Highlights:

  • US curve sits bull steeper, PPI up next
  • Powell set to appear with ECB's Knot - no text due, but Q&A eyed
  • EURJPY bounce extends, re-approaching pre-intervention high


US TSYS: Modest Bull Steepening, Outperforming Europe

  • Treasuries sit modestly firmer overnight, led by the front end with cash yields 2.5-0.5bp lower.
  • The bull steepening sees 2s10s at -35.7bps (+1bp) and nearing the higher end of yesterday’s range.
  • Treasuries outperform EGBs across the curve, whilst outperformance to Gilts is limited to the front-end.
  • TYM4 trades at 108-27+ (+ 01) on subdued volumes of 240k. It has pulled a little further off support at 108-19+ (20-day EMA) and channel resistance remains exposed at 109-06+ (top from Feb 1 high) after which lies both 109-08+ (50-day EMA) and 109-09+ (May 3 high).
  • Focus is firmly on PPI inflation and comments from Chair Powell whilst tomorrow's CPI report looms on the horizon (MNI preview here).
  • Data: PPI inflation Apr (0830ET)
  • Fedspeak: Gov Cook on growth and change (0910ET, text with no Q&A), Powell in discussion with ECB’s Knot (1000ET, no text).
  • Bill issuance: US Tsy $75B 42D CMB, $46B 52W Bill auctions

STIR: Fed Rate Path Softens Slightly With PPI and Powell Ahead

  • Fed Funds implied rates have tilted slightly lower, initially aided by some dovish BoE commentary but with front end Treasuries since outperforming.
  • It leaves a rate path broadly similar to levels seen prior to the payrolls report, slightly higher for near-term meetings and lower for end-2024.
  • Cumulative cuts from 5.33% effective: 1.5bp Jun, 7bp Jul, 20bp Seo, 29bp Nov and 43bp Dec.
  • Today’s focus is first on PPI inflation at 0830ET before Fed Chair Powell in a special event with ECB’s Knot at 1000ET (no text).
  • It’ll be Powell’s first appearance since the May 1 FOMC press conference (highlights of which can be found in the MNI Fed Review here). Since then, the payrolls report surprised dovishly across the board but some inflation metrics have surprised higher including ISM services prices paid and surveyed inflation expectations.
  • There will no doubt be questions on whether Powell has seen tomorrow’s CPI data. Guidance that he gave when speaking to Rubenstein in Feb 2023 suggests his appearance will come a little early as he said he receives some key data the “night” before.

MNI: US CPI Preview: Testing Persistence Of Q1 “Bump” In Disinflation Path

US TSY FUTURES: OI Suggests Long Setting Dominated On Monday

Yesterday's uptick in Tsy futures and preliminary OI data points to a mix of net long setting (FV, TY, US & WN) and net short cover (TU & UXY), with the former dominating in net curve terms.

  • The largest net long setting (in DV01 equivalent terms) seemed to come in WN futures.
  • A reminder that an uptick in the New York Fed's short-run inflation expectations metric helped trim the early rally, with subsequent block sales also factoring in.
  • Impending inflation data presents the immediate tier 1 risk events for Tsys, with futures positioning still skewed short across the curve (although there will be some influence from basis trade positions evident there).
  • It is also worth flagging that net shorts have pared back from recent extremes, presenting a little more two-way event risk than was evident ahead of the most recent NFP release.
  • Expect our full CPI preview to be published over the next couple of hours.
 13-May-2410-May-24Daily OI ChangeOI DV01 Equivalent Change ($)
TU4,050,5584,054,696-4,138-149,922
FV6,167,3876,153,007+14,380+588,424
TY4,387,2724,382,680+4,592+291,568
UXY2,148,2542,148,475-221-18,951
US1,603,5301,598,509+5,021+639,261
WN1,651,9351,642,670+9,265+1,818,112
  Total+28,899+3,168,492

STIR: OI Points To Mix Of Positioning Swings As SOFR Futures Twist Flattened On Monday

Yesterday’s twist flattening of the SOFR futures strip and preliminary OI data points to a mix of net short setting and long cover in the whites, with the former seemingly dominating in net pack OI terms.

  • Further out the strip we seemed to see a mix of net long setting and net short cover, with the former dominating in the blues and the latter dominating in the reds.
  • Net pack OI was little changed in the greens as those forces roughly offset.
  • A reminder that an uptick in the New York Fed's short-run inflation expectations metric helped push the space away from session highs.
  • Impending inflation data presents the immediate tier 1 risk events.
  • It is worth flagging that net SOFR shorts have seemingly pared back from recent extremes, presenting a little more two-way event risk than was evident ahead of the most recent NFP release.
  • Still, the greatest risk to the market still seems to lie towards a softer-than-expected data release.
  • Our full CPI preview can be found here.
  • Proximity to that data has probably been a limiting factor for SOFR futures activity early this week.
 13-May-2410-May-24Daily OI Change Daily OI Change In Packs
SFRH4956,985959,275-2,290Whites+10,410
SFRM41,116,6531,107,110+9,543Reds-8,679
SFRU41,096,9021,086,116+10,786Greens-446
SFRZ41,204,5671,212,196-7,629Blues+9,094
SFRH5798,471788,576+9,895  
SFRM5788,754797,993-9,239  
SFRU5713,567713,699-132  
SFRZ5828,056837,259-9,203  
SFRH6513,469514,127-658  
SFRM6532,045536,139-4,094  
SFRU6419,230414,704+4,526  
SFRZ6360,886361,106-220  
SFRH7248,572245,260+3,312  
SFRM7182,929180,620+2,309  
SFRU7175,062173,300+1,762  
SFRZ7149,830148,119+1,711  

EUROPE ISSUANCE UPDATE:

  • Netherlands auction results:
    E1.53bln of the 0% Jan-29 DSL. Avg yield 2.695%.
  • UK auction results:
    GBP600mln of the 0.125% Mar-73 linker. Avg yield -0.994% (bid-to-cover 3.29x).
  • German auction results:
    E5bln (E4.1bln allotted) of the 2.90% Jun-26 Schatz. Avg yield 2.93% (bid-to-offer 2.07x; bid-to-cover 2.52x).
  • EU syndication: Final terms
    EU6b WNG of the Oct-54 EU-bond (ISIN: EU000A3K4EY2). Books at above EUR 74bln, spread set at MS+88 (guidance was MS+91 area).
  • Italy syndication: Final terms
    EUR9bln of the new Oct-37 BTP Green (ISIN: IT0005596470). Books in excess of E84bln, spread set at 0.95% Mar-37 BTP + 9bp (guidance was +11bp area).

FOREX: GBP Slips as Pill Eyes Cut Conversation Over Summer

  • GBP trades poorly despite the pick-up in wages data evident in the March labour market report. Average weekly earnings rose by 5.7% on a 3M/YOY basis, 0.2ppts ahead of consensus, despite the uptick in the unemployment rate. Any hawkish signals from the data were countered, however, by an appearance from BoE's Pill - who saw a conversation over cutting rates in the UK to take place over the summer. As a result, GBP is weaker, putting EUR/GBP again back above the 200-dma. 0.8621 remains key resistance ahead of 0.8644.
  • JPY weakness is gathering pace, helping the winning streak in EUR/JPY extend further. EUR/JPY has now traded higher for six consecutive sessions, extending the bounce off 50-dma support and targeting 169.77 and the bull trigger of 171.56 further out - the pre-intervention high.
  • The USD is mixed, flat-to-higher against most others to put the USD Index in very minor positive territory ahead of the NY crossover.
  • After a quiet Monday session, data picks up on Tuesday with the release of April PPI. PPI unusually comes ahead of CPI this week, so may carry more market weight - consensus looks for PPI Y/Y to tick up to 2.2%, however ex-food and energy is expected to moderate to 2.3%. Speeches from ECB's Schnabel & Knot and Fed's Powell & Cook are also on the docket.

OPTIONS: Expiries for May14 NY cut 1000ET (Source DTCC)

  • EUR/USD: $1.0650(E1.9bln), $1.0750-60(E2.2bln), $1.0800(E1.1bln), $1.0850(E1.1bln)
  • GBP/USD: $1.2495-00(Gbp1.7bln), $1.2525-30(Gbp640mln)
  • USD/JPY: Y155.15($602mln)
  • AUD/USD: $0.6590-00(A$2.7bln)
  • USD/CAD: C$1.3700($657mln), C$1.3755($579mln)
  • USD/CNY: Cny7.2400($536mln)

EQUITIES: Global Equities Remain Firm as Techs Point Higher

S&P E-Minis traded higher last week, extending the current bull cycle. Price has moved through resistance at the 20-day EMA - a bullish development. This highlights scope for a continuation higher that would expose the key resistance. Eurostoxx 50 futures build on the recent firm tone and the contract has traded higher to top the bull trigger. Recent gains have resulted in a breach of the 20-day EMA, resistance at 4990.00, as well as the bull trigger at 5079.00, Apr 2 high.

  • WTI Crude down $0.16 or -0.2% at $78.97
  • Natural Gas down $0.04 or -1.64% at $2.342
  • Gold spot up $9.67 or +0.41% at $2345.49
  • Copper up $4.75 or +1% at $481.35
  • Silver up $0.23 or +0.8% at $28.416
  • Platinum up $8.45 or +0.84% at $1008.78

COMMODITIES: WTI Futures Retain Bearish Theme

Gold rallied well for two consecutive sessions as markets undergo a corrective bump higher. This breaks the consolidation phase and concludes the bearish short-term condition. A bearish theme in WTI futures remains intact and the contract traded to a fresh short-term cycle low last week. Gains off this mark are considered corrective for now. Price has recently breached the 50-day EMA, strengthening a short-term bearish theme that highlights potential for a deeper correction.

  • WTI Crude down $0.19 or -0.24% at $78.97
  • Natural Gas down $0.04 or -1.85% at $2.342
  • Gold spot up $10.07 or +0.43% at $2345.49
  • Copper up $4.55 or +0.95% at $481.35
  • Silver up $0.24 or +0.86% at $28.416
  • Platinum up $8.77 or +0.88% at $1008.78
DateGMT/LocalImpactCountryEvent
14/05/20241230/0830***us USPPI
14/05/20241230/0830**ca CAWholesale Trade
14/05/20241255/0855**us USRedbook Retail Sales Index
14/05/20241310/0910 us USFed Governor Lisa Cook
14/05/20241315/1515 eu EUECB's Schnabel speech at scientific conference
14/05/20241400/1000 us USFed Chair Jerome Powell
14/05/20241530/1130**us USUS Treasury Auction Result for 52 Week Bill
14/05/20241530/1130*us USUS Treasury Auction Result for Cash Management Bill
14/05/20240015/2015 us USKansas City Fed's Jeff Schmid
15/05/20240130/1130***au AUQuarterly wage price index
15/05/20240600/0800***se SEInflation Report
15/05/20240645/0845***fr FRHICP (f)
15/05/20240900/1100**eu EUIndustrial Production
15/05/20240900/1100***eu EUGDP (p)
15/05/20241100/0700**us USMBA Weekly Applications Index
15/05/20241215/0815**ca CACMHC Housing Starts
15/05/20241230/0830***us USCPI
15/05/20241230/0830**ca CAMonthly Survey of Manufacturing
15/05/20241230/0830***us USRetail Sales
15/05/20241230/0830**us USEmpire State Manufacturing Survey
15/05/20241300/0900*ca CACREA Existing Home Sales
15/05/20241400/1000*us USBusiness Inventories
15/05/20241400/1000**us USNAHB Home Builder Index
15/05/20241400/1000 us USFed Vice Chair Michael Barr
15/05/20241405/1505 gb GBBernanke Review of Bank of England Forecasting
15/05/20241430/1030**us USDOE Weekly Crude Oil Stocks
15/05/20241600/1200 us USMinneapolis Fed's Neel Kashkari
15/05/20241920/1520 us USFed Governor Michelle Bowman
15/05/20242000/1600**us USTICS

MNI US MARKETS ANALYSIS - US Curve a Touch Steeper Pre-PPI

Last updated at:May-14 11:01By: Edward Hardy

Highlights:

  • US curve sits bull steeper, PPI up next
  • Powell set to appear with ECB's Knot - no text due, but Q&A eyed
  • EURJPY bounce extends, re-approaching pre-intervention high


US TSYS: Modest Bull Steepening, Outperforming Europe

  • Treasuries sit modestly firmer overnight, led by the front end with cash yields 2.5-0.5bp lower.
  • The bull steepening sees 2s10s at -35.7bps (+1bp) and nearing the higher end of yesterday’s range.
  • Treasuries outperform EGBs across the curve, whilst outperformance to Gilts is limited to the front-end.
  • TYM4 trades at 108-27+ (+ 01) on subdued volumes of 240k. It has pulled a little further off support at 108-19+ (20-day EMA) and channel resistance remains exposed at 109-06+ (top from Feb 1 high) after which lies both 109-08+ (50-day EMA) and 109-09+ (May 3 high).
  • Focus is firmly on PPI inflation and comments from Chair Powell whilst tomorrow's CPI report looms on the horizon (MNI preview here).
  • Data: PPI inflation Apr (0830ET)
  • Fedspeak: Gov Cook on growth and change (0910ET, text with no Q&A), Powell in discussion with ECB’s Knot (1000ET, no text).
  • Bill issuance: US Tsy $75B 42D CMB, $46B 52W Bill auctions

STIR: Fed Rate Path Softens Slightly With PPI and Powell Ahead

  • Fed Funds implied rates have tilted slightly lower, initially aided by some dovish BoE commentary but with front end Treasuries since outperforming.
  • It leaves a rate path broadly similar to levels seen prior to the payrolls report, slightly higher for near-term meetings and lower for end-2024.
  • Cumulative cuts from 5.33% effective: 1.5bp Jun, 7bp Jul, 20bp Seo, 29bp Nov and 43bp Dec.
  • Today’s focus is first on PPI inflation at 0830ET before Fed Chair Powell in a special event with ECB’s Knot at 1000ET (no text).
  • It’ll be Powell’s first appearance since the May 1 FOMC press conference (highlights of which can be found in the MNI Fed Review here). Since then, the payrolls report surprised dovishly across the board but some inflation metrics have surprised higher including ISM services prices paid and surveyed inflation expectations.
  • There will no doubt be questions on whether Powell has seen tomorrow’s CPI data. Guidance that he gave when speaking to Rubenstein in Feb 2023 suggests his appearance will come a little early as he said he receives some key data the “night” before.

MNI: US CPI Preview: Testing Persistence Of Q1 “Bump” In Disinflation Path

US TSY FUTURES: OI Suggests Long Setting Dominated On Monday

Yesterday's uptick in Tsy futures and preliminary OI data points to a mix of net long setting (FV, TY, US & WN) and net short cover (TU & UXY), with the former dominating in net curve terms.

  • The largest net long setting (in DV01 equivalent terms) seemed to come in WN futures.
  • A reminder that an uptick in the New York Fed's short-run inflation expectations metric helped trim the early rally, with subsequent block sales also factoring in.
  • Impending inflation data presents the immediate tier 1 risk events for Tsys, with futures positioning still skewed short across the curve (although there will be some influence from basis trade positions evident there).
  • It is also worth flagging that net shorts have pared back from recent extremes, presenting a little more two-way event risk than was evident ahead of the most recent NFP release.
  • Expect our full CPI preview to be published over the next couple of hours.
 13-May-2410-May-24Daily OI ChangeOI DV01 Equivalent Change ($)
TU4,050,5584,054,696-4,138-149,922
FV6,167,3876,153,007+14,380+588,424
TY4,387,2724,382,680+4,592+291,568
UXY2,148,2542,148,475-221-18,951
US1,603,5301,598,509+5,021+639,261
WN1,651,9351,642,670+9,265+1,818,112
  Total+28,899+3,168,492

STIR: OI Points To Mix Of Positioning Swings As SOFR Futures Twist Flattened On Monday

Yesterday’s twist flattening of the SOFR futures strip and preliminary OI data points to a mix of net short setting and long cover in the whites, with the former seemingly dominating in net pack OI terms.

  • Further out the strip we seemed to see a mix of net long setting and net short cover, with the former dominating in the blues and the latter dominating in the reds.
  • Net pack OI was little changed in the greens as those forces roughly offset.
  • A reminder that an uptick in the New York Fed's short-run inflation expectations metric helped push the space away from session highs.
  • Impending inflation data presents the immediate tier 1 risk events.
  • It is worth flagging that net SOFR shorts have seemingly pared back from recent extremes, presenting a little more two-way event risk than was evident ahead of the most recent NFP release.
  • Still, the greatest risk to the market still seems to lie towards a softer-than-expected data release.
  • Our full CPI preview can be found here.
  • Proximity to that data has probably been a limiting factor for SOFR futures activity early this week.
 13-May-2410-May-24Daily OI Change Daily OI Change In Packs
SFRH4956,985959,275-2,290Whites+10,410
SFRM41,116,6531,107,110+9,543Reds-8,679
SFRU41,096,9021,086,116+10,786Greens-446
SFRZ41,204,5671,212,196-7,629Blues+9,094
SFRH5798,471788,576+9,895  
SFRM5788,754797,993-9,239  
SFRU5713,567713,699-132  
SFRZ5828,056837,259-9,203  
SFRH6513,469514,127-658  
SFRM6532,045536,139-4,094  
SFRU6419,230414,704+4,526  
SFRZ6360,886361,106-220  
SFRH7248,572245,260+3,312  
SFRM7182,929180,620+2,309  
SFRU7175,062173,300+1,762  
SFRZ7149,830148,119+1,711  

EUROPE ISSUANCE UPDATE:

  • Netherlands auction results:
    E1.53bln of the 0% Jan-29 DSL. Avg yield 2.695%.
  • UK auction results:
    GBP600mln of the 0.125% Mar-73 linker. Avg yield -0.994% (bid-to-cover 3.29x).
  • German auction results:
    E5bln (E4.1bln allotted) of the 2.90% Jun-26 Schatz. Avg yield 2.93% (bid-to-offer 2.07x; bid-to-cover 2.52x).
  • EU syndication: Final terms
    EU6b WNG of the Oct-54 EU-bond (ISIN: EU000A3K4EY2). Books at above EUR 74bln, spread set at MS+88 (guidance was MS+91 area).
  • Italy syndication: Final terms
    EUR9bln of the new Oct-37 BTP Green (ISIN: IT0005596470). Books in excess of E84bln, spread set at 0.95% Mar-37 BTP + 9bp (guidance was +11bp area).

FOREX: GBP Slips as Pill Eyes Cut Conversation Over Summer

  • GBP trades poorly despite the pick-up in wages data evident in the March labour market report. Average weekly earnings rose by 5.7% on a 3M/YOY basis, 0.2ppts ahead of consensus, despite the uptick in the unemployment rate. Any hawkish signals from the data were countered, however, by an appearance from BoE's Pill - who saw a conversation over cutting rates in the UK to take place over the summer. As a result, GBP is weaker, putting EUR/GBP again back above the 200-dma. 0.8621 remains key resistance ahead of 0.8644.
  • JPY weakness is gathering pace, helping the winning streak in EUR/JPY extend further. EUR/JPY has now traded higher for six consecutive sessions, extending the bounce off 50-dma support and targeting 169.77 and the bull trigger of 171.56 further out - the pre-intervention high.
  • The USD is mixed, flat-to-higher against most others to put the USD Index in very minor positive territory ahead of the NY crossover.
  • After a quiet Monday session, data picks up on Tuesday with the release of April PPI. PPI unusually comes ahead of CPI this week, so may carry more market weight - consensus looks for PPI Y/Y to tick up to 2.2%, however ex-food and energy is expected to moderate to 2.3%. Speeches from ECB's Schnabel & Knot and Fed's Powell & Cook are also on the docket.

OPTIONS: Expiries for May14 NY cut 1000ET (Source DTCC)

  • EUR/USD: $1.0650(E1.9bln), $1.0750-60(E2.2bln), $1.0800(E1.1bln), $1.0850(E1.1bln)
  • GBP/USD: $1.2495-00(Gbp1.7bln), $1.2525-30(Gbp640mln)
  • USD/JPY: Y155.15($602mln)
  • AUD/USD: $0.6590-00(A$2.7bln)
  • USD/CAD: C$1.3700($657mln), C$1.3755($579mln)
  • USD/CNY: Cny7.2400($536mln)

EQUITIES: Global Equities Remain Firm as Techs Point Higher

S&P E-Minis traded higher last week, extending the current bull cycle. Price has moved through resistance at the 20-day EMA - a bullish development. This highlights scope for a continuation higher that would expose the key resistance. Eurostoxx 50 futures build on the recent firm tone and the contract has traded higher to top the bull trigger. Recent gains have resulted in a breach of the 20-day EMA, resistance at 4990.00, as well as the bull trigger at 5079.00, Apr 2 high.

  • WTI Crude down $0.16 or -0.2% at $78.97
  • Natural Gas down $0.04 or -1.64% at $2.342
  • Gold spot up $9.67 or +0.41% at $2345.49
  • Copper up $4.75 or +1% at $481.35
  • Silver up $0.23 or +0.8% at $28.416
  • Platinum up $8.45 or +0.84% at $1008.78

COMMODITIES: WTI Futures Retain Bearish Theme

Gold rallied well for two consecutive sessions as markets undergo a corrective bump higher. This breaks the consolidation phase and concludes the bearish short-term condition. A bearish theme in WTI futures remains intact and the contract traded to a fresh short-term cycle low last week. Gains off this mark are considered corrective for now. Price has recently breached the 50-day EMA, strengthening a short-term bearish theme that highlights potential for a deeper correction.

  • WTI Crude down $0.19 or -0.24% at $78.97
  • Natural Gas down $0.04 or -1.85% at $2.342
  • Gold spot up $10.07 or +0.43% at $2345.49
  • Copper up $4.55 or +0.95% at $481.35
  • Silver up $0.24 or +0.86% at $28.416
  • Platinum up $8.77 or +0.88% at $1008.78
DateGMT/LocalImpactCountryEvent
14/05/20241230/0830***us USPPI
14/05/20241230/0830**ca CAWholesale Trade
14/05/20241255/0855**us USRedbook Retail Sales Index
14/05/20241310/0910 us USFed Governor Lisa Cook
14/05/20241315/1515 eu EUECB's Schnabel speech at scientific conference
14/05/20241400/1000 us USFed Chair Jerome Powell
14/05/20241530/1130**us USUS Treasury Auction Result for 52 Week Bill
14/05/20241530/1130*us USUS Treasury Auction Result for Cash Management Bill
14/05/20240015/2015 us USKansas City Fed's Jeff Schmid
15/05/20240130/1130***au AUQuarterly wage price index
15/05/20240600/0800***se SEInflation Report
15/05/20240645/0845***fr FRHICP (f)
15/05/20240900/1100**eu EUIndustrial Production
15/05/20240900/1100***eu EUGDP (p)
15/05/20241100/0700**us USMBA Weekly Applications Index
15/05/20241215/0815**ca CACMHC Housing Starts
15/05/20241230/0830***us USCPI
15/05/20241230/0830**ca CAMonthly Survey of Manufacturing
15/05/20241230/0830***us USRetail Sales
15/05/20241230/0830**us USEmpire State Manufacturing Survey
15/05/20241300/0900*ca CACREA Existing Home Sales
15/05/20241400/1000*us USBusiness Inventories
15/05/20241400/1000**us USNAHB Home Builder Index
15/05/20241400/1000 us USFed Vice Chair Michael Barr
15/05/20241405/1505 gb GBBernanke Review of Bank of England Forecasting
15/05/20241430/1030**us USDOE Weekly Crude Oil Stocks
15/05/20241600/1200 us USMinneapolis Fed's Neel Kashkari
15/05/20241920/1520 us USFed Governor Michelle Bowman
15/05/20242000/1600**us USTICS

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