BoJ tweak. US Treasury borrows.
October 31, 2023
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–Yesterday afternoon Treasury announced borrowing estimates of $776b for Oct-Dec 2023 and $816b for Jan-Mar 2024. Cash balance at the end of both quarters is assumed at $750b, though current TGA is $848b according to the St Louis Fed site. Though Q4 borrowing was lower than expected due to “projections of higher receipts”, Q1 is higher and both are big numbers. Financing details will be released at 8:30 on Wednesday. Yields were marginally higher on the day with tens up 1.3 bps to 4.856%.
–BoJ removed the hard cap 1% yield on JGBs as was leaked by Nikkei during yesterday’s session. Yen has weakened to 150.44. Core inflation forecasts were also revised higher, to 2.8% in 2024. US treasury futures slightly higher with TYZ3 106-13, up 6 at 5:30 EST. China’s Mfg PMI fell to 49.5 vs 50.2 expected, and Service PMI to 50.6 from 51.7 last.
–Early buying yesterday of TY puts: TYZ3 105p 33 to 35 paid for 28k. Settled 28 ref TYZ 106-07. Open interest rose 39k to 89k, the most OI of any TYZ put. Also a buyer of 12k TY Week2 Nov 104.5p for 11-12, settled 9, OI +12k. Week2 options expire 10-November, so these options capture the last leg of auctions next week; the 30y is on 9-Nov.
–Today’s news includes Employment Cost Index expected 1% Q/Q. Chicago PMI expected 45 from 44.1 last.
https://home.treasury.gov/news/press-releases/jy1851
