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The US treasury auctioned off $13 billion of 20 year bonds:

• High yield 4.590%
• WI level at the time of the auction 4.574%
• Tail +1.6 basis points vs six-month average -0.62 basis points (although the last election was 2.0 basis points)
• Bid to cover 2.59Xvs six-month average 2.63X
• Directs 17.64% vs six-month average 16.93%
• Indirects 67.87% vs six-month average 72.78%
• Dealers 14.5% vs six-month average 10.29%.

AUCTION GRADE:D+

Although better than the last months auction in comparison to the six-month averages, the selection was still weak. The only bright spot was that domestic bidders were higher than the six-month average. International buyers were well below the six-month average and dealers were saddled with more than the average as well. The bid to cover was marginally lower than the six-month average which required a positive tail for the second consecutive month of 1.6 basis points.

This comes even with yields higher by 55 basis points from last months auction at 4.04%.

This article was written by Greg Michalowski at www.forexlive.com.

The US treasury will auction off $13 billion of 20 year bonds at the top of the hour. The auction results will be compared to the six-month averages of the major components from the auction. Those six-month components show:

• Tail six-month average -0.62 basis points (although the last election was 2.0 basis points)
• Bid to cover six-month average 2.63X
• Directs six-month average 16.93%
• Indirects six-month average 72.78%
• Dealers six-month average 10.29%.

The current 20-year yield is at 4.577% up 1.8 basis points on the day.

A month ago, the auction went off at a high yield of 4.040%, but it was not received well with a tail of +2.0 basis points, a bid to cover of 2.51x lower than the 6-month average, and Dealers taking a large 18.62% (vs 6 month average of 10.29%).

Needless to say, yields are sharply higher since that auction. The low intraday yield was reached on September 17 at 3.974%.

This article was written by Greg Michalowski at www.forexlive.com.

On the day:

• Stoxx 600 -0.3%
• German DAX -0.2%
• Francis CAC -0.5%
• UK’s FTSE 100 -0.6%
• Spain’s Ibex +0.2%
• Italy’s FTSE MIB -0.1%

The Nasdaq is trading at the lows of the day, down 1.1%. Nvidia shares are a laggard, down 2.5%.

This article was written by Adam Button at www.forexlive.com.

• Crude oil inventories +5474K vs +270K exp
• Gasoline inventories +878K vs -1212K exp
• Distillates inventories -1140K vs -1679K exp
• Refinery utilization +1.8% versus expectations of -0.3%

Oil was in the midst of a nice intraday bounce before this data but there has been some selling since.

Private oil inventories released late yesterday:

• Crude +1643K
• Gasoline -2019K
• Distillates -1478K

This article was written by Adam Button at www.forexlive.com.

Here are the key forecast changes (July 2024 → October 2024):

GDP growth:

• 2024: 1.2% → 1.2% (unchanged)
• 2025: 2.1% → 2.1% (unchanged)
• 2026: 2.4% → 2.3% (slight decrease)

CPI Inflation:

• 2024: 2.6% → 2.5% (decrease)
• 2025: 2.4% → 2.2% (decrease)
• 2026: 2.0% → 2.0% (unchanged)

Core Inflation (by Q4):

• 2024: 2.4% → 2.3% (decrease)
• 2025: 2.0% → 2.1% (slight increase)
• 2026: 2.0% → 2.0% (unchanged)

US GDP Growth:

• 2024: 2.3% → 2.8% (significant increase)
• 2025: 2.1% → 2.4% (increase)
• 2026: 2.2% → 2.2% (unchanged)

China GDP Growth:

• 2024: 4.7% → 4.6% (slight decrease)
• 2025: 4.3% → 4.3% (unchanged)
• 2026: 4.0% → 4.1% (slight increase)

Key Commodity Price Changes:

• Oil price assumptions reduced by US$10 per barrel:
  • Brent: US$85 → US$75
  • WTI: US$80 → US$70
  • WCS: US$65 → US$55

Other notable changes:

• Q3 2024 inflation came in 0.2 percentage points lower than expected
• U.S. growth outlook revised up due to stronger consumption, productivity growth, and easier financial conditions
• Near-term China outlook revised down due to persistent property market weakness
• Canadian housing market expected to strengthen due to lower interest rates and recent changes to mortgage insurance rules

USD/CAD was slow to react to the rate cut but has now risen to the highs of the day, up 35 pips to 1.3851.

This article was written by Adam Button at www.forexlive.com.

No fresh news to report out of Japan.

No intervention type comments. Its only just pasty 9am in Tokyo though so maybe later.

This article was written by Eamonn Sheridan at www.forexlive.com.

Gold is down $10 today after hitting a record high yesterday. Reuters is out with a report highlighting a drop in China gold and copper imports due to a potential tax change, citing four sources:

• Gold ore/concentrate imports to China fell 22.4% m/m in September to 201,004.9 MT
• Chinese customs floating plan to put higher taxes on gold products with >58% iron/sulfur, taxing it as pyrite, which is subject to a 1% import tax and 13% VAT
• Proposal being fought by Chinese importers but customs not budging
• Some traders already diverting shipments elsewhere to avoid retroactive tax risk

This isn’t a negative for the gold market as it’s more about refining and processing, though if there are local shortages in physical gold, it could create some kind of domestic premium that hurts buying until the supply chain is sorted out

This article was written by Adam Button at www.forexlive.com.

• Prior month 3.86M revised to 3.88M last month.
• Existing Home sales 3.84M annualized pace versus 3.86M estimate.Lowest level since October 2010
• Sales MoM -1.0% vs -2.0% last month (revised from -2.5%)
• Sales YoY -3.5% % vs -4.2% YoY last month. Last year sales pace was at 3.98 million
• Inventory 4.3 months vs 4.2 months last month. A year ago the month supply was 3.4 months
• Inventories are up 1.5% on the month
• Total inventory 1.39 million at the end of September
• Median price $404,500 up 3% year on year. This was the 15th consecutive month of year-over-year price increases

Other details

• First-time buyers accounted for 26% of sales in September, matching the record low from August 2024 and November 2021, down from 27% in September 2023.
• All-cash sales made up 30% of transactions in September, rising from 26% in August and 29% in September 2023.
• Individual investors or second-home buyers purchased 16% of homes in September, down from 19% in August and 18% in September 2023.
• Distressed sales, including foreclosures and short sales, remained steady at 2%, unchanged from last month and September 2023.
• The 30 year mortgage rate average 6.44% as of October 17. That’s up from 6.32% one week ago, but down from 7.63% one year ago

regional data showed declines in Northeast, Midwest, and South but a rebound in the West:

• Northeast: Sales fell 4.2% MoM, down 6.1% YoY to 460,000; median price up 6.0% to $467,100.
• Midwest: Sales slipped 2.2% MoM, down 5.3% YoY to 900,000; median price up 5.0% to $306,600.
• South: Sales decreased 1.7% MoM, down 5.5% YoY to 1.72M; median price up 0.8% to $359,700.
• West: Sales rose 4.1% MoM, up 5.6% YoY to 760,000; median price up 1.7% to $616,400.

“Home sales have been essentially stuck at around a four-million-unit pace for the past 12 months, but factors usually associated with higher home sales are developing,” said NAR Chief Economist Lawrence Yun. “There are more inventory choices for consumers, lower mortgage rates than a year ago and continued job additions to the economy. Perhaps, some consumers are hesitating about moving forward with a major expenditure like purchasing a home before the upcoming election.”

This article was written by Greg Michalowski at www.forexlive.com.

The major US stock indices are trading lower. The Dow and the S&P are on pace for their third consecutive losing day. Remember all three indices are working on six weeks of gains. That string is at risk with more than half of the trading week remaining.

A snapshot of the market currently shows:

• Dow industrial average is trading down -283 points or -0.67% at 42634.64
• S&P index is trading down -20.44 points or -0.35% at 5831
• NASDAQ index down -88.6 points or -0.46% at 18487.65

The small-cap Russell 2000 is down -8.33 points or -0.37% at 2223.28.

Shares of McDonald’s are trading down -6.22% after announcing a E. coli outbreak in its quarter pounder sandwiches.

Starbucks preannounced lower-than-expected earnings and its shares are down -2.41% in early trading.

Nvidia shares are trading down -1.79%

This article was written by Greg Michalowski at www.forexlive.com.

S&P 500 futures are down 0.4% ahead of the open in what’s become a familiar pattern. Over the past week, stock futures have been weak only to see buying throughout the day and decent closes.

The index hit a record high on Thursday but has seen some mild profit taking since.

Eyes are on McDonald’s after a E.coli outbreak sent shares as much as 10% lower. They’re now down about 6%. Shares of Starbucks are also down 3% after abandoning its guidance for next year.

Coca-Cola highlighted a stable global economic backdrop but has seen shares fall 2% in the pre-market despite beating estimates. Boeing also announced a huge loss but shares are relatively flat as the company has been beaten up.

Texas Instruments shares are higher after earnings but the company said the industrial market remains weak, having seen 8 quarters of decline and is down more than 30% from peak. They note that three markets (personal electronics, enterprise systems, and communications equipment) are showing cyclical recovery.

After the close today, Tesla earnings are highly anticipated.

This article was written by Adam Button at www.forexlive.com.

I’ve been listening to corporate conference calls closely for hints about macroeconomic weakness. Railways have great insight into the goods macroeconomy, which has been struggling since the covid boom. Some comments in the conference call yesterday highlight caution on the Canadian economy but there are also comments on the US, where it generates about one third of its revenue.

Tracy Robinson (President and CEO):

• “The macro is lighter than what we expected coming into 2024 and maybe even a bit softer than what we thought on our last call back in July. We’re seeing this play out in our merchandise business, especially in construction and related commodities as well as in automotive.”
• “As we look forward, we see that continuing through next year, so kind of lower and longer.”

Ghislain Houle (Chief Financial Officer):

• “From a macroeconomic perspective, lumber remains at the trough and consumer consumption continues to be tepid.”
• “As we enter the final few months of the year, overall industrial production now looks to be largely flat for 2024.”

Remi Lalonde (Chief Commercial Officer):

• “Business has been a bit more challenging than expected due to the labor uncertainty and lower-than-expected industrial production and manufacturing activity and mixed signals around consumer confidence.”
• “Despite soft consumer confidence in the U.S. and Canada, we’re looking for sequential and year-over-year growth in intermodal”

This article was written by Adam Button at www.forexlive.com.

USD/JPY has soared 200 pips today in its fourth day of gains as the FX market recalibrates to a stronger US dollar and US economy. The move brings the pair back into line with Treasury yields, which have also erased the decline that started in late July.

The market may also be making an election trade on the US dollar and the possibility of a red sweep and large deficits (and higher yields) to go along with that.

There is certainly some element of a short squeeze as well as dollar shorts were a crowded position on the theme of US exceptionalism briefly fading.

Also notable is that yen crosses are breaking out to the best levels since early August in a good sign for risk appetite despite S&P 500 futures down 0.2%.

The main spot to watch today is the Canadian dollar with the Bank of Canada decision coming at 9:45 am ET. The consensus is for 50 basis points but anything from 25 to 75 bps is possible and the path beyond today is also highly uncertain as the Canadian economy diverges from the US.

It would take a real dovish surprise to drive USD/CAD above the highs of the past year as much of the bad news is priced in.

This article was written by Adam Button at www.forexlive.com.