US NATGAS: US-CAN NatGas: Cross Border Flows

• RES 4: 115-00+ High Oct 1 ‘24 (cont) 
• RES 3: 114-21+ 1.00 proi of the Aug 18 - Sep 11 - 25 price swing
• RES 2: 114-10   High Apr 7 (cont) and a key resistance 
• RES 1: 113-24/114-02   High Oct 24 / 17 and the bull trigger 
• PRICE:‌‌ 113-15+ @ 16:52 GMT Oct 29
• SUP 1: 113-04   Low Oct 27 
• SUP 2: 112-27   50-day EMA
• SUP 3: 112-16+ Low Oct 10
• SUP 4: 112-06   Low Sep 25 and a reversal trigger

The trend structure in Treasuries remains bullish. Moving average studies are in a bull-mode position, highlighting a dominant uptrend. Attention is on 114-02, the Oct 24 high and a bull trigger. A breach of this hurdle would confirm a resumption of the medium-term uptrend, and open 114-10, the Apr 7 high (cont). Support to watch is 112-27, the 50-day EMA. A clear breach of the average would instead highlight scope for a deeper retracement.

• MNI’s Instant Answers questions for the meeting include whether there are dissenters.
• Gov Miran dissented in September in favor of a larger 50bp cut and we don’t expect any more to join him this time.
• Once again, it’s also possible a regional president dissents in favor of a hold. If so, at a guess it would likely be Kansas City’s Schmid; Collins and Goolsbee aren’t opposed to at least one further cut this year, and Musalem signaled relative openness to an October cut. However, the tame September CPI print could suffice to assuage the hawks to acquiesce to a cut.
• The Implementation Note could add detail to the decision to shift balance sheet policy, but no changes to the administered rates are expected outside of reflecting the policy rate cut.
• There has been increasing speculation that the Fed could adjust various rates including a 5bp downward adjustment in the interest rate paid on reserve balances (IORB, currently 4.15%) in light of funding market rate developments, however.
• That's not our base case for this meeting and would be out of consensus; we have included a question on this in our Instant Answers (it should come out at 3.90% if it is adjusted downward with the expected 25bp policy rate cut, with 3.85% marking a relative adjustment).
• More speculative views include an adjustment lower in the Standing Repo Facility minimum bid rate (4.25%) but that seems extremely unlikely to us at this juncture (if it does arise we will make note of it in our Instant Answers).
• Some analysts expect in addition to the above that the Fed could announce it will conduct temporary open market operations (TOMOs) to provide reserves to the system on key "crunch" dates for liquidity. It's unclear whether this would appear in the Statement or in the Implementation Note.

With no quarterly projections at the October meeting, attention upon the 2pm ET FOMC decision release will be on the policy statement - and to an unusual extent, the accompanying Implementation Note which discusses among other things administered policy rates and balance sheet directives. Going paragraph by paragraph through the previous (September) statement in italics: (Link to September FOMC statement)

• The upward revisions to Q2 growth and continued momentum apparent in the data through Q3 should warrant an upgrade in the description of economic activity.
• With no new nonfarm payrolls data since September however, the description of job gains/unemployment should remain the same (one could justify that both continued in the latest data through ADP private payrolls data/Chicago Fed unemployment estimate for September).
• There may be scope for a mention of the lack of official government data during the federal shutdown in this context, perhaps indicating as Chair Powell did in his inter-meeting speech that the assessment of the economy is based on a “wide variety of public and private sector data” that remains available.
• As for inflation, the softer-than-expected September CPI reading could argue for nudging the language in a slightly more dovish direction (ie modifying “has moved up”) but it would not be surprising to see this unchanged.

• The Statement will of course announce the rate cut decision, but we don’t expect any change in the forward guidance “in considering the extent and timing…”. The current language leaves the door open to further cuts but does not pre-commit, which is likely where the FOMC majority’s mindset is now. It’s unclear whether they will cite the shift in the balance of risks again (they added this language in September to justify the resumption of easing) but any change here should be inconsequential.
• In our review of sell-side analysts, no analyst expected the characterization of the balance of risks to be changed. Likewise, there are no core views that forward rate guidance will be changed - though JPMorgan cites risks the Statement could mention "in considering the extent and timing of additional adjustments" to hint an imminent end of the mini-easing cycle.
• The QT language will be the most closely-watched part of the statement. We think that an end to balance sheet runoff will be signaled here – we discuss in more depth elsewhere in our meeting preview.