LOOK AHEAD: US Macro Week Ahead: Trump-Xi Meeting But Otherwise Quieter Calendar

The Treasury curve flattened markedly Wednesday on heavy volumes.

• After an indifferent start, long-end Treasuries rallied after the US Treasury surprisingly announced that it is "at least" doubling the size of liquidity support buyback operations for 10-20Y and 20-30Y Treasuries this quarter to $4+B from the current max of $2B. It follows through from Tsy Sec Bessent's comments back  in April 2025 at another time of long-end bond weakness that his department had the tools to address market dislocation ("we could up the buybacks if we wanted").
• While details of the operational changes remain scarce, 30Y yields would drop as much as 10bp following the announcement (5.1817% low) with front TYs hitting the best levels of the week (108-30), in a sweeping bull flattening move across the curve.
• A burst of 200+k contracts on the announcement would help overall TY volumes rise to the highest of the month, 2.22M traded as of 3:40pm ET.
• While 10+Y Treasuries would hold gains, the move in shorter-dated securities had largely reversed within the following hour. And the related lack of concession appeared to soften appetite for the 20Y Bond auction later in the session: it was the weakest 20Y sale since February, coming with a 0.5bp tail that briefly dragged on broader Treasuries.
• But the remainder of the session saw Treasuries largely on the front foot, with oil retesting session lows and the July FOMC minutes showing a hawkish contingent that was no larger than had previously been assumed.
• Data was limited (MBA mortgage applications fell slightly in the latest week, remaining subdued) and there were no Fed speaker appearances.
• Curve flattening was prevalent:  2Y30Y  -9.1bp at 101.8bp (low of 99.4bp), 5Y30Y  -6.8bp at 84.7bp (low of 83.0bp).
• Latest levels: 2-Yr yield is flat at 4.1707%, 5-Yr is down 2.1bps at 4.3444%, 10-Yr is down 6bps at 4.6446%, and 30-Yr is down 8.8bps at 5.1942%.
  Sep 10-Yr futures (TY) up 8/32  at 108-26 (L: 108-16 / H: 108-30).
• Thursday brings Philly Fed Manufacturing and jobless claims data, as well as appearances by Fed's Daly and Musalem (both non-voters).

US conducting stealth operation to transport oil through Hormuz

• The US military has quietly established a shipping corridor in and out of the Strait of Hormuz to transport millions of barrels of oil each day — a notable success even as the broader war remains at a stalemate, two US officials told Axios.
• Under the operation, which has been underway for the last several weeks, 15 to 20 tankers have entered and exited the strait through a southern channel along the coast of Oman.
• About 10 mbpd, roughly half the pre-war volume, are being transported out of the strait and injected into the global energy market, the officials said.

• RES 4: 0.7278 High May 6 and key resistance 
• RES 3: 0.7201 High May 29
• RES 2: 0.7181 76.4% retracement of the May 6 - Jun 30 bear leg 
• RES 1: 0.7129/49 High Aug 17 & 19 / High Jun 4 
• PRICE: 0.7122 @ 16:29 BST Aug 19
• SUP 1: 0.7027/0.6922 50-day EMA / Low Jul 29 
• SUP 2: 0.6907 Low Jul 8
• SUP 3: 0.6865 Low Jun 30 and the bear trigger 
• SUP 4: 0.6757 38.2% retracement of the Apr 9 ‘25 - May 6 bull cycle

A bull cycle in AUDUSD remains intact for now and short-term pullbacks are considered corrective. Price continues to trade above the 50-day EMA, at 0.7027, and Monday’s gains delivered a print above 0.7120, the 61.8% of the May 6 - Jun 30 bear leg. This reinforces the current bull theme and a continuation higher would pave the way for an extension towards 0.7181, the 76.4% retracement point. Support at the 50-day EMA lies at 0.7027.