US TSYS: What to Watch: More Fed Speakers
Feb-07 13:42
- Light data calendar again Wednesday: MBA Mortgage Applications reported 3.7% earlier, up from -7.2% prior, Trade Balance reported -$62.2B vs. -$62.0B est (-$63.2B prior) wraps up the morning releases. Consumer Credit this afternoon at 1500ET.
- Weaker Tsys inching off lows: TYH4 -3 at 111-06 vs. 111-01 low, well inside technicals: support at 110-22+ (Low Feb 5 and the bear trigger), resistance at 111-20 (20-day EMA). 10Y yield currently +.0076 at 4.1076%.
- Focus remains on Fed speakers: MN Fed Kashkari popping up in the last few minutes expects 2-3 25bp cuts this year "seems appropriate". Scheduled speakers:
- Fed Gov Kugler, outlook Brookings event, text, Q&A, livestreamed 1100ET
- Boston Fed Collins, Boston Economic Club text, Q&A, livestreamed, 1130ET
- Richmond Fed Barkin economic outlook, Q&A, no text, 1230ET
- Fed Gov Bowman on supporting small businesses, 1400ET
- NY Fed Dep SOMA Mngr Remache, keynote women in finance conf, 1515ET
- NY Fed Nordstrom fixed income conf, moderated Q&A, livestreamed, 1630ET
- Fed Gov Kugler, outlook Brookings event, text, Q&A, livestreamed 1100ET
- Tsy supply: US Tsy $60B 17W Bill auction at 1130ET followed by $42B 10Y Note auction (91282CJZ5) at 1300ET.
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BONDS: US Treasuries help EGBs off their lows.
Jan-08 13:40
- Some recovery in Treasuries, lift EGBs off their lows once again., a two way price action remains so far today.
- Latest cumulative flows have seen buyer of TYH4 in 4k, TUA and FVA in 2.5k respectively, and USA 1k.
- Short end part of the US strip, 2s, 5s, 10s are back in the green.
- Initial support in Bund at 135.06 has been untested, printed a 135.15 low.
US SWAPS: Comments From Fed’s Logan Re: QT Build On Discussions In Minutes, Spreads Wider
Jan-08 13:35
Weekend comments from Dallas Fed President Logan (non-voter in ’24, one of the more hawkish regional Fed Presidents) has helped bias swap spreads wider to start the week.
- The move has been led by the 5- & 10-Year tenors.
- Logan addressed the future of QT over the weekend, noting that she thinks that “it’s appropriate to consider the parameters that will guide a decision to slow the runoff of our assets. In my view, we should slow the pace of runoff as ON RRP balances approach a low level. Normalizing the balance sheet more slowly can actually help get to a more efficient balance sheet in the long run by smoothing redistribution and reducing the likelihood that we’d have to stop prematurely.”
- A quick reminder that details of the Dec FOMC meeting minutes had already help bias swap spreads wider last week.
- That came after the minutes noted that “several participants remarked that the Committee’s balance sheet plans indicated that it would slow and then stop the decline in the size of the balance sheet when reserve balances are somewhat above the level judged consistent with ample reserves. These participants suggested that it would be appropriate for the Committee to begin to discuss the technical factors that would guide a decision to slow the pace of runoff well before such a decision was reached in order to provide appropriate advance notice to the public.
- Flows surrounding a brisk, albeit not record breaking, start to ’24 IG issuance will have also filtered into swap spread activity during the early rounds of ’24 swap spread dealing.
Fig. 1: U.S. 2-. 5-. 10- & 30-Year Swap Spreads (bp)
US: MNI POLITICAL RISK - Shutdown Risk Decreases With FY24 Numbers
Jan-08 13:33
- Congressional leaders yesterday unveiled topline spending numbers to fund the government through Fiscal Year 2024. The Senate returns to Washington today, and the House tomorrow, ahead of a two-week sprint to conclude spending legislation and avert a partial government shutdown on January 20.
- The deal, announced by House Speaker Mike Johnson (R-LA) and Senate Majority Leader Chuck Schumer (D-NY), falls largely in-line with the numbers agreed by President Biden and former House Speaker Kevin McCarthy in last spring’s Fiscal Responsibility Act – the bill to raise the debt limit and curb some government spending.
- Republican negotiator Senator James Lankford (R-OK) told reporters over the weekend that a framework for US-Mexico border policy overhaul could be released as soon as this week.
- US Secretary of State Antony Blinken will meet Saudi Crown Prince Mohammad bin Salman this evening as he continues fourth extended tour of the Middle East since October.
- President Biden will give another speech today warning that former President Donald Trump and his ‘MAGA’ movement pose an existential threat to US democracy.
- US Defense Secretary Lloyd Austin is facing criticism after failing to disclose that he had been hospitalised after complications with an elective surgery.
- Former President Donald Trump’s 2024 presidential campaign and legal calendar converges this week.
- China has announced new sanctions on five US defence industry firms.
- Poll of the Day: Voter optimism over the economy is increasing but President Biden is not getting much credit.
Full article: US Daily Brief
