MNI ASIA MARKETS ANALYSIS - Buffeted By Covid Related Headlines

US TSY SUMMARY: Paring Risk

Treasuries held weaker levels all session, starting off with a tentative risk-on tone as equities managed modest early gains on hopes of some Covid relief package. Overall volumes rather muted, however, delivering some real vol on choppy moves.

• Tsy bounced off midmorning lows, stocks reversed gains after Sen McConnell's headlines: "MCCONNELL SAYS SCHUMER, PELOSI BRUSHING OFF GOP AID PROPOSALS; SAYS DEMOCRATS MOVING GOALPOSTS ON AID BILL," Bbg
• Spurring a second rebound in rates/weakness in equities amid headlines that Pfizer hit by cyberattack in Europe: PFIZER: EUROPEAN MEDICINES AGENCY HIT BY CYBERATTACK; SAYS SOME VACCINE DOCUMENTS ACCESSED IN EMA CYBERATTACK," Bbg.
• Another Tail To Tell: US Tsy $38B 10Y note auction re-open (91282CAV3) drew 0.951% high yield (0.960% last month) vs. 0.947% WI; 2.33 bid/cover (2.32 previous).
• Heavy volumes in Eurodollar futures, Whites generating nearly 950,000 by the close, flow mixed/varied in outrights (EDZ0>418k) and spds (>40k EDZ1=EDH2). Reminder, Dec Eurodollar futures, options expire Fri/Mon.
• The 2-Yr yield is unchanged at 0.1508%, 5-Yr is up 1.3bps at 0.4052%, 10-Yr is up 2bps at 0.9377%, and 30-Yr is up 2.4bps at 1.6863%.

US TSY: Short Term Rates

US DOLLAR LIBOR: Latest settles

• O/N +0.00013 at 0.08263% (-0.00062/wk)
• 1 Month -0.00087 to 0.14788% (-0.00417/wk)
• 3 Month -0.00937 to 0.22063% (-0.00525/wk)
• 6 Month -0.00263 to 0.25075% (-0.00500/wk)
• 1 Year -0.00137 to 0.33588% (-0.00087/wk)

• Daily Effective Fed Funds Rate: 0.09% volume: $57B
• Daily Overnight Bank Funding Rate: 0.08%, volume: $158B

• Secured Overnight Financing Rate (SOFR): 0.07%, $939B
• Broad General Collateral Rate (BGCR): 0.06%, $360B
• Tri-Party General Collateral Rate (TGCR): 0.06%, $341B
• (rate, volume levels reflect prior session)

• Tsy 20Y-30Y, $1.734B accepted vs. $4.230B submission
• Next scheduled purchases:
• Thu 12/10 1010-1030ET: Tsy 7Y-20Y, appr $3.625B
• Fri 12/11 1010-1030ET: Tsy 0Y-2.25Y, appr $12.825B
• Fri 12/11 Next forward schedule release at 1500ET

EURODOLLAR/TREASURY OPTIONS: Summary

US EURODLR OPTIONS: December Expiration, Slight Decline Open Interest
Reminder, December Eurodollar futures and options expire Friday (lead quarterly futures and options expire early Mon morning while Red through Purple midcurves expire at 5:00 pm ET Fri). Final OI coming into session according to CME Group Data below:

• * Dec quarterly OI: 8,149,210 (2,151,611 calls, 5,997,599 puts);
• * Dec 1yr midcurve (Red) OI: 1,582,609 (982,188 calls, 600,421 puts);
• * Dec 2yr midcurve (Green) OI: 1,125,556 (442,617 calls, 682,939 puts);
• * Dec 3yr midcurve (Blue) OI: 808,930 (349,561 calls, 459,369 puts);
• * Dec 4yr midcurve (Gold) OI: 78,275 (12,417 calls, 65,858 puts);
• * Total of options 11,744,580 options coming off the sheets (3,595,370 of which
• are midcurves) compares to 17,188,942 last December 2019.

• +7,000 Green Mar 95/96 2x1 put spds, 1.5
• -4,500 Blue Mar 95 straddles, 19.0
• +34,000 Red Mar'22 100.5 calls, 0.5
• +1,400 Sep 100.25 calls, 1.5
• +/-10,000 Mar 97 put, 1.0
• Overnight trade
• 1,250 Red Sep 87/93 2x1 put spds
• 5,500 Blue Feb 97/100.25 call spds

• -20,000 TYG 140 calls, 3/64 vs. 137-14 to -17.5/0.10%
• -3,000 TYG 136.5/138.5 strangles, 38
• +5,000 TYH 135.5/136 put strip, 39
• +5,000 TYF 137.5/TYG 136.5 put spds, 0.0 Feb over
• +4,600 TYG 137 puts, 19
• +3,000 TYF 138/TYG 138.5 call diagonal, 7 Feb over
• +3,000 TYF 137.5/TYG 137 put spds, 9 Feb over
• Overnight trade
• 4,000 TYG 135.5/137 put spds vs. TYG 138.5 calls
• 1,250 FVF 125.25/126.25 strangles

EGBs-GILTS: Yields Pare Rise Ahead Of Brussels Summits, ECB

Bund and Gilt yields descended from highs toward the end of Wednesday's session, having earlier climbed on apparent optimism over a Brexit breakthrough at tonight's dinner between UK's Johnson and EU's von der Leyen.

• Curves flat-to-steeper, periphery spreads a little tighter.
• Of course markets also await the ECB decision Thursday - expected to expand/extend PEPP (contact us if you haven't seen our preview).
• 2-day European summit starts Thurs, though threat of budget being vetoed looks to have been averted.
• Apart from that, UK GDP and BTP supply the main points on Thursday's docket.

Closing Levels / 10-Yr Periphery EGB Spreads:

• Germany: The 2-Yr yield is down 0.1bps at -0.774%, 5-Yr is up 0.1bps at -0.793%, 10-Yr is up 0.2bps at -0.605%, and 30-Yr is up 0.6bps at -0.179%.
• UK: The 2-Yr yield is up 0.1bps at -0.08%, 5-Yr is unchanged at -0.04%, 10-Yr is up 0.4bps at 0.261%, and 30-Yr is up 0.9bps at 0.808%.
• Italian BTP spread down 1bps at 118.7bps
• Spanish bond spread down 1bps at 62.6bps /Portuguese down 1.3bps at 58.8bps

EUROPE SUMMARY: Schatz Puts In Size

Wednesday's options flow included:

• UBF1 223/218ps, bought for 84/80/78 in 1.7k
• RXG1 176.50/175.50/174.50 p fly, bought for 8 in 1k
• RXH1 178.00/173.50ps 1x3, bought for 70 and 70.5 in 1.5k
• DUG1 112.30 put sold at 2 in 33k. 66k total last 2 days
• DUG1 112.20/00 put spread bought for 0.75 in 5k
• DUG1 112.30/20 put spread bought for 1.5 in 5k
• DUG1 112.30/112.20/112.10p fly, bought for 1.25 and 1.50 in 16k total
• LU1 100.00/100.12/100.25c fly, bought for 1.5 in 2k
• LZ1 100^, bought for 19 in 4kLU1 100.00/100.12/100.25c fly, bought for 1.5 in 2k
• 0LU1 99.87/100.00^^, bought for 15.5 in 2k

FOREX: GBP Hopeful Ahead of Pivotal Dinner

• The USD erased early weakness to trade firmly into the London close. This put most major pairs under pressure and took some of the shine off EUR/USD, which hit new weekly lows just above 1.2050. AUD was the outperformer, with NOK the weakest in G10.
• Focus Thursday turns to the ECB rate decision, at which the bank are expected to 'recalibrate' their policy approach with some sort of tweak to their asset purchase scheme. Weekly US jobless claims and November CPI data are also due.

FX OPTIONS: Expiries for Dec10 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1800-10(E1.4bln), $1.1900-05(E1.0bln), $1.2000(E572mln), $1.2045-60(E1.1bln)
• USD/JPY: Y103.50-60($1.3bln), Y104.00($836mln), Y104.25-35($938mln), Y104.90-105.00($1.2bln), Y105.50-55($838mln), Y105.75-85($1.4bln)
• EUR/GBP: Gbp0.8890-00(E532mln), Gbp0.8970(E847mln), Gbp0.9075(E579mln)
• AUD/USD: $0.7270-80(A$1.2bln), $0.7400-05(A$1.1bln), $0.7430(A$533mln), $0.7495-00(A$771mln)
• USD/CNY: Cny6.50($904mln-USD puts), Cny6.60($1.4bln-USD puts), Cny6.70($726mln)

EQUITIES: After Record Start, US Stocks Retreat Into Close

• Sentiment was mixed in Europe, with gains posted across German, Swiss stocks while most other indices traded either side of flat.
• The VIX index held close to recent lows, with the December average reflecting the more muted equity price action in recent weeks.

PIPELINE: Realty Income Launched

Date $MM Issuer (Priced *, Launch #)

• 12/09 $725M #Realty Income $325M 5Y +50, $400M 12Y +100
• 12/09 $Benchmark Lao People's Democratic Rep 5Y investor calls
• -
• $10.766B Priced Tuesday; December total $48.266B
• 12/08 $2.5B *Charles Schwab PerpNC10 4%
• 12/08 $2B *Charles Schwab $1.25B 5Y +53, $750M 10Y +75
• 12/08 $3B *Morocco $750M 7Y +175, $1B 12Y +200, $1.25B 30Y +4%
• 12/08 $1.5B *Occidental Petroleum $750M 5Y 5.5%, $1.25B 10Y 6.12%
• 12/08 $1.266B *Dominican Republic 2032 Tap 4.1%
• 12/08 $500M *CBOE 10Y +78

COMMODITIES: WTI Erases Post-Inventory Data Losses

• In precious metals space, a recovery in the initially-underperforming greenback weighed, with alltime highs in equity markets also providing an anchor. Spot gold and silver traded lower by around 2 apiece, cementing gold's failure to top the 50-dma resistance of $1878.01.