EXECUTIVE SUMMARY

US

US: Consensus puts core CPI inflation at 0.2% M/M in July in what’s likely only a minor uptick from the unrounded 0.16% M/M in June.

  • Analysts see two conflicting (and familiar) drivers on the month: airfares (upside) and used cars (downside).
  • Some expect the Fed’s closely watched core services ex housing measures to firm from particularly weak flat or near flat readings in June but to still help the trend moderate.
  • The market remains sceptical of additional hikes from here, pricing just 8bp of cumulative tightening with the November meeting. NY Fed’s Williams and Philly Fed’s Harker have this week talked on 2024 rate cuts and there is more than 140bps of cuts priced for 2024. We suspect reaction is skewed larger in the event of a miss.

FED: The Federal Reserve's increasing open discussion of potential rate cuts on the horizon over the next year signals the central bank is close to the end of rate increases, former Fed economist Nathan Sheets told MNI, adding that he expects just one more hike in November.

  • "The fact that they are now kind of open to thinking about additional nuance on how long they're going to hold the terminal rate -- interestingly before arguably they've even achieved the terminal rate -- is striking, but it highlights the realities of the economic uncertainties," he said.
  • "They've got to be thinking about scenarios in which it is important to be cutting if you have a recession. Also, no terminal rate is kept forever." For more see MNI Policy main wire at 1157ET.

FED: U.S. inflation is likely to keep coming down as lower rents filter through to consumer price measures and as moderating employment and wage growth take steam off a red-hot service sector, Robert Rich, director of the Federal Reserve Bank of Cleveland’s Center for Inflation Research, told MNI.

  • “We've seen pretty strong deceleration in goods inflation, so that is certainly a very good sign. All the new tenant rent measures are indicating a strong deceleration if not a decline, so even though it’s not showing up in the numbers right now we’re quite sanguine about the fact that we should see a slowing taking place in shelter inflation,” said Rich, also a senior economic and policy adviser at the Cleveland Fed and previously a New York Fed economist.
  • The third and thus far most stubborn component of inflation is core services ex-housing – the so-called supercore measure emphasized by Fed Chair Jerome Powell that is seen as closely linked to wage gains because of the labor intensity of the services sector. For more see MNI Policy main wire at 0951ET.

EUROPE

ECB: Concerns over potential collateral squeezes are likely to prevent the European Central Bank and other national central banks from replicating the Bundesbank’s Aug 4 decision to cut reserve remuneration on domestic government deposits to zero before early next year, the International Capital Markets Association senior director Andy Hill told MNI.

  • While the Bundesbank had indicated in April that a return to 0% for reserves currently earning 20 basis points below the ESTR benchmark would be appropriate and neutral for monetary policy, Hill said investors had clearly thought such a move was still months away.
  • But the Bundesbank felt “emboldened” by the ECB decision on July 27 to end remuneration on banks’ minimum required reserves, said Hill, who oversees ICMA’s work on repo and short-term interest rates. “I think they have been itching to do this for a while. It’s a bit of a free lunch, even at ESTR less 20bp, it is still a free lunch,” he said in a phone interview. For more see MNI Policy main wire at 0847ET.

US TSYS Rates Inside Range Ahead July CPI

  • Rates are trading mixed after the bell, inside a generally narrow session range, curves flatter with the short end underperforming: 3M10Y -1.050a t -143.773, 2s10s -6.012 at -79.368.
  • Light session volumes with no data or Fed speak to report, traders plied the sidelines ahead Thursday's CPI data for July.
  • Consensus puts core CPI inflation at 0.2% M/M in July in what’s likely only a minor uptick from the unrounded 0.16% M/M in June. Analysts see two conflicting (and familiar) drivers on the month: airfares (upside) and used cars (downside).
  • Some expect the Fed’s closely watched core services ex housing measures to firm from particularly weak flat or near flat readings in June but to still help the trend moderate.
  • Treasury futures see-sawed mildly higher after the $38B 10Y note auction (91282CHT1) tails slightly: 3.999% high yield vs. 3.997% WI; 2.56x bid-to-cover vs. 2.53x prior. Meanwhile, some modest corporate debt ($2B McDonald's over three tranches, $600M Toyota Motor Credit) generated some two-way rate lock hedging.

OVERNIGHT DATA

  • US MBA: REFIS -4% SA; PURCH INDEX -3% SA THRU AUGUST 4 WK
  • US MBA: UNADJ PURCHASE INDEX -27% VS YEAR-EARLIER LEVEL
  • US MBA: 30-YR CONFORMING MORTGAGE RATE 7.09% VS 6.93% PREV
  • US MBA: MARKET COMPOSITE -3.1% SA THRU AUG 04 WK

US DATA: MBA mortgage applications fell -3.1% last week, with broadly equal declines in purchases (-3%) and refis (-4%) for the second week running.

  • It comes as the 30Y conforming mortgage rate increased 16bps to 7.09% to push back within touching distance of its Oct’22 cycle high of 7.16%, with the spread to Treasury yields still sticky at the ~300bps mark.
  • The level of purchase applications is just 3.5% above the Feb’23 cycle low, below which application levels were last seen in the 1990s.
  • “There is arguably some evidence that short-run r* is currently elevated relative to pre-COVID levels: The economy has proven to be extremely resilient and spreads remain relatively low, in spite of the recent banking turmoil. As shown in June, the model expects short-run real r* to be 2.5% by the end of the year.”
  • “Evidence on whether long-run r*—that is, the persistent component, or trend, in r*—has risen after COVID is much weaker. We use a battery of models, from VARs to DSGEs, to estimate these trends, and these models reach different conclusions.
  • “According to VAR models, long-run r* has roughly remained constant and, if anything, declined a bit since late 2019, reaching 0.75% in real terms. According to the DSGE model, long-run r* has instead risen by almost 50bps during this period, and is now about 1.8%.”

MARKETS SNAPSHOT

Key late session market levels:
  • DJIA down 21.52 points (-0.06%) at 35298.28
  • S&P E-Mini Future down 11 points (-0.24%) at 4508.5
  • Nasdaq down 90.8 points (-0.7%) at 13799.02
  • US 10-Yr yield is down 1.8 bps at 4.0041%
  • US Sep 10-Yr futures are up 0.5/32 at 111-13.5
  • EURUSD up 0.0021 (0.19%) at 1.0978
  • USDJPY up 0.28 (0.2%) at 143.66
  • WTI Crude Oil (front-month) up $1.36 (1.64%) at $84.28
  • Gold is down $9.13 (-0.47%) at $1916.12
European bourses closing levels:
  • EuroStoxx 50 up 28.48 points (0.66%) at 4317.33
  • FTSE 100 up 59.88 points (0.8%) at 7587.3
  • German DAX up 77.65 points (0.49%) at 15852.58
  • French CAC 40 up 52.57 points (0.72%) at 7322.04

US TREASURY FUTURES CLOSE

  • 3M10Y -2.235, -144.958 (L: -149.071 / H: -141.918)
  • 2Y10Y -6.405, -79.761 (L: -79.971 / H: -73.306)
  • 2Y30Y -8.368, -63.255 (L: -63.465 / H: -55.02)
  • 5Y30Y -5.156, 4.264 (L: 4.088 / H: 9.432)
  • Current futures levels:
  • Sep 2-Yr futures down 2.25/32 at 101-20.75 (L: 101-20.25 / H: 101-24)
  • Sep 5-Yr futures down 2.75/32 at 107-0.75 (L: 106-31.5 / H: 107-07)
  • Sep 10-Yr futures steady at at 111-13 (L: 111-08.5 / H: 111-20)
  • Sep 30-Yr futures up 13/32 at 122-27 (L: 122-06 / H: 123-01)
  • Sep Ultra futures up 22/32 at 129-0 (L: 127-31 / H: 129-04)

US 10Y FUTURE TECHS: (U3) Briefly Pierces The 20-Day EMA

  • RES 4: 113-08 High Jul 18 and a bull trigger
  • RES 3: 112-31 High Jul 20
  • RES 2: 112-13 50-day EMA
  • RES 1: 111-17+/112-07 20-day EMA / High Jul 27
  • PRICE: 111-13 @ 1515 ET Aug 9
  • SUP 1: 110-23/109-24 Low Aug 7 / 4 and the bear trigger
  • SUP 2: 109-14 Low Nov 8 2022 (cont)
  • SUP 3: 109-10+ Low Nov 4 2022 (cont)
  • SUP 4: 108-26+ Low Oct 21 2022 (cont) and a major support

The trend condition in Treasuries remains bearish, however, a bullish corrective cycle remains in play and the contract is trading closer to its latest high. Resistance to watch is 111-17+, the 20-day EMA - it has been pierced, with Wednesday trade briefly touching 111-20. A clear break of this average would signal scope for a stronger recovery and potentially expose the 50-day EMA, at 112-13. The bear trigger has been defined at 109-24, the Aug 4 low. A break would resume the downtrend.

SOFR FUTURES CLOSE

  • Sep 23 steady at 94.60
  • Dec 23 -0.005 at 94.645
  • Mar 24 -0.030 at 94.895
  • Jun 24 -0.045 at 95.265
  • Red Pack (Sep 24-Jun 25) -0.055 to -0.045
  • Green Pack (Sep 25-Jun 26) -0.035 to -0.02
  • Blue Pack (Sep 26-Jun 27) -0.01 to +0.005
  • Gold Pack (Sep 27-Jun 28) +0.015 to +0.030

SHORT TERM RATES

SOFR Benchmark Settlements:

  • 1M +0.00006 to 5.31246 (-.00778/wk)
  • 3M +0.00150 to 5.36678 (-0.00380/wk)
  • 6M -0.00486 to 5.42097 (-0.01322/wk)
  • 12M -0.00995 to 5.30832 (-0.05403/wk)
STIR: FRBNY EFFR for prior session:
  • Daily Effective Fed Funds Rate: 5.33% volume: $110B
  • Daily Overnight Bank Funding Rate: 5.32% volume: $284B
US TSYS: Repo Reference Rates
  • Secured Overnight Financing Rate (SOFR): 5.30%, $1.340T
  • Broad General Collateral Rate (BGCR): 5.28%, $572B
  • Tri-Party General Collateral Rate (TGCR): 5.27%, $561B
  • (rate, volume levels reflect prior session)

FED REVERSE REPO OPERATION

NY Federal Reserve/MNI

The latest operation bounces to $1,796.519B, w/106 counterparties, compared to $1,778.351B in the prior session. The high for 2023 stands at $2,375.171B on Friday March 31, 2023; all-time record high of $2,553.716B reached December 30, 2022.

PIPELINE: $2B McDonald's 3Pt Launched

  • Date $MM Issuer (Priced *, Launch #)
  • 08/09 $2B #McDonald's $600M 5Y +68, $600M 10Y +98, $800M 30Y +128. Compares to last year's $1.5B issuance on September 9, McDonald's issued $750M 10Y +133, $750M 30Y +168
  • 08/09 $600M #Toyota Motor Credit 3Y +60

EGBs-GILTS CASH CLOSE: Safe-Haven Bid Dissipates Amid Bank Tax Backtrack

Gilts outperformed Bunds Wednesday, with periphery EGB spreads a little tighter in a modestly risk-on session.

  • The safe-haven bid observed Tuesday following the introduction of a windfall tax on banks in Italy dissipated Wednesday as the Italian gov't appeared to backtrack on the scope of the new tax.
  • Core FI's yield rises were fairly steady all session, though curves were at their flattest early in the session before unwinding higher as the longer-end caught up with the short-end sell-off.
  • UK yields were relatively less affected by the Italian headlines, with yields dipping slightly. Periphery EGB spreads tightened, but the sharp early narrowing dissipated as the equity rally faded.
  • Thursday's main event is the US CPI report, though also of note are some final eurozone national-level July CPI data and the ECB's Econ Bulletin.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

  • Germany: The 2-Yr yield is up 4.4bps at 2.962%, 5-Yr is up 2.4bps at 2.511%, 10-Yr is up 2.8bps at 2.497%, and 30-Yr is up 4bps at 2.59%.
  • UK: The 2-Yr yield is down 2.8bps at 4.926%, 5-Yr is down 1.1bps at 4.412%, 10-Yr is down 2bps at 4.365%, and 30-Yr is down 1.8bps at 4.562%.
  • Italian BTP spread down 0.5bps at 165bps / Greek down 0.9bps at 132.8bps

FOREX: Subdued Greenback Ahead Of CPI, NOK Remains Strongest Performer

  • Major currency markets traded within tight ranges on Wednesday, with the USD index oscillating either side of unchanged throughout the trading session. Price action is mainly reflective of a dearth of fresh data and in anticipation of the important US July inflation data on Thursday.
  • The Euro is a marginal outperformer, with EURUSD (+0.17%) creeping back towards the 1.10 mark, however the likes of AUD, NZD and GBP are all moderately lower on the day.
  • USDJPY has stealthily been climbing throughout the session, registering around a 75 pip recovery from the early 143.00 lows, however, price action has shown very little volatility.
  • NOK, yesterday's poorest performer, remains the strongest in G10 on Wednesday, with EURNOK (-0.41%) consolidating just above session lows of 11.1844. Moves coincide with a solid move higher of the Brent crude price, which stands at the best levels of the week having erased the entirety of the early Monday/Tuesday decline. Support seen layered below the EURNOK price headed into tomorrow's Norway CPI release, with downside levels at 11.1483-11.0965, capturing a key Fib retracement, the 200-dma as well as the Jul25 low.
  • US CPI data the clear focus on tomorrow’s docket. Consensus puts US Core CPI inflation at 0.2% M/m in July in what’s likely only a minor uptick from the unrounded 0.16% print in June. Analysts see two conflicting (and familiar) drivers on the month: airfares (upside) and used cars (downside).

THURSDAY DATA CALENDAR

DateGMT/LocalImpactFlagCountryEvent
10/08/20230600/0800*NOCPI Norway
10/08/20230600/0800**SEPrivate Sector Production
10/08/20230800/1000**ITItaly Final HICP
10/08/20231230/0830**USJobless Claims
10/08/20231230/0830**USWASDE Weekly Import/Export
10/08/20231230/0830***USCPI
10/08/20231430/1030**USNatural Gas Stocks
10/08/20231530/1130**USUS Bill 04 Week Treasury Auction Result
10/08/20231530/1130*USUS Bill 08 Week Treasury Auction Result
10/08/20231700/1300***USUS Treasury Auction Result for 30 Year Bond
10/08/20231800/1400**USTreasury Budget
10/08/20231900/1500USAtlanta Fed's Raphael Bostic
10/08/20232015/1615USPhiladelphia Fed's Pat Harker

MNI ASIA OPEN: Sights on Next Inflation Measure, July CPI

Last updated at:Aug-09 19:30By: Bill Sokolis
EXECUTIVE SUMMARY

US

US: Consensus puts core CPI inflation at 0.2% M/M in July in what’s likely only a minor uptick from the unrounded 0.16% M/M in June.

  • Analysts see two conflicting (and familiar) drivers on the month: airfares (upside) and used cars (downside).
  • Some expect the Fed’s closely watched core services ex housing measures to firm from particularly weak flat or near flat readings in June but to still help the trend moderate.
  • The market remains sceptical of additional hikes from here, pricing just 8bp of cumulative tightening with the November meeting. NY Fed’s Williams and Philly Fed’s Harker have this week talked on 2024 rate cuts and there is more than 140bps of cuts priced for 2024. We suspect reaction is skewed larger in the event of a miss.

FED: The Federal Reserve's increasing open discussion of potential rate cuts on the horizon over the next year signals the central bank is close to the end of rate increases, former Fed economist Nathan Sheets told MNI, adding that he expects just one more hike in November.

  • "The fact that they are now kind of open to thinking about additional nuance on how long they're going to hold the terminal rate -- interestingly before arguably they've even achieved the terminal rate -- is striking, but it highlights the realities of the economic uncertainties," he said.
  • "They've got to be thinking about scenarios in which it is important to be cutting if you have a recession. Also, no terminal rate is kept forever." For more see MNI Policy main wire at 1157ET.

FED: U.S. inflation is likely to keep coming down as lower rents filter through to consumer price measures and as moderating employment and wage growth take steam off a red-hot service sector, Robert Rich, director of the Federal Reserve Bank of Cleveland’s Center for Inflation Research, told MNI.

  • “We've seen pretty strong deceleration in goods inflation, so that is certainly a very good sign. All the new tenant rent measures are indicating a strong deceleration if not a decline, so even though it’s not showing up in the numbers right now we’re quite sanguine about the fact that we should see a slowing taking place in shelter inflation,” said Rich, also a senior economic and policy adviser at the Cleveland Fed and previously a New York Fed economist.
  • The third and thus far most stubborn component of inflation is core services ex-housing – the so-called supercore measure emphasized by Fed Chair Jerome Powell that is seen as closely linked to wage gains because of the labor intensity of the services sector. For more see MNI Policy main wire at 0951ET.

EUROPE

ECB: Concerns over potential collateral squeezes are likely to prevent the European Central Bank and other national central banks from replicating the Bundesbank’s Aug 4 decision to cut reserve remuneration on domestic government deposits to zero before early next year, the International Capital Markets Association senior director Andy Hill told MNI.

  • While the Bundesbank had indicated in April that a return to 0% for reserves currently earning 20 basis points below the ESTR benchmark would be appropriate and neutral for monetary policy, Hill said investors had clearly thought such a move was still months away.
  • But the Bundesbank felt “emboldened” by the ECB decision on July 27 to end remuneration on banks’ minimum required reserves, said Hill, who oversees ICMA’s work on repo and short-term interest rates. “I think they have been itching to do this for a while. It’s a bit of a free lunch, even at ESTR less 20bp, it is still a free lunch,” he said in a phone interview. For more see MNI Policy main wire at 0847ET.

US TSYS Rates Inside Range Ahead July CPI

  • Rates are trading mixed after the bell, inside a generally narrow session range, curves flatter with the short end underperforming: 3M10Y -1.050a t -143.773, 2s10s -6.012 at -79.368.
  • Light session volumes with no data or Fed speak to report, traders plied the sidelines ahead Thursday's CPI data for July.
  • Consensus puts core CPI inflation at 0.2% M/M in July in what’s likely only a minor uptick from the unrounded 0.16% M/M in June. Analysts see two conflicting (and familiar) drivers on the month: airfares (upside) and used cars (downside).
  • Some expect the Fed’s closely watched core services ex housing measures to firm from particularly weak flat or near flat readings in June but to still help the trend moderate.
  • Treasury futures see-sawed mildly higher after the $38B 10Y note auction (91282CHT1) tails slightly: 3.999% high yield vs. 3.997% WI; 2.56x bid-to-cover vs. 2.53x prior. Meanwhile, some modest corporate debt ($2B McDonald's over three tranches, $600M Toyota Motor Credit) generated some two-way rate lock hedging.

OVERNIGHT DATA

  • US MBA: REFIS -4% SA; PURCH INDEX -3% SA THRU AUGUST 4 WK
  • US MBA: UNADJ PURCHASE INDEX -27% VS YEAR-EARLIER LEVEL
  • US MBA: 30-YR CONFORMING MORTGAGE RATE 7.09% VS 6.93% PREV
  • US MBA: MARKET COMPOSITE -3.1% SA THRU AUG 04 WK

US DATA: MBA mortgage applications fell -3.1% last week, with broadly equal declines in purchases (-3%) and refis (-4%) for the second week running.

  • It comes as the 30Y conforming mortgage rate increased 16bps to 7.09% to push back within touching distance of its Oct’22 cycle high of 7.16%, with the spread to Treasury yields still sticky at the ~300bps mark.
  • The level of purchase applications is just 3.5% above the Feb’23 cycle low, below which application levels were last seen in the 1990s.
  • “There is arguably some evidence that short-run r* is currently elevated relative to pre-COVID levels: The economy has proven to be extremely resilient and spreads remain relatively low, in spite of the recent banking turmoil. As shown in June, the model expects short-run real r* to be 2.5% by the end of the year.”
  • “Evidence on whether long-run r*—that is, the persistent component, or trend, in r*—has risen after COVID is much weaker. We use a battery of models, from VARs to DSGEs, to estimate these trends, and these models reach different conclusions.
  • “According to VAR models, long-run r* has roughly remained constant and, if anything, declined a bit since late 2019, reaching 0.75% in real terms. According to the DSGE model, long-run r* has instead risen by almost 50bps during this period, and is now about 1.8%.”

MARKETS SNAPSHOT

Key late session market levels:
  • DJIA down 21.52 points (-0.06%) at 35298.28
  • S&P E-Mini Future down 11 points (-0.24%) at 4508.5
  • Nasdaq down 90.8 points (-0.7%) at 13799.02
  • US 10-Yr yield is down 1.8 bps at 4.0041%
  • US Sep 10-Yr futures are up 0.5/32 at 111-13.5
  • EURUSD up 0.0021 (0.19%) at 1.0978
  • USDJPY up 0.28 (0.2%) at 143.66
  • WTI Crude Oil (front-month) up $1.36 (1.64%) at $84.28
  • Gold is down $9.13 (-0.47%) at $1916.12
European bourses closing levels:
  • EuroStoxx 50 up 28.48 points (0.66%) at 4317.33
  • FTSE 100 up 59.88 points (0.8%) at 7587.3
  • German DAX up 77.65 points (0.49%) at 15852.58
  • French CAC 40 up 52.57 points (0.72%) at 7322.04

US TREASURY FUTURES CLOSE

  • 3M10Y -2.235, -144.958 (L: -149.071 / H: -141.918)
  • 2Y10Y -6.405, -79.761 (L: -79.971 / H: -73.306)
  • 2Y30Y -8.368, -63.255 (L: -63.465 / H: -55.02)
  • 5Y30Y -5.156, 4.264 (L: 4.088 / H: 9.432)
  • Current futures levels:
  • Sep 2-Yr futures down 2.25/32 at 101-20.75 (L: 101-20.25 / H: 101-24)
  • Sep 5-Yr futures down 2.75/32 at 107-0.75 (L: 106-31.5 / H: 107-07)
  • Sep 10-Yr futures steady at at 111-13 (L: 111-08.5 / H: 111-20)
  • Sep 30-Yr futures up 13/32 at 122-27 (L: 122-06 / H: 123-01)
  • Sep Ultra futures up 22/32 at 129-0 (L: 127-31 / H: 129-04)

US 10Y FUTURE TECHS: (U3) Briefly Pierces The 20-Day EMA

  • RES 4: 113-08 High Jul 18 and a bull trigger
  • RES 3: 112-31 High Jul 20
  • RES 2: 112-13 50-day EMA
  • RES 1: 111-17+/112-07 20-day EMA / High Jul 27
  • PRICE: 111-13 @ 1515 ET Aug 9
  • SUP 1: 110-23/109-24 Low Aug 7 / 4 and the bear trigger
  • SUP 2: 109-14 Low Nov 8 2022 (cont)
  • SUP 3: 109-10+ Low Nov 4 2022 (cont)
  • SUP 4: 108-26+ Low Oct 21 2022 (cont) and a major support

The trend condition in Treasuries remains bearish, however, a bullish corrective cycle remains in play and the contract is trading closer to its latest high. Resistance to watch is 111-17+, the 20-day EMA - it has been pierced, with Wednesday trade briefly touching 111-20. A clear break of this average would signal scope for a stronger recovery and potentially expose the 50-day EMA, at 112-13. The bear trigger has been defined at 109-24, the Aug 4 low. A break would resume the downtrend.

SOFR FUTURES CLOSE

  • Sep 23 steady at 94.60
  • Dec 23 -0.005 at 94.645
  • Mar 24 -0.030 at 94.895
  • Jun 24 -0.045 at 95.265
  • Red Pack (Sep 24-Jun 25) -0.055 to -0.045
  • Green Pack (Sep 25-Jun 26) -0.035 to -0.02
  • Blue Pack (Sep 26-Jun 27) -0.01 to +0.005
  • Gold Pack (Sep 27-Jun 28) +0.015 to +0.030

SHORT TERM RATES

SOFR Benchmark Settlements:

  • 1M +0.00006 to 5.31246 (-.00778/wk)
  • 3M +0.00150 to 5.36678 (-0.00380/wk)
  • 6M -0.00486 to 5.42097 (-0.01322/wk)
  • 12M -0.00995 to 5.30832 (-0.05403/wk)
STIR: FRBNY EFFR for prior session:
  • Daily Effective Fed Funds Rate: 5.33% volume: $110B
  • Daily Overnight Bank Funding Rate: 5.32% volume: $284B
US TSYS: Repo Reference Rates
  • Secured Overnight Financing Rate (SOFR): 5.30%, $1.340T
  • Broad General Collateral Rate (BGCR): 5.28%, $572B
  • Tri-Party General Collateral Rate (TGCR): 5.27%, $561B
  • (rate, volume levels reflect prior session)

FED REVERSE REPO OPERATION

NY Federal Reserve/MNI

The latest operation bounces to $1,796.519B, w/106 counterparties, compared to $1,778.351B in the prior session. The high for 2023 stands at $2,375.171B on Friday March 31, 2023; all-time record high of $2,553.716B reached December 30, 2022.

PIPELINE: $2B McDonald's 3Pt Launched

  • Date $MM Issuer (Priced *, Launch #)
  • 08/09 $2B #McDonald's $600M 5Y +68, $600M 10Y +98, $800M 30Y +128. Compares to last year's $1.5B issuance on September 9, McDonald's issued $750M 10Y +133, $750M 30Y +168
  • 08/09 $600M #Toyota Motor Credit 3Y +60

EGBs-GILTS CASH CLOSE: Safe-Haven Bid Dissipates Amid Bank Tax Backtrack

Gilts outperformed Bunds Wednesday, with periphery EGB spreads a little tighter in a modestly risk-on session.

  • The safe-haven bid observed Tuesday following the introduction of a windfall tax on banks in Italy dissipated Wednesday as the Italian gov't appeared to backtrack on the scope of the new tax.
  • Core FI's yield rises were fairly steady all session, though curves were at their flattest early in the session before unwinding higher as the longer-end caught up with the short-end sell-off.
  • UK yields were relatively less affected by the Italian headlines, with yields dipping slightly. Periphery EGB spreads tightened, but the sharp early narrowing dissipated as the equity rally faded.
  • Thursday's main event is the US CPI report, though also of note are some final eurozone national-level July CPI data and the ECB's Econ Bulletin.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

  • Germany: The 2-Yr yield is up 4.4bps at 2.962%, 5-Yr is up 2.4bps at 2.511%, 10-Yr is up 2.8bps at 2.497%, and 30-Yr is up 4bps at 2.59%.
  • UK: The 2-Yr yield is down 2.8bps at 4.926%, 5-Yr is down 1.1bps at 4.412%, 10-Yr is down 2bps at 4.365%, and 30-Yr is down 1.8bps at 4.562%.
  • Italian BTP spread down 0.5bps at 165bps / Greek down 0.9bps at 132.8bps

FOREX: Subdued Greenback Ahead Of CPI, NOK Remains Strongest Performer

  • Major currency markets traded within tight ranges on Wednesday, with the USD index oscillating either side of unchanged throughout the trading session. Price action is mainly reflective of a dearth of fresh data and in anticipation of the important US July inflation data on Thursday.
  • The Euro is a marginal outperformer, with EURUSD (+0.17%) creeping back towards the 1.10 mark, however the likes of AUD, NZD and GBP are all moderately lower on the day.
  • USDJPY has stealthily been climbing throughout the session, registering around a 75 pip recovery from the early 143.00 lows, however, price action has shown very little volatility.
  • NOK, yesterday's poorest performer, remains the strongest in G10 on Wednesday, with EURNOK (-0.41%) consolidating just above session lows of 11.1844. Moves coincide with a solid move higher of the Brent crude price, which stands at the best levels of the week having erased the entirety of the early Monday/Tuesday decline. Support seen layered below the EURNOK price headed into tomorrow's Norway CPI release, with downside levels at 11.1483-11.0965, capturing a key Fib retracement, the 200-dma as well as the Jul25 low.
  • US CPI data the clear focus on tomorrow’s docket. Consensus puts US Core CPI inflation at 0.2% M/m in July in what’s likely only a minor uptick from the unrounded 0.16% print in June. Analysts see two conflicting (and familiar) drivers on the month: airfares (upside) and used cars (downside).

THURSDAY DATA CALENDAR

DateGMT/LocalImpactFlagCountryEvent
10/08/20230600/0800*NOCPI Norway
10/08/20230600/0800**SEPrivate Sector Production
10/08/20230800/1000**ITItaly Final HICP
10/08/20231230/0830**USJobless Claims
10/08/20231230/0830**USWASDE Weekly Import/Export
10/08/20231230/0830***USCPI
10/08/20231430/1030**USNatural Gas Stocks
10/08/20231530/1130**USUS Bill 04 Week Treasury Auction Result
10/08/20231530/1130*USUS Bill 08 Week Treasury Auction Result
10/08/20231700/1300***USUS Treasury Auction Result for 30 Year Bond
10/08/20231800/1400**USTreasury Budget
10/08/20231900/1500USAtlanta Fed's Raphael Bostic
10/08/20232015/1615USPhiladelphia Fed's Pat Harker

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