US TSYS: Twist Steeper With ADP, ISM Services, QRA & Shutdown Progress All Eyed
Nov-05 11:36
- Treasuries have pared gains to trade mildly twist steeper on decent overnight volumes ahead of a heavier docket with multiple focal points including ADP (0815ET), Treasury's QRA (0830ET) and ISM services (1000ET) – see preview links below.
- Larger gains in early Asia trade were pared with help from a report on a handful of moderate Senate Democrats considering voting to end the government shutdown whilst some colleagues to their left urge them to hold out.
- Odds of the shutdown ending sooner rather than later had improved since Monday with an acceleration in rank-and-file talks aimed at finding an offramp. However, our political risk team cautions that a strong performance in yesterday’s elections may temper optimism by validating Democrats’ assumption that voters approve of Senate Minority Leader Schumer’s hardline strategy to extract concessions on healthcare.
- Cash yields range from 1bp lower to 0.5bp higher.
- TYZ5 trades at 112-27, back to only 2 ticks higher off an overnight high of 113-02 on elevated cumulative volumes of 385k.
- That 113-02 marks new initial resistance although it needs to trade above 113-18+ (Oct 28 high) to signal a possible bullish reversal away from recent lows. Support is seen at 112-16 (Oct 30 low).
- Data: MBA mortgage applications (0700ET), ADP Oct (0815ET), S&P Global serv/comp PMI Oct final (0945ET), ISM services Oct (1000ET)
- Fedspeak: A break in scheduled appearances todayqra
- Bill issuance: US Tsy $69B 17W bill auction (1130ET)
- Politics: Trump delivers remarks at breakfast with Republican Senators (0830ET), Trump delivers remarks at America Business Forum Miami (1300ET)
- MNI QRA preview found here. It predates Monday’s borrowing estimates which were below MNI expectations and at the lower end of most estimates seen. Current quarter borrowing requirements were lowered to $569B from August's $590B estimate and the initial estimate of Jan-Mar requirements saw a slight further uptick to $578B.
- ADP mini preview: See "Private Labor Indicators To Watch Over The Next Two Days" [Nov 4]
- ISM services preview: “Oct ISM Services: Activity Steadying Out At A Weak Level (1/2)” and “Oct ISM Services: Price Gauge Seen At 4-Month Low (2/2)” [Nov 4]
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GILTS: Basis Trades
Oct-06 11:15
Gilt Basis trades:
20 minutes ago:
- G Z5 1.46k at 90.48.
Now:
- G Z5 1.46k at 90.54.
EGB FUNDING UPDATE: AFT may publish France's 2026 issuance plans at any time
Oct-06 10:55
- With the 13 October deadline to submit the Budget to parliament almost certain to be missed we look at when the AFT has published its year-ahead funding plans in recent years.
- France's AFT (Agence France Tresor) normally publishes its year-ahead "funding situation" which includes an outline for issuance volumes in September. For reference between 2016-2023 it was published between 22-28 September.
- Last year, despite the political uncertainty, the government did still present a budget to parliament on 9 October - meeting the 70 day timeline required for parliament to deliberate.
- The AFT then published its 2025 provisional plans on 10 October - the day after the budget was submitted to parliament.
- In the absence of anything else, the AFT may choose to use broadly unchanged numbers from 2025 for the deficit size. Together with an extra E10-11bln of MT/IL debt due to mature in 2026, we think that expectations will be for the 2026 gross issuance plan to be around E310-315bln. This follows E300bln in 2025, E285bln in 2024, E270bln in 2023 and E260bln in 2022.
- The AFT may chose to publish this initial estimate at any time - it may decide that the political turmoil won't lead to a definitive outcome any time soon so publish imminently, or may leave until later this year. There is no real precedent here.
- Note that the more detailed update has been published later in the last couple of years: on 19 December in 2024, 13 December in 2023, 7 December in 2022, 10 December in 2021 and 9 December in 2020.
OUTLOOK: Price Signal Summary - Gold Bulls Still In The Driver's Seat
Oct-06 10:52
- On the commodity front, a bull cycle in Gold remains in play and today’s fresh cycle high, reinforces current conditions. This maintains the bullish price sequence of higher highs and higher lows and note too that corrections, when they do occur, are shallow. Furthermore, momentum studies highlight a condition known as momentum drag - where momentum studies remain in overbought territory and move sideways. This condition reinforces the current trend direction. Sights are on $3987.3 next, a 2.236 projection of the May 15 - Jun 16 - 30 price swing. Support to watch lies at $3715.0, the 20-day EMA.
- In the oil space, WTI futures remain in a bear-mode condition. Last week’s sell-off resulted in a move through key support and the bear trigger at $60.85, the Aug 13 low. Clearance of this level strengthens a bearish theme and paves the way for an extension towards $57.50, the May 30 low. Initial firm resistance has been defined at $66.42, the Sep 29 high. Clearance of this level would highlight a reversal.
