Highlights: 

  • Juneteenth leaves markets with limited open, likely to contain price action through the session
  • EUR/AUD breaks out to new YTD lows
  • CHF vols underpinned ahead of Thursday SNB decision, rate call on a knife edge


US TSYS: Private Data Releases Headline Juneteenth Session

  • Volumes are unsurprisingly low considering the Juneteenth holiday with cash markets closed.
  • TYU4 at 110-22+ trades back at levels seen through Asia hours having fully reversed a lift to 110-26+ (competing spillover from Bunds rally vs firmer than expected UK services CPI) which kept within yesterday’s high of 110-28+. Volumes are just 135k.
  • The bull cycle is still seen in play after clearance of 110-21 (Jun 7 high), a move that has next opened resistance at 111-01 (Jun 14 high) along with greater focus on 111-17+ (Fibo projection).
  • Fed Funds implied rates hold yesterday’s retail sales-driven decline. Of note, it leaves 3bp of cuts for July, a cumulative 19bp for Sept and 48bp for Dec meetings.
  • Early London trade saw a sizeable ~15k lots of FFQ4 trade at 94.700, with ~80%trading on the bid.
  • Data: Weekly MBA mortgage data (0700ET), NAHB housing index Jun (1000ET)
  • No issuance.


US DATA: Mortgage Applications Consolidate Prior Jump

  • MBA composite mortgage applications increased a seasonally adjusted 0.9% last week after the particularly large 15.6% gain the week prior.
  • The latest increase was led by purchases (1.6% after 8.6%) whilst refinancing mortgages lagged after their surge (-0.4% after 28.4%).
  • As the chart below shows though, purchase applications are still only 56% of 2019 levels whilst refis are 32%.
  • The 30Y conforming rate fell further to 6.94% (-8bps), its lowest since Mar 29.
  • The regular-jumbo spread pushed slightly lower to -18bps although remains within recent lows of -27bps from mid-April.

EGBS: Little Sign Of Reprieve For OATs Vs. Iberian Paper

Little sign of reprieve for 10-Year OATs on an equal weighted butterfly vs. Spanish & Portuguese peers.

  • The fiscal and sovereign credit rating trajectories for the Iberian nations resulted in numerous sell-side cross-market SPGB & PGB tightener recommendations in recent times.
  • Early ’24 French fiscal worry resulted in a particular focus on compression trades vs. OATs, even as France avoided negative rating action from Fitch & Moody’s.
  • The French political uncertainty then added further momentum to that trade, pushing the Spain/France/Portugal 10-Year butterfly towards 0bp.
  • The fly trades at levels not seen since pre-GFC times.
  • Portuguese 10s have traded through 10-Year OATs since the early part of last week.
  • Short-term fiscal trajectories and the potential for French political/fiscal paralysis mean that participants are unwilling to fade OAT weakness via Iberian peers at this juncture.
  • Note that a benchmark roll for French 10-Year OATs has factored into the recent move, but that doesn’t alter the short-term picture for the structure.
  • Similarly, a Portuguese benchmark roll in early ’24 impacted the below chart/pricing of the fly structure.

Fig. 1: Spain/France/Portugal 10-Year Butterfly (bp)

Source: MNI - Market News/Bloomberg

EUROPE ISSUANCE UPDATE: 

Greece auction results
* E200mln of the 3.375% Jun-34 GGB. Avg yield 3.56% (bid-to-cover 3.64x).

Germany auction results
* E2bln (E1.629bln allotted) of the 2.50% Aug-54 Bund. Avg yield 2.54% (bid-to-offer 1.31x; bid-to-cover 1.61x).

Cyprus syndication:
E1bln (in line with MNI expectations) of the Cyprus 7-year EMTN. Books in excess E6.7bln, spread set at MS+55bps (guidance was MS +60 bps area).

Overnight Vols Surge as SNB Decision on a Knife Edge

  • EUR/CHF vols are a particular standout - the overnight contract has surged ahead of the Thursday SNB decision - hitting levels not seen in well over a year, implying a sizeable intraday reaction tomorrow. Vols briefly cleared 18 points for the first time since March last year, blowing out the break-even on an overnight straddle to over 60 pips, well over double the YTD average overnight swing. 
  • This leaves pullback and cycle lows at today's 0.9478 under pressure, a break below which puts the cross at the lowest levels since February. There remains rationale for the SNB to stick to their current policy orientation, as stickier overseas inflation, a hawkish Fed and re-emerging political risk among Switzerland's largest trading partners could all argue for unchanged headline rates.
  • This would be a resolutely hawkish outcome relative to market expectations, which currently price 17bps, or a 70% chance, of a 25bps rate cut this week. 
  • Our full SNB preview here: https://roar-assets-auto.rbl.ms/files/64861/SNBPreview-2024-06.pdf
  • We see the SNB decision as going either way, with high uncertainty around the decision. Markets see a 25bps cut as slightly more likely but analysts are tilted slightly towards a hold. While inflation has accelerated in line with SNB expectations since the March meeting, it remains well within the SNB price stability target range. 

GBP Firms as Services CPI Remains a Sticking Point

  • GBP outperforms, trading well on the back of a broadly inflationary UK inflation release. While headline CPI was inline with expectations, particular stickiness in services CPI remains a thorn in the side of the BoE. While we don't expect this release to sway tomorrow's rate decision (expected unchanged, with a 7-2 vote), market pricing for the BoE cycle across 2024 has shifted; 44bps of cuts are now priced by year-end, relative to 46bps at yesterday's close.
  • GBP/USD has printed a fourth session of higher lows, and a third session of higher highs. 1.2750 presents the next intraday resistance ahead of 1.2782, the 61.8% retracement for the downleg off the mid-June high.
  • AUD similarly trades well, with EUR/AUD a particular cross of interest. Prices have broken through the YTD lows to print the lowest level in a year on improved risk appetite and the lingering impact of this week's hawkish RBA decision. EUR/AUD downside demand was evident in sizeable FX options trade in Asia-Pac hours. Put strikes layered between 1.57-1.59 saw solid interest of over  A$750mln notional - decent volume for the cross.
  • The USD Index is mid-table, trading either side of the 50-dma at 105.198. Drivers are thin Wednesday, suggesting more muted trade, and keeping focus on political risk across Europe and the UK.
  • The Bank of Canada minutes/delliberations release and the MBA Mortgage Applications data takes focus for the rest of the trading day, with the central bank speakers slate particularly quiet given the Juneteenth market holiday in the US. 

FX OPTIONS: Expiries for Jun19 NY cut 1000ET (Source DTCC)

  • EUR/USD: $1.0600(E1.6bln), $1.0715(E580mln), $1.0745-50(E1.3bln), $1.0765-70(E1.1bln), $1.0800(E1.1bln)
  • USD/JPY: Y155.00($831mln), Y156.90-05($2.6bln), Y158.00($531mln)
  • NZD/USD: $0.6070(N$500mln)
  • USD/CAD: C$1.3565($663mln), C$1.3765($589mln) 
  • USD/CNY: Cny7.3000($1.8bln), Cny7.3500($1.2bln)

E-Mini S&P Just Shy of 5500 Handle, Bull Cycle Extends

  • The trend condition in Eurostoxx 50 futures remains bullish, however, a corrective cycle remains in play and this has resulted in a pullback from the May high. Recent weakness has resulted in a break of 4943.00, the Jun 11 low, highlighting potential for a deeper retracement. Scope is seen for a move towards 4762.00, the Apr 19 low and a key support. Firm resistance is at 5046.00, Jun 12 high.
  • The uptrend in S&P E-Minis remains intact and the contract has traded higher this week, confirming an extension of the current bull cycle. Price has recently cleared 5430.75, the May 23 high and bull trigger. This confirmed a resumption of the uptrend. Note that MA studies are in a bull-mode  position too, highlighting positive market sentiment. Sights are on 5572.00 next, a Fibonacci projection. Initial support lies at 5433.13, the 20-day EMA.

WTI Futures Trade Near Key Resistance at $80.11

  • WTI futures traded higher yesterday, extending the current bull phase. The climb has resulted in a break of $80.11, the May 29 high and a key resistance. A clear breach of this hurdle would cancel a recent bearish theme and pave the way for $82.24, a Fibonacci retracement point. Initial firm support to watch is $77.74, the 20-day EMA. A break would be seen as an early potential reversal signal.
  • Gold is unchanged and is trading closer to its recent lows. A sharp sell-off on Jun 7 reinforced a S/T bearish theme. The yellow metal has pierced the 50-day EMA, at 2315.2. A clear break would confirm a resumption of the reversal that started May 20 and signal scope for a deeper correction. This would open $2277.4, the May 3 low. Clearance of this price point would also strengthen a bearish theme. Initial firm resistance is $2387.8, the Jun 7 high.

 

DateGMT/LocalImpactCountryEvent
19/06/20241100/0700**us USMBA Weekly Applications Index
19/06/20241400/1000**us USNAHB Home Builder Index
19/06/20241730/1330 ca CABOC Minutes (Summary of Deliberations)
20/06/20242245/1045***nz NZGDP
20/06/20240600/0800**de DEPPI
20/06/20240700/0900 eu EUECB's Lagarde and Cipollone in Eurogroup meeting
20/06/20240730/0930***ch CHSNB PolicyRate
20/06/20240730/0930***ch CHSNB Interest Rate Decision
20/06/20240800/1000***no NONorges Bank Rate Decision
20/06/20241100/1200***gb GBBank Of England Interest Rate
20/06/20241100/1200***gb GBBank Of England Interest Rate
20/06/20241230/0830***us USJobless Claims
20/06/20241230/0830*us USCurrent Account Balance
20/06/20241230/0830***us USHousing Starts
20/06/20241230/0830**us USPhiladelphia Fed Manufacturing Index
20/06/20241245/0845 us USMinneapolis Fed's Neel Kashkari
20/06/20241400/1600**eu EUConsumer Confidence Indicator (p)
20/06/20241430/1030**us USNatural Gas Stocks
20/06/20241500/1100**us USDOE Weekly Crude Oil Stocks
20/06/20241530/1130*us USUS Bill 08 Week Treasury Auction Result
20/06/20241530/1130**us USUS Bill 04 Week Treasury Auction Result
20/06/20241700/1300**us USUS Treasury Auction Result for TIPS 5 Year Note
20/06/20241900/2000 gb GBQuestion Time Leaders' Special
20/06/20242000/1600 us USRichmond Fed's Tom Barkin
21/06/20242300/0900***au AUJudo Bank Flash Australia PMI
21/06/20242301/0001**gb GBGfk Monthly Consumer Confidence
21/06/20242330/0830***jp JPCPI
21/06/20240030/0930**jp JPJibun Bank Flash Japan PMI
20/06/20240215/2215 us USSan Francisco Fed's Mary Daly
21/06/20240600/0700***gb GBRetail Sales
21/06/20240600/0700***gb GBPublic Sector Finances
21/06/20240645/0845**fr FRManufacturing Sentiment
21/06/20240700/0900 eu EUECB's De Guindos participates in ECONFIN meeting
21/06/20240715/0915**fr FRS&P Global Services PMI (p)
21/06/20240715/0915**fr FRS&P Global Manufacturing PMI (p)
21/06/20240730/0930**de DES&P Global Services PMI (p)
21/06/20240730/0930**de DES&P Global Manufacturing PMI (p)
21/06/20240800/1000**eu EUS&P Global Services PMI (p)
21/06/20240800/1000**eu EUS&P Global Manufacturing PMI (p)
21/06/20240800/1000**eu EUS&P Global Composite PMI (p)
21/06/20240830/0930***gb GBS&P Global Manufacturing PMI flash
21/06/20240830/0930***gb GBS&P Global Services PMI flash
21/06/20240830/0930***gb GBS&P Global Composite PMI flash
21/06/20241230/0830*ca CAIndustrial Product and Raw Material Price Index
21/06/20241230/0830**ca CARetail Trade
21/06/20241230/0830**us USWASDE Weekly Import/Export
21/06/20241345/0945***us USS&P Global Manufacturing Index (Flash)
21/06/20241345/0945***us USS&P Global Services Index (flash)
21/06/20241400/1000***us USNAR existing home sales
21/06/20241530/1630 gb GBBoE APF Sales Schedule for Q3
21/06/20241700/1300**us USBaker Hughes Rig Count Overview - Weekly

 

 

 

MNI US MARKETS ANALYSIS - EUR/AUD Breaks to New YTD Lows

Last updated at:Jun-19 11:13By: Edward Hardy

Highlights: 

  • Juneteenth leaves markets with limited open, likely to contain price action through the session
  • EUR/AUD breaks out to new YTD lows
  • CHF vols underpinned ahead of Thursday SNB decision, rate call on a knife edge


US TSYS: Private Data Releases Headline Juneteenth Session

  • Volumes are unsurprisingly low considering the Juneteenth holiday with cash markets closed.
  • TYU4 at 110-22+ trades back at levels seen through Asia hours having fully reversed a lift to 110-26+ (competing spillover from Bunds rally vs firmer than expected UK services CPI) which kept within yesterday’s high of 110-28+. Volumes are just 135k.
  • The bull cycle is still seen in play after clearance of 110-21 (Jun 7 high), a move that has next opened resistance at 111-01 (Jun 14 high) along with greater focus on 111-17+ (Fibo projection).
  • Fed Funds implied rates hold yesterday’s retail sales-driven decline. Of note, it leaves 3bp of cuts for July, a cumulative 19bp for Sept and 48bp for Dec meetings.
  • Early London trade saw a sizeable ~15k lots of FFQ4 trade at 94.700, with ~80%trading on the bid.
  • Data: Weekly MBA mortgage data (0700ET), NAHB housing index Jun (1000ET)
  • No issuance.


US DATA: Mortgage Applications Consolidate Prior Jump

  • MBA composite mortgage applications increased a seasonally adjusted 0.9% last week after the particularly large 15.6% gain the week prior.
  • The latest increase was led by purchases (1.6% after 8.6%) whilst refinancing mortgages lagged after their surge (-0.4% after 28.4%).
  • As the chart below shows though, purchase applications are still only 56% of 2019 levels whilst refis are 32%.
  • The 30Y conforming rate fell further to 6.94% (-8bps), its lowest since Mar 29.
  • The regular-jumbo spread pushed slightly lower to -18bps although remains within recent lows of -27bps from mid-April.

EGBS: Little Sign Of Reprieve For OATs Vs. Iberian Paper

Little sign of reprieve for 10-Year OATs on an equal weighted butterfly vs. Spanish & Portuguese peers.

  • The fiscal and sovereign credit rating trajectories for the Iberian nations resulted in numerous sell-side cross-market SPGB & PGB tightener recommendations in recent times.
  • Early ’24 French fiscal worry resulted in a particular focus on compression trades vs. OATs, even as France avoided negative rating action from Fitch & Moody’s.
  • The French political uncertainty then added further momentum to that trade, pushing the Spain/France/Portugal 10-Year butterfly towards 0bp.
  • The fly trades at levels not seen since pre-GFC times.
  • Portuguese 10s have traded through 10-Year OATs since the early part of last week.
  • Short-term fiscal trajectories and the potential for French political/fiscal paralysis mean that participants are unwilling to fade OAT weakness via Iberian peers at this juncture.
  • Note that a benchmark roll for French 10-Year OATs has factored into the recent move, but that doesn’t alter the short-term picture for the structure.
  • Similarly, a Portuguese benchmark roll in early ’24 impacted the below chart/pricing of the fly structure.

Fig. 1: Spain/France/Portugal 10-Year Butterfly (bp)

Source: MNI - Market News/Bloomberg

EUROPE ISSUANCE UPDATE: 

Greece auction results
* E200mln of the 3.375% Jun-34 GGB. Avg yield 3.56% (bid-to-cover 3.64x).

Germany auction results
* E2bln (E1.629bln allotted) of the 2.50% Aug-54 Bund. Avg yield 2.54% (bid-to-offer 1.31x; bid-to-cover 1.61x).

Cyprus syndication:
E1bln (in line with MNI expectations) of the Cyprus 7-year EMTN. Books in excess E6.7bln, spread set at MS+55bps (guidance was MS +60 bps area).

Overnight Vols Surge as SNB Decision on a Knife Edge

  • EUR/CHF vols are a particular standout - the overnight contract has surged ahead of the Thursday SNB decision - hitting levels not seen in well over a year, implying a sizeable intraday reaction tomorrow. Vols briefly cleared 18 points for the first time since March last year, blowing out the break-even on an overnight straddle to over 60 pips, well over double the YTD average overnight swing. 
  • This leaves pullback and cycle lows at today's 0.9478 under pressure, a break below which puts the cross at the lowest levels since February. There remains rationale for the SNB to stick to their current policy orientation, as stickier overseas inflation, a hawkish Fed and re-emerging political risk among Switzerland's largest trading partners could all argue for unchanged headline rates.
  • This would be a resolutely hawkish outcome relative to market expectations, which currently price 17bps, or a 70% chance, of a 25bps rate cut this week. 
  • Our full SNB preview here: https://roar-assets-auto.rbl.ms/files/64861/SNBPreview-2024-06.pdf
  • We see the SNB decision as going either way, with high uncertainty around the decision. Markets see a 25bps cut as slightly more likely but analysts are tilted slightly towards a hold. While inflation has accelerated in line with SNB expectations since the March meeting, it remains well within the SNB price stability target range. 

GBP Firms as Services CPI Remains a Sticking Point

  • GBP outperforms, trading well on the back of a broadly inflationary UK inflation release. While headline CPI was inline with expectations, particular stickiness in services CPI remains a thorn in the side of the BoE. While we don't expect this release to sway tomorrow's rate decision (expected unchanged, with a 7-2 vote), market pricing for the BoE cycle across 2024 has shifted; 44bps of cuts are now priced by year-end, relative to 46bps at yesterday's close.
  • GBP/USD has printed a fourth session of higher lows, and a third session of higher highs. 1.2750 presents the next intraday resistance ahead of 1.2782, the 61.8% retracement for the downleg off the mid-June high.
  • AUD similarly trades well, with EUR/AUD a particular cross of interest. Prices have broken through the YTD lows to print the lowest level in a year on improved risk appetite and the lingering impact of this week's hawkish RBA decision. EUR/AUD downside demand was evident in sizeable FX options trade in Asia-Pac hours. Put strikes layered between 1.57-1.59 saw solid interest of over  A$750mln notional - decent volume for the cross.
  • The USD Index is mid-table, trading either side of the 50-dma at 105.198. Drivers are thin Wednesday, suggesting more muted trade, and keeping focus on political risk across Europe and the UK.
  • The Bank of Canada minutes/delliberations release and the MBA Mortgage Applications data takes focus for the rest of the trading day, with the central bank speakers slate particularly quiet given the Juneteenth market holiday in the US. 

FX OPTIONS: Expiries for Jun19 NY cut 1000ET (Source DTCC)

  • EUR/USD: $1.0600(E1.6bln), $1.0715(E580mln), $1.0745-50(E1.3bln), $1.0765-70(E1.1bln), $1.0800(E1.1bln)
  • USD/JPY: Y155.00($831mln), Y156.90-05($2.6bln), Y158.00($531mln)
  • NZD/USD: $0.6070(N$500mln)
  • USD/CAD: C$1.3565($663mln), C$1.3765($589mln) 
  • USD/CNY: Cny7.3000($1.8bln), Cny7.3500($1.2bln)

E-Mini S&P Just Shy of 5500 Handle, Bull Cycle Extends

  • The trend condition in Eurostoxx 50 futures remains bullish, however, a corrective cycle remains in play and this has resulted in a pullback from the May high. Recent weakness has resulted in a break of 4943.00, the Jun 11 low, highlighting potential for a deeper retracement. Scope is seen for a move towards 4762.00, the Apr 19 low and a key support. Firm resistance is at 5046.00, Jun 12 high.
  • The uptrend in S&P E-Minis remains intact and the contract has traded higher this week, confirming an extension of the current bull cycle. Price has recently cleared 5430.75, the May 23 high and bull trigger. This confirmed a resumption of the uptrend. Note that MA studies are in a bull-mode  position too, highlighting positive market sentiment. Sights are on 5572.00 next, a Fibonacci projection. Initial support lies at 5433.13, the 20-day EMA.

WTI Futures Trade Near Key Resistance at $80.11

  • WTI futures traded higher yesterday, extending the current bull phase. The climb has resulted in a break of $80.11, the May 29 high and a key resistance. A clear breach of this hurdle would cancel a recent bearish theme and pave the way for $82.24, a Fibonacci retracement point. Initial firm support to watch is $77.74, the 20-day EMA. A break would be seen as an early potential reversal signal.
  • Gold is unchanged and is trading closer to its recent lows. A sharp sell-off on Jun 7 reinforced a S/T bearish theme. The yellow metal has pierced the 50-day EMA, at 2315.2. A clear break would confirm a resumption of the reversal that started May 20 and signal scope for a deeper correction. This would open $2277.4, the May 3 low. Clearance of this price point would also strengthen a bearish theme. Initial firm resistance is $2387.8, the Jun 7 high.

 

DateGMT/LocalImpactCountryEvent
19/06/20241100/0700**us USMBA Weekly Applications Index
19/06/20241400/1000**us USNAHB Home Builder Index
19/06/20241730/1330 ca CABOC Minutes (Summary of Deliberations)
20/06/20242245/1045***nz NZGDP
20/06/20240600/0800**de DEPPI
20/06/20240700/0900 eu EUECB's Lagarde and Cipollone in Eurogroup meeting
20/06/20240730/0930***ch CHSNB PolicyRate
20/06/20240730/0930***ch CHSNB Interest Rate Decision
20/06/20240800/1000***no NONorges Bank Rate Decision
20/06/20241100/1200***gb GBBank Of England Interest Rate
20/06/20241100/1200***gb GBBank Of England Interest Rate
20/06/20241230/0830***us USJobless Claims
20/06/20241230/0830*us USCurrent Account Balance
20/06/20241230/0830***us USHousing Starts
20/06/20241230/0830**us USPhiladelphia Fed Manufacturing Index
20/06/20241245/0845 us USMinneapolis Fed's Neel Kashkari
20/06/20241400/1600**eu EUConsumer Confidence Indicator (p)
20/06/20241430/1030**us USNatural Gas Stocks
20/06/20241500/1100**us USDOE Weekly Crude Oil Stocks
20/06/20241530/1130*us USUS Bill 08 Week Treasury Auction Result
20/06/20241530/1130**us USUS Bill 04 Week Treasury Auction Result
20/06/20241700/1300**us USUS Treasury Auction Result for TIPS 5 Year Note
20/06/20241900/2000 gb GBQuestion Time Leaders' Special
20/06/20242000/1600 us USRichmond Fed's Tom Barkin
21/06/20242300/0900***au AUJudo Bank Flash Australia PMI
21/06/20242301/0001**gb GBGfk Monthly Consumer Confidence
21/06/20242330/0830***jp JPCPI
21/06/20240030/0930**jp JPJibun Bank Flash Japan PMI
20/06/20240215/2215 us USSan Francisco Fed's Mary Daly
21/06/20240600/0700***gb GBRetail Sales
21/06/20240600/0700***gb GBPublic Sector Finances
21/06/20240645/0845**fr FRManufacturing Sentiment
21/06/20240700/0900 eu EUECB's De Guindos participates in ECONFIN meeting
21/06/20240715/0915**fr FRS&P Global Services PMI (p)
21/06/20240715/0915**fr FRS&P Global Manufacturing PMI (p)
21/06/20240730/0930**de DES&P Global Services PMI (p)
21/06/20240730/0930**de DES&P Global Manufacturing PMI (p)
21/06/20240800/1000**eu EUS&P Global Services PMI (p)
21/06/20240800/1000**eu EUS&P Global Manufacturing PMI (p)
21/06/20240800/1000**eu EUS&P Global Composite PMI (p)
21/06/20240830/0930***gb GBS&P Global Manufacturing PMI flash
21/06/20240830/0930***gb GBS&P Global Services PMI flash
21/06/20240830/0930***gb GBS&P Global Composite PMI flash
21/06/20241230/0830*ca CAIndustrial Product and Raw Material Price Index
21/06/20241230/0830**ca CARetail Trade
21/06/20241230/0830**us USWASDE Weekly Import/Export
21/06/20241345/0945***us USS&P Global Manufacturing Index (Flash)
21/06/20241345/0945***us USS&P Global Services Index (flash)
21/06/20241400/1000***us USNAR existing home sales
21/06/20241530/1630 gb GBBoE APF Sales Schedule for Q3
21/06/20241700/1300**us USBaker Hughes Rig Count Overview - Weekly

 

 

 

MNI Podcasts

Unearthing fresh policy thinking & market intelligence.

Copyright 2024Twitter, Xlinkedin logo