US TSYS/OVERNIGHT REPO: Partial Bounceback In ON RRP Takeup
Takeup of the Fed's overnight reverse repo facility partially rebounded Friday from Thursday's drop, rising $15.7B to $204.3B after a prior $29.2B fall.
- The latter was likely induced by flows out of ON RRP into bills Thursday amid unusually large bill settlements.
- ON RRP takeup is expected to remain relatively steady until picking up at end-month.
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US TSYS/SUPPLY: Refunding Preview- Bigger Auctions Unlikely For Several Qs (1/3)
Treasury's quarterly Refunding process begins next Monday Oct 28 with the release of the financing estimates for the current quarter (we refer to this as the November refunding round). Wednesday Oct 30 brings Treasury's announcement of coupon auction sizes, as well as its guidance for future issuance. MNI usually produces a Deep Dive ahead of the Refunding announcement, but in this case Treasury auctions continue through Tuesday - so unusually, for this round, we will publish a smaller preview for financing/coupon sizes, with our Deep Dive covering the Refunding results after their release.
- First, we begin with the coupon auction sizes. MNI does not expect any change in nominal coupon sizes to be announced (though there might be a small $1B uptick in TIPS) for Nov-Dec-Jan. See table below.
- This would be in keeping with sizes since the May-Jun-Jul quarter and the previous quarter's guidance that Based on current projected borrowing needs, "Treasury does not anticipate needing to increase nominal coupon or FRN auction sizes for at least the next several quarters." This outlook is shared by sell-side analysts whose previews we have seen.
- In that case, more important will be whether the guidance itself changes, to indicate potential for higher issuance in coming quarters. That would be considered a surprise, particularly as it would be conveyed less than a week before the Nov 5 elections. Some see a softening in guidance to open up the possibility of future increases, which would come as an unwelcome surprise to markets.
- Broad consensus is that the next upsizing will not come until late 2025 or even early 2026 though of course much will depend on the fiscal path taken in the next administration/Congress.
STIR: US FED Reverse Repo Operation
RRP usage rebounds to $270.839 after falling to new multi-year low (early May 2021) of $237.760B yesterday. Number of counterparties surges to 84 from 60 prior.
COMMODITIES: Gold Pulls Back From Record High, WTI Falls Amid Stock Build
- Spot gold has fallen by 1.3% to $2,714/oz on Wednesday, as the yellow metal has pulled back from the fresh record high of $2,758.5 it reached earlier in the session.
- Despite today’s profit taking, following the recent run-up in prices, analysts at Standard Chartered expect further gains in the coming weeks, with price averaging $2,800 in Q4, and $2,900 in Q1 2025.
- In terms of the technicals, the recent extension in gold reinforces the bullish theme. Sights are on $2,767.1 next, a Fibonacci projection point, ahead of the $2,800.0 handle.
- Firm support is at $2,666.4, the 20-day EMA.
- Silver has also pulled back from its highest level in 12 years today, with the precious metal falling by 3.7% to $33.6/oz.
- Bullish conditions in silver remain intact, with eyes on $35.167 next, a Fibonacci projection. Initial firm support lies at $32.112, the 20-day EMA.
- Meanwhile, WTI is headed for the close trading lower, with additional pressure during the day coming from EIA data showing a 5.47mn barrel build in US crude inventories.
- WTI Dec 24 is down by 1.2% at $70.9/bbl.
- For WTI futures, a bearish theme remains intact, with attention on $65.99, the Oct 1 low, and $64.16, the Sep 10 low and a key support. On the upside, key short-term resistance at $77.70, the Oct 8 high.
