US TSYS/OVERNIGHT REPO: SOFR Ticks Up In Line With Bill Settles
Nov-22 16:22
As broadly anticipated, SOFR ticked up Thursday by 1bp to 4.57% - this is likely attributable to unusually large bill settlements (including $50B cash management bill in addition to the usual bills). Secured rates are roughly expected to remain around current levels or slightly higher through most of the rest of the month. Effective Fed Funds remains steady as ever, at 4.58%.
REPO REFERENCE RATES (rate, change from prev. day, volume):
- Secured Overnight Financing Rate (SOFR): 4.57%, 0.01%, $2291B
- Broad General Collateral Rate (BGCR): 4.56%, no change, $798B
- Tri-Party General Collateral Rate (TGCR): 4.56%, no change, $771B
New York Fed EFFR for prior session (rate, chg from prev day):
- Daily Effective Fed Funds Rate: 4.58%, no change, volume: $101B
- Daily Overnight Bank Funding Rate: 4.58%, no change, volume: $281B
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BONDS: EGBs-GILTS CASH CLOSE: Bunds Outperform Gilts On Easier ECB Outlook
Oct-23 16:21
EGB curves bull steepened sharply Wednesday in anticipation of increasingly aggressive ECB easing.
- Pricing for a 50bp ECB cut in December neared 50/50 implied probability (~45%), vs 20% Tuesday morning, though this faded to around 38% at the time of the bond cash close. The profile through March implied 9bp of additional cumulative cuts, to 91bp including 65bp through January.
- The additional pricing-in of cuts came following a Reuters sources story suggesting policymakers have begun to debate if weak economic growth warrants rates being cut below neutral levels.
- Bunds easily outperformed Gilts on the day, with yields higher across the UK curve, focused in the belly.
- EGB periphery spreads tightened on the lower ECB rate outlook, with BTPs outperforming.
- Thursday's European data highlight is the October flash PMI round, after September's soft readings.
Closing Yields / 10-Yr Periphery EGB Spreads To Germany
- Germany: The 2-Yr yield is down 7.4bps at 2.103%, 5-Yr is down 3.1bps at 2.113%, 10-Yr is down 1.4bps at 2.304%, and 30-Yr is down 0.3bps at 2.625%.
- UK: The 2-Yr yield is up 2.3bps at 4.094%, 5-Yr is up 4.3bps at 4.039%, 10-Yr is up 3.4bps at 4.2%, and 30-Yr is up 2.3bps at 4.731%.
- Italian BTP spread down 2.8bps at 121.6bps / Spanish down 1.9bps at 69.9bps
PIPELINE: $1B Kommunivest, $1B IFFIm Corporate Issuance Priced
Oct-23 16:19
- Date $MM Issuer (Priced *, Launch #)
- 10/23 $1B *Kommunivest WNG 2026 SOFR+29
- 10/23 $1B *IFFIm 3Y SOFR+43
FOREX: USDJPY Surges Above 153.00 as Yields Continue to Climb
Oct-23 16:17
- USDJPY has rallied substantially on Thursday, advancing 1.15% to trade just below the 153.00 mark as we approach the APAC crossover. Fresh cycle highs of 153.19 have been printed, and price action further affirms the resumption of the uptrend that started Sep 16, underpinned by rising core yields.
- Initial resistance is at 153.40, the 61.8% retracement of the downleg posted off the July 3rd high. Above here, the most notable level is 155.22, the Jul 30 high.
- The Bank of Canada lowered its policy rate 50bps for the first time since the pandemic slump and said further reductions are likely needed without committing to any particular pace. USDCAD spiked very briefly to 1.3863 as the press conference began, however we have since faded back to pre-announcement levels at 1.3840.
- Both the trend outlook and positioning indicators remain bullish for USDCAD, and it is noteworthy that spot has recently traded through 1.3822, 76.4% retracement of the Aug 5 - Sep 25 bear leg. Above here, markets will focus on 1.3946, the Aug 5 high and the next key resistance. Initial firm support to watch lies at 1.3702, the 20-day EMA. A pullback would be considered corrective and allow an overbought condition to unwind.
- EURUSD has continued to trade with a downward bias, sinking further below 1.0800 in the process. The latest sell-off reinforces the bearish theme for EURUSD and sights are now on 1.0746, a Fibonacci retracement point and 1.0710, the Jul 2 low.
- Eurozone flash PMIs will highlight the European session on Thursday, providing the latest barometer for the strength of the Eurozone economy. US initial jobless claims, flash PMI and new home sales will be the focus on the US docket.
