MNI ASIA MARKETS ANALYSIS - Risk-On Ahead Political Risk Events

US TSY SUMMARY: Risk-On

General risk-on as rates traded weaker vs. stronger equities Tuesday -- despite upcoming risk-events surrounding the Georgia state run-off (polls close 1900ET, election officials est winners likely annc'd early Wed), and Wednesday's electoral vote count in DC. Though the count may take some time due to expected objections from select Republicans, it's more the potentially violent protests in/around DC that have people on edge.

• Better than expected data weighed on rates: Mfg PMI rose 3.2pt to 60.7 in Dec, beating expectations of a decline to 56.6. The Dec reading marks the highest level since Aug '18 and the increase was broad-based.
• Second consecutive session decent if not heavy corporate debt issuance, near $25B (over $52B since Mon) generated additional hedging pressure in rates.
• Yield curves bear steepened to multi-year highs, 5Y30Y topped 134.5 on the day, level not seen since late 2016.
• The 2-Yr yield is up 0.8bps at 0.1211%, 5-Yr is up 2.2bps at 0.3718%, 10-Yr is up 3.3bps at 0.9465%, and 30-Yr is up 4.2bps at 1.6979%.

US TSY: Short Term Rates

US DOLLAR LIBOR: Latest settles:

• O/N +0.00175 at 0.08638% (+0.00875/wk)
• 1 Month -0.00887 to 0.13088 (-0.01300/wk)
• 3 Month -0.00037 to 0.23688% (-0.00150/wk)
• 6 Month -0.00200 to 0.25388% (-0.00375/wk)
• 1 Year -0.01088 to 0.32975% (-0.01213/wk)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 0.09% volume: $57B
• Daily Overnight Bank Funding Rate: 0.09%, volume: $131B

• Secured Overnight Financing Rate (SOFR): 0.10%, $1.046T
• Broad General Collateral Rate (BGCR): 0.06%, $367B
• Tri-Party General Collateral Rate (TGCR): 0.06%, $335B
• (rate, volume levels reflect prior session)

FED: NY Fed Operational Purchases

• Tsy 20Y-30Y, $1.733B accepted vs. $3.345B submission
• Next scheduled purchase:
• Wed 1/06 1010-1030ET: TIPS 7.5Y-30Y, appr $1.225B
• Thu 1/07 1100-1120ET: Tsy 20Y-30Y, appr $1.750B
• Fri 1/08 1100-1120ET: Tsy 0Y-2.25Y, appr $12.825B

EURODOLLAR/TREASURY OPTIONS: Summary

• +15,000 Green Dec 92/95 put spds, 2.25-2.5
• BLOCK +45,000 short Sep 96/97 put spds, 3.0, w/+25k more in pit
• 6,000 Blue Mar 92 puts, 3.0
• +5,000 Red Dec'22 95 puts, 5.0
• +4,000 Green Mar 95/97 put spds, 4.25
• +2,000 short Apr 96/97 put spds, 1.0
• +2,000 Green Dec 90/92 put spds, 4.0
• 3,600 Green Mar 95/96 2x3 put spds
• +1,800 Dec 93/97 2x1 put spds, 1.5
• Overnight
• 2,600 long Green Sep'23 95/96/97 call flys
• 2,500 Jun 99.62/99.687/99.75/99.812 put condors

• 7,500 TYH 136.5/137/137.5 call flys, 3
• +30,000 TYG 136.75/137.25/137.75 put trees, 3
• +5,000 TYH 135.5/136.5 2x1 put strips, 29-32
• +3,200 USG 176/177 call spds, 6-7
• +5,000 TYG 136.5 puts, 6
• +2,500 TYH 138.5/139.5/140.5 call flys, 13
• -8,000 TYH 138 straddles, 1-23-1-21
• Overnight
• Block 10,000 FVH 126.25 calls, 14, another 2,300 on screen 13.5 last
• 9,900 TYG 136 puts, 3
• 5,000 TYG 137 puts, 9-11
• 3,700 TYG 136.5 puts, 6
• 1,000 TYG 138 straddles, 61

EGBs-Gilts Cash Close: Big Supply Weighs

Heavy supply weighed on European bonds all session, with Italy, Germany, Ireland and Slovenia combining to sell EUR22.3bln via syndications and auction today.

• The German curve bear steepened, but solid demand for Italy 15-Yr sale helped periphery spreads tighten. In the UK, Chancellor Sunak's announcement of a GBP4.6bn lockdown support package for businesses helped keep a lid on Gilts, which also bear steepened.
• Supply slows a bit Weds but we still get 10-Yr auctions from the UK (GBP3bn) and Germany (E5bn of new Bund). Also, Services PMI and Inflation data tomorrow. Closing Levels / 10-Yr Periphery EGB Spreads:
• Germany: The 2-Yr yield is up 0.6bps at -0.716%, 5-Yr is up 1.5bps at -0.747%, 10-Yr is up 2.7bps at -0.577%, and 30-Yr is up 3bps at -0.166%.
• UK: The 2-Yr yield is up 1bps at -0.143%, 5-Yr is up 1.1bps at -0.092%, 10-Yr is up 3.6bps at 0.209%, and 30-Yr is up 4.9bps at 0.779%.
• Italian BTP spread down 0.9bps at 114.3bps / Spanish spread down 1.5bps at 61.2bps

EUROPE OPTIONS: Summary

• DUG1 112.30/20/10p ladder, sold at 2.5 in 5k
  
• RXH1 177.5/176.5/176.0p ladder, bought for -1 in 1k vs 176.50/175ps 1x2, sold at 8 in 1k
  
• RXH1 177.50/176.50/176.00 put ladder, paid flat in 3k
• LH1 100.00/100.12cs 1x2, bought for 1 in 6k
• LM1 100.25 call bought for 2.5 in 50k
• LM1 100.12/100.25/100.37c fly, bought for 1.5 in circa 10k
• LM1 100/100.12^^, sold at 8.5 in 1k
• LM1 100.12c vs LU1 100.12/100.25cs, sold the June at 1 in 14k
• LM1 100.125/100.25/100.375 call fly bought for 1.5 in 6.25k
• LM1 100.00/12/25/37c condor, bought for 3.5 in 2k
• LM1 100.00/100.125/100.25 call fly bought for 2 in 2k
• LM1 100.125/100.25cs x2 vs 100.00p, bought the cs for 1.25 in 30k x 15k
• LU1 100.25/100.50cs, bought for 2.75 in 3k
• 0LF1 100 calls, sold at 4.75 in 12k (ref 04s)
• ERU2 100.875/100.25 combo (v 100.55) bought for 1 in 3.5k (+put)

FOREX: USD Lower As Risk Grinds Higher, Oil Spike

Risk is trading back on the front foot today with Equities reversing from yesterday's lows, spurring fresh Dollar selling and a reversal of yesterday's safe haven rally.

• The Dollar Index was steadily lower throughout the session and has picked up some momentum to trade just above most recent lows at 89.43
• AUD (+1.3%), NZD (1.1%) and CAD (+0.87%) have been the main beneficiaries of the improved sentiment in the G10 space.
• Less pronounced moves were witnessed in EUR and JPY which were both boosted around 0.4% in a slow grind throughout the session. EURUSD is currently trading just below 1.2310 which has been notable resistance over the past week and remains the bull trigger for another leg higher.
• Cable was off the lows in line with a weaker USD, however, seems to be struggling for momentum as the UK logged another record daily Covid Case count of over 60,000.
• OPEC - reports emerged that OPEC+ members have agreed to broadly maintain production levels around their current amounts for both February and March. Most recently *Saudis to cut 1m b/d oil unilaterally in Feb, March has seen WTI Crude back above $50 a barrel for the first time since February.
• Both EURSEK and EURNOK (benefitting from the rebound in oil) are trading at the lows of their daily ranges, down 0.5%.

FX OPTIONS: Expiries for Jan 6 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.2035-50(E664mln-EUR puts), $1.2255-70(E670mln-EUR puts), $1.2300(E1.1bln-EUR puts), $1.2465-70(E507mln-EUR puts)
• USD/JPY: Y101.00($501mln), Y103.25-35($890mln-USD puts), Y104.00($1.1bln)
• AUD/USD: $0.7500(A$659mln)
• USD/MXN: Mxn20.85 $800mln-USD puts)

• EUR/USD: Jan07 $1.2155(E1.3bln-EUR puts); Jan11 $1.2095-1.2110(E1.6bln), $1.2295-1.2300(E3.0bln-EUR puts), $1.2310-15(E1.1bln-EUR puts); Jan12 $1.2200(E1.1bln)
• USD/JPY: Jan07 Y104.00($1.2bln); Jan12 Y104.00($1.2bln-USD puts); Jan13 Y103.00($1.2bln)
• GBP/USD: Jan11 $1.3700-15(Gbp1.1bln-GBP puts)
• EUR/GBP: Jan07 Gbp0.8800(E1.1bln-EUR puts)
• AUD/USD: Jan11 $0.7625(A$1.2bln-AUD puts), $0.7724-25(A$1.2bln-AUD puts)

PIPELINE: Another Day Heavy Issuance

At least $23.4B to price Tuesday, waiting on Berkshire Hathaway, IADB, Indonesia to launch.

• Date $MM Issuer (Priced *, Launch #)
• 01/05 $5B *European Inv Bank (EIB) 5Y +5
• 01/05 $3B *Sinopec $1.15B 5Y +110, $1.2B 10Y +140, $650M 30Y +138
• 01/05 $2.7B #Hyundai $1.25B 3Y +67, $850M 5Y +95, $650M 7Y +115
• 01/05 $2.5B #General Motors $1.5B 5Y +92, $1B 10Y +140
• 01/05 $1.5B #Credit Agricole 20Y +110
• 01/05 $1.5B #Cooperative Rabobank $750M 3Y +23, $750M 3Y FRN SOFR+30
• 01/05 $1.25B #National Australia Bank 20Y +95
• 01/05 $1.25B #Macquarie Grp 6NC5 fix/FRN +97
• 01/05 $1.25B #Standard Chartered perp NC10 4.75%
• 01/05 $900M #So-Cal Edison $150M 2030 tap +85, $750M 30Y +127
• 01/05 $750M #Protective Life Global Funding $500M 3Y +30, $250M 10Y +80
• 01/05 $750M Berkshire Hathaway WNG 30Y +90a
• 01/05 $550M #Principle Life Global Funding 5Y +55
• 01/05 $500M *Kroger Co 10Y +77
• 01/05 $Benchmark IADB 10Y +16a
• 01/05 $Benchmark Indonesia +10Y 2.35%a, +30Y 3.55%a, +50Y 3.85%a
• On tap for Wednesday:
• 01/06 $Benchmark Kommunalbanken 5Y +11a

EQUITIES: US Indexes Outperform

• Dow Jones mini up 244 pts or +0.81% at 30350, S&P 500 mini up 32.25 pts or +0.87% at 3724.25, NASDAQ mini up 106.25 pts or +0.84% at 12791.
• Japan's NIKKEI down 99.75 pts or -0.37% at 27158.63 and the TOPIX down 3.37 pts or -0.19% at 1791.22
• China's SHANGHAI closed up 25.719 pts or +0.73% at 3528.677 and the HANG SENG ended 177.05 pts higher or +0.64% at 27649.86
• The German Dax down 75.52 pts or -0.55% at 13651.22, FTSE 100 up 40.37 pts or +0.61% at 6612.25, CAC 40 down 24.36 pts or -0.44% at 5564.6 and Euro Stoxx 50 down 16.54 pts or -0.46% at 3547.85.

COMMODITIES: Continue To Soar

• WTI Crude up $2.34 or +4.91% at $49.95
• Natural Gas up $0.1 or +4.03% at $2.686
• Gold spot up $8.8 or +0.45% at $1951.67
• Copper up $10.35 or +2.91% at $365.85
• Silver up $0.42 or +1.54% at $27.6637
• Platinum up $41.72 or +3.89% at $1115.49