US TSYS: Twist Steeper Ahead Of A Busy Session Including Powell and 2Y Supply
- Treasuries trade twist steeper although are within yesterday’s wide ranges.
- The front end is supported by crude oil futures adding to yesterday’s heavy declines on limited Iran retaliation to US strikes. The long end sees some spillover from German supply expectations following Reuters headlines with the DFA Q3 announcement, although losses have been pared there.
- Today sees a heavy session, with Fedspeak headlined by day one of Fed Chair Powell’s semi-annual congressional testimony plus an update on consumer confidence in June before 2Y supply.
- Cash yields are 1.9bp lower (2s) to 1.2bp higher (30s).
- TYU5 deals at 111-09+ (-05) on reasonable cumulative volumes of 385k.
- Yesterday’s high of 111-20+ comfortably breached resistance at 111-14+ (Jun 5 high and 61.8% retrace of May 1-22 downleg), highlighting a stronger reversal. It opens 111-30 (76.4% retrace) whilst support is seen at 110-21+ (50-day EMA).
- Data: Current account Q1 (0830ET), Philly Fed non-mfg Jun (0830ET), FHFA and S&P CoreLogic house prices Apr (0900ET), Conf Board consumer survey Jun (1000ET), Richmond Fed mfg Jun (1000ET)
- Fedspeak: Powell text (likely 0830ET), Hammack on mon pol (0915ET), Powell appearance (1000ET), Williams keynote remarks (1230ET), Kashkari town hall (1345ET), Collins on housing (1400ET), Barr (1600ET), Schmid on economic outlook (2015ET) – see FED bullet
- Coupon issuance: US Tsy $69B 2Y note auction - 91282CNL1 (1300ET). Last month’s 2Y auction was solid, with a 1bp trade through for its highest since Feb, although had some mixed peripheral stats.
- Bill issuance: US Tsy $55B 6W Bill auction (1130ET)
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JGB TECHS: (M5) Rallies off Lows
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 141.48/142.95 - High May 2 / High Apr 7
- PRICE: 139.40 @ 15:42 GMT May 23
- SUP 1: 138.54 - Low May 22
- SUP 2: 136.57 - 1.382 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
- SUP 3: 134.89 - 2.000 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
JGBs have rallied off recent lows and for now, however a bearish theme remains intact following the reversal that started Apr 7. A continuation lower would signal scope for an extension towards 136.57, a Fibonacci projection. On the upside, a reversal higher would instead refocus attention on 142.95, the Apr 7 high. The first important resistance to watch is 141.48, the May 2 high. A break of this level would be viewed as an early bullish signal.
US FISCAL: Total Tariff Income Jumping In May As New Rates Hit
Treasury reported a record $16.5B in customs/excise taxes on May 22, reflecting the large increase in tariff rates that went into effect in April.
- Today's report is important because it represents the largest tariff collections of the month which are typically on a due date around the 22nd, when most corporate importers make their payments.
- Thursday's one-day collection is a record, and the month has already set a new record. Tariff revenues have totaled $22.3B so far in May, and are came in at $17.4B in April (after averaging $8.1B/month in 2024).
- For the fiscal year as a whole so far, customs duties have totaled just under $93B, per the Treasury Daily Statement.
US FISCAL: Extraordinary Measures Continue To Dissipate Alongside Treasury Cash
Treasury's latest estimate of the size of "extraordinary measures" available to use "in order to prevent the United States from defaulting on its obligations as Congress deliberate[s] on increasing the debt limit" is down to $67B on May 21 (of an available $299B), vs $82B a week earlier.
- The amount hit the 2nd lowest level since the debt limit impasse started, at $46B, on May 20 (the low was $34B on Feb 24).
- With $476B in cash in the Treasury General Account on May 21, that left the total resources available to Treasury at $543B, the least since April 14 - the day before the annual April 15 tax deadline.
- Treasury Sec Bessent warned Congress earlier this month that "there is a reasonable probability that the federal government's cash and extraordinary measures will be exhausted in August while Congress is scheduled to be in recess. Therefore, I respectfully urge Congress to increase or suspend the debt limit by mid-July".
