US TSYS/SUPPLY: MNI UST Issuance Deep Dive: Nov 2024 Refunding Review
The November Treasury Refunding announcement brought limited surprises for the upcoming quarter (Nov-Dec-Jan) but highlights significant uncertainty about the outlook in calendar 2025 stemming from a continued deterioration in the fiscal outlook and higher financing costs. MNI's review includes a calendar of upcoming auctions and buyback operations - PDF LINK HERE
- The upcoming quarter's nominal coupon auction sizes were - as unanimously expected - unchanged.
- Guidance was also (as largely but not unanimously expected) reaffirmed that auction sizes were not foreseen to change for "at least the next several quarters".
- The policy statement acknowledged significant uncertainty ahead, though.
- The prevailing expectation continues to be that the next upsizing will be no earlier than August 2025, with November 2025 looking like a central view.
- Some of this will be dependent on the timing of the lifting of the debt limit (which returns in January), but we haven't seen any expectations that Treasury will wait beyond early 2026 to increase sizes, given large budget deficit expectations.
- Auction Results: October's nominal coupon auctions were relatively weak, with 5 of 7 sales scoring negatively on MNI's Relative Strength Indicator. The two that didn't - the 7Y and 30Y - were unusually strong in their own right.
- Upcoming Supply: November is set to see $324B in nominal Treasury coupon sales, in addition to $17B in 10Y TIPS and $28B FRN for a total of $369B – unchanged from the previous month, for the joint-highest since Oct 2021.
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US TSYS: Late SOFR/Treasury Option Roundup
Option desks report better downside put trade on net -- well ahead of Chairman Powell's comments at NABE conf that weighed heavily on markets. SOFR White pack (SFRZ4-SFRU5) currently -0.090-0.135, while projected rate cuts into early 2025 recede vs. early morning levels (*): Nov'24 cumulative -34.1bp (-35.1bp), Dec'24 -68.9bp (-71.4bp), Jan'25 -100.6bp (-103.4bp). Salient trade includes:
- SOFR Options:
- -10,000 SFRV4 95.75/95.93/96.06/96.25 call condors, 11.0 ref 96.005
- +8,000 SFRV4 95.87/95.93/96.00 put flys, 1.25 vs. 95.975/0.05%
- +6,000 2QZ4 96.62/97.00 2x1 put spds vs 2QV4 96.68/96.93 2x1 put spds, 1.25
- Block, +5,000 SFRZ4 95.68/95.81 2x1 put spds 1.0 net ref 96.00 at 0854:53ET
- +5,000 SFRZ4 96.00/96.25 call spds 8.0
- +9,000 SFRZ4 95.93/96.00/96.06 put flys, 0.5
- +5,000 SFRX4 96.12/96.37 cal spds 2.0 over 2QX4 97.25/97.37 call spds
- over 28,000 SFRX4 95.81/95.93 put spds ref 96.005
- 2,500 SFRV4 95.75/95.81/95.87 put trees ref 96.00
- 5,000 SFRV4 96.06/96.25 call spds ref 95.995
- Block, 15,000 SFRV4 96.12/96.18 call spds 1.25 vs. 96.005/0.07%
- 3,000 SFRX4 96.12/96.25/96.31/96.43 call condors ref 95.985
- Block, 3,000 SFRH5 95.43/95.50 put spds 0.5 vs. 96.51/0.05%
- 1,000 SFRZ4 95.68/95.75/95.75 & SFRZ4 95.75/95.81/95.93 2x3x1 put flys
- Block/screen, 15,000 SFRZ4 95.25/95.75/96.25 put flys, 25.0 ref 95.995 to 96.00
- Block, 5,000 SFRH5 96.50/97.00 call spds vs. 2QH5 97.50/98.00 call spds, 9.0 net steepener
- Block/screen 13,000 SFRV4 96.18/96.25 call spds
- 4,000 0QZ4 96.50 puts, 4.0 ref 97.085
- Treasury Options:
- 3,000 wk1 TY/TYX4 114 put spds, 13 ref 114-19
- 4,500 wk2 10Y 113/114 3x2 put spds, 30 net ref 114-13.5
- 3,000 TYX4 115/116/117 call flys ref 114-15.5
- 2,300 TYX4 113 puts, 10 last
- 3,000 Wednesday wkly 10Y 114 puts, 3 ref 114-16.5
EURJPY TECHS: Bearish Outlook
- RES 4: 166.53 High Jul 31
- RES 3: 165.00 Round number resistance
- RES 2: 163.89 High Aug 15 and a reversal trigger
- RES 1: 161.57/163.49 50-day EMA / High Sep 27
- PRICE: 159.70 @ 16:48 BST Sep 30
- SUP 1: 157.05/155.15 Low Sep 18 / Low Sep 16
- SUP 2: 154.42 Low Aug 5 and the bear trigger
- SUP 3: 154.00 Round number support
- SUP 4: 153.87 Low Dec 14 ‘23
A bear cycle in EURJPY remains intact and Friday’s strong sell-off reinforces this theme and signals the end of the recent corrective cycle. Moving average studies are in a bear-mode position, highlighting a dominant downtrend. A continuation lower would open 155.15, the Sep 16 low, and 154.42, the Aug 5 low and a bear trigger. Key short-term resistance has been defined at 163.49, the Sep 27 high, and 163.89, the Aug 15 high.
US TSYS: Tsys Near Lows As Chair Powell Rebuts His Own Post FOMC Comments
- Treasuries look to finish near session lows after comments from Chairman Powell at NABE conference taken hawkishly by markets, projected rate cut pricing receding as Powell stressed the Fed is not in a hurry to cut rates.
- Dec'24 10Y futures nearly breached initial technical support of 114-07, last Thursday's low, before rebounding 114-11 (-12.5) after Powell ended his session. Curves bear flattened: 2s10s -4.701 at 14.234 vs. -13.208 low after climbing to 19.687 this morning.
- Treasuries traded a narrow band earlier, taking cues from EGBs -- bouncing to top of session range in reaction to ECB Pres Lagarde commenting that the ECB will take into account stronger confidence in the inflation outlook at that gathering.
- Tsys held near top of range after MNI Chicago PMI comes out higher than expected at 46.6 (but still contractionary -- well below 50). The marginal rise was due to two of the five subcomponents improving significantly: Order Backlogs and Employment. Meanwhile, reductions in Supplier Deliveries, New Orders, and Production restricted the upward move.
- Focus turns to tomorrow's flash PMI, JOLTS and ISMs and more Fed speak from Bostic, Barkin and Cook.
