest potential for a deeper retracement.