US TSYS: TYZ5 Sees Fresh Cycle Highs Ahead Of A Busy Docket
Sep-04 10:56
- After somewhat muted Asia trade, Treasuries have extended yesterday’s JOLTS-driven gains for new recent highs.
- It’s been assisted by firmer EGBs, with gains extended after the smooth passing of Spanish and French supply.
- Today sees many potential risk events, including ADP employment, jobless claims, ISM services, Miran’s nomination hearing, broader Fedspeak and potential Cook lawsuit headlines.
- Cash yields are 2-3bp lower on the day, with declines led by 7s.
- 30Y yields are now down to 4.8715% (-2.5bp) after yesterday’s failed clearance of 5.00% having last been higher on Jul 18.
- Curves mostly consolidate yesterday’s bull flattening, a move that continued right up to the close. That includes 5s30s at 120.8bp after fresh cycle highs of 124.6bp seen Tue/Wed.
- TYZ5 trades close to session and fresh short-term cycle highs of 112-23+ (+04), extending the mid-week shift away from Tuesday lows of 111-31. Volumes are thin at 215k ahead of a busy docket.
- It confirms a resumption of the uptrend and paves the way for an extension towards 112-28+ (Fibo projection) before the round 113-00.
- Data: Challenger jobs report Aug (1230ET), ADP report Aug (0815ET), Weekly jobless claims (0830ET), Productivity/ULCS Q2 final (0830ET), Trade balance Jul final (0830ET), S&P Global serv/comp PMI Aug final (0945ET), ISM services Aug (1000ET)
- Fedspeak: Williams on economic outlook and mon pol (1205ET, text + Q&A), Goolsbee in Q&A (1900ET, text tbd but Q&A) – see STIR bullet
- Bill issuance: US Tsy $100B 4W & $85B 8W bill auctions (1130ET)
- Politics: President Trump hosts tech leaders for a dinner in the Rose Garden (1930ET)
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Historical bullets
BUNDS: BTP/Bund spread extends below 80.00bps
Aug-05 10:50
- BTP/Bund is just 0.6bp tighter, but it is clearing the Psychological 80.00bps Mark, now trading at 79.4bps.
- Technically, noted multiple times of late, that looking at that longer term chart, aside from the April 2010 low situated at ~75.4bps, the next big support resides at 65.37bps, the 2009 low.
US TSYS: Modestly Lower But Rangebound, ISM Services And 3Y Supply In Focus
Aug-05 10:47
- Treasuries are modestly lower across the curve but continue to hold a relatively narrow range seen since Friday’s nonfarm payrolls and less so ISM manufacturing reports were digested.
- Moves have been aided by equity futures consolidating yesterday's strong gains.
- Today’s focus should be on ISM services with sensitivity to further downside surprises whilst 3Y supply will be watched closely. There’s little scheduled for President Trump today, signing an executive order at 1600ET, but markets will be on watch for any potential contenders for Fed Governor Kugler’s position and the new BLS commissioner.
- Cash yields are 1.5-2.5bp higher on the day, with increases led by the front end.
- 2Y yields, currently at 3.6996%, appear to have found some support at 3.65% in the post-payrolls period, with a low of 3.655% with Monday’s Asia open. They last traded below this level in late April/very early May.
- TYU5 trades at 112-09 (-03), easing back from an overnight high for a second day running albeit at a slower pace today. Cumulative volumes are low at 230k.
- The latest high of 112-15+ more comfortably cleared resistance at a bull trigger of 112-12+ (Jul 1 high) and briefly 112-15 (61.8% retrace of Apr 7-11 sell-off). A firmer break could open 112-23 (May 1 high).
- Data: Trade balance Jun (0830ET), S&P Global US serv/comp PMI Jul final (0945ET), ISM services Jul (1000ET)
- Fedspeak: None scheduled
- Coupon issuance: US Tsy $58B 3Y Note auction - 91282CNU1 (1300ET)
- Bill issuance: US Tsy $85B 6W & $50B 52W bill auctions (1130ET)
SWITZERLAND: Keller-Sutter To Visit US In Effort To Avoid 39% Tariffs
Aug-05 10:37
The Swiss gov't has confirmed president of the Swiss Confederation, Karin Keller-Sutter, will travel to Washington, D.C., today (5 August) to discuss the 39% tariff rate imposed as part of US President Donald Trump's 'reciprocal' tariffs. Says the "aim is to present the US with [a] more attractive offer to reduce the level of additional tariffs on Swiss exports".
- Keller-Sutter has come in for significant domestic criticism for her percieved failures in negotiating a trade deal with the US. The FT reports that the President of the Swiss Confederation, "is accused of grossly miscalculating the trade deal she thought she was able to secure with the Trump administration. [...] “It’s knives out,” a former Swiss diplomat said. Late on Thursday, Keller-Sutter held a “disastrous” phone call with Donald Trump, according to multiple people familiar with the situation."
- Keller-Sutter is one of seven on the Federal Council, which sits as the cabinet and a collective head of government and state. The president does not hold any more powers than the other councillors, only chairing meetings and is a 'first among equals'. This means that she will not travel to the US as the head of the Swiss gov't or state, but as the Federal Councillor responsible for the Federal Department of Finance.
- Inter-industry spats have developed, with exporters hit by tariffs criticising the sizeable pharmaceutical industry (not currently subject to tariffs). FT reports "watchmaker Breitling’s chief executive Georges Kern said his country was being “held hostage” by the pharmaceutical industry".
