CONSUMER STAPLES: Mars: $25-30b may come this week (x8)

• RES 4: 110-25   High Dec 12
• RES 3: 110-19   76.4% retracement of the Dec 6  - Jan 13 bear leg.    
• RES 2: 109-31   High Dec 18  
• RES 1: 109-10+/13 50-day EMA / High Jan 30 
• PRICE:‌‌ 109-03 @ 16:55 GMT Feb 3
• SUP 1: 108-23+/21+ 20-day EMA / Low Feb 3
• SUP 2: 108-06/107-06 Low Jan 23 / 13 and the bear trigger 
• SUP 3: 107-04   Low Apr 25 ‘24 and a key support 
• SUP 4: 106-11   2.00 proj of the Oct 1 - 14 - 16 price swing  

Treasury futures gave up a sharp mid-session rally to fade into the London close, and test the 20-day EMA support in the process. A bullish corrective cycle is intact and the contract is holding on to its recent gains. 109-10+, the 50-day EMA, remains exposed. It has been pierced, a clear break of it would strengthen a bullish theme and open 109-31, the Dec 18 high. The medium-term trend condition is bearish. The bear trigger is 107-06, the Jan 13 low. Initial firm support has been defined at 108-06, the Jan 23 low.

• Date $MM Issuer (Priced *, Launch #)
• 02/03 $1.25B Romania 12Y +300
• 02/03 $800M Hess Midstream 3NC1
• 02/03 $500M Air Transport 7NC3 
• 02/03 $Benchmark L-Bank 2Y SOFR, 5Y
• Expected Tuesday:
• 02/04 $3B EIB WNG 10Y +60a
• 02/04 $Benchmark BNG Bank 3Y SOFR+38a

Note that the expected 2nd (calendar year 2025) quarter borrowing requirements are much lower than in Q1 - that's typical and reflective of the large tax receipts in April. Treasury's estimated financing needs will largely reflect their forecasting of those receipts. MNI's estimate of $450B marketable borrowing may this be very much on the high side (we wouldn't be shocked by a figure closer to $0-100B). 

• The debt limit is expected to be sustained for a few quarters, which means that Treasury will have to burn through some of its Treasury General Account cash pile ($745B at end-2024).
• Having targeted $850B by end-March in the previous refunding, we assume that they will maintain that assumption, with only a small dip in the following quarter.
• However expectations differ widely on this, with at least one analyst (Wrightson ICAP) seeing $500B projected cash at end-quarters. A lower/higher cash balance reduces/increases the number in the financing need column, and vice-versa. A “realistic” number would be closer to $300-400B for both quarters.
• The Fed’s expected (per primary dealers/analysts) conclusion to balance sheet runoff by Q3 could help by moderating net financing requirements, but this is very unlikely to be incorporated in Treasury’s assumptions. That means that the projected net financing requirements will be higher than they are expected to be in reality by private sector analysts.
• We could get more color on Treasury’s approach to dealing with the debt limit with Wednesday’s Refunding documents, including on extraordinary measures and cash management strategy, but any discussion is likely to remain tentative and apolitical.
• Note most analysts see the “x-date” by which Treasury risks running out of cash as being around August, though some see risks/core scenario of a much earlier resolution (ie March). More detail is available in our Refunding Preview.