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JGB TECHS

(Z1) Bearish Trend Condition

AUSSIE 10-YEAR TECHS

(Z1) Bearish Price Sequence

AUSSIE 3-YEAR TECHS

(Z1) Off Recent Highs

US 10YR FUTURE TECHS

(Z1)‌‌ Support Appears Exposed


US TSY SUMMARY - Weak 30Y Bond Sale Underscores Steeper Yld Curves

Rates trade mostly weaker, yield curves back near Monday highs as short end levels outperform (2YY tapped new low of .0972%.
  • Little react to marginally disappointing weekly claims (-19K TO 793K), continuing claims ( -0.145M to 4.545M). Rates inched gradually lower as equities held near all-time highs in early trade (ESH1 3920.5).
  • Equities sold off around noon, no substantive driver but sources pointed to couple large sell-programs at the time followed by go-to excuse of asset allocation.
  • Tsys sell off after weak US Tsy $27B 30Y bond auction (912810SU3) draws 1.933% high yield (1.825% last month) vs. 1.924% WI; w/ 2.18 bid/cover (2.47 prior).
  • No deal-tied hedging, issuers hitting the sidelines ahead the extended US holiday weekend after $35.47B high-grade issued in first half of week. Two-way positioning, pick-up in March-June futures rolling and option-tied hedging rounding out flow so far. University of Michigan consumer confidence rounds out data for week, 80.8 exp Friday vs. 79.0 prior.
  • The 2-Yr yield is unchanged at 0.1071%, 5-Yr is up 0.8bps at 0.4578%, 10-Yr is up 3.2bps at 1.1549%, and 30-Yr is up 3.6bps at 1.9435%.

US TSY: Short Term Rates

US DOLLAR LIBOR: Latest settles:

  • O/N -0.00013 at 0.07975% (-0.00213/wk)
  • 1 Month +0.00275 to 0.11225% (-0.00663/wk)
  • 3 Month -0.00325 to 0.19763% (+0.00675/wk) ** Record Low on 2/05/21: 0.19088%
  • 6 Month +0.00038 to 0.20838% (+0.00138/wk)
  • 1 Year -0.00150 to 0.30363% (-0.00050/wk)
STIR: FRBNY EFFR for prior session:
  • Daily Effective Fed Funds Rate: 0.08% volume: $68B
  • Daily Overnight Bank Funding Rate: 0.07%, volume: $200B
US TSYS: Repo Reference Rates
  • Secured Overnight Financing Rate (SOFR): 0.06%, $884B
  • Broad General Collateral Rate (BGCR): 0.05%, $357B
  • Tri-Party General Collateral Rate (TGCR): 0.05%, $337B
  • (rate, volume levels reflect prior session)
FED: NY Fed Operational Purchase
  • TIPS 2.25Y-4.5Y, $8.801B accepted vs. $27.275B submission

Updated NY Fed operational purchase schedule, $80B from 2/12-3/11, next two wks:

  • Fri 2/12 1010-1030ET: Tsy 0Y-2.25Y, appr $12.825B
  • Tue 2/16 1010-1030ET: Tsy 20Y-30Y, appr $1.750B
  • Wed 2/17 1010-1030ET: TIPS 7.5Y-30Y, appr $1.225B
  • Thu 2/18 1010-1030ET: Tsy 4.5Y-7Y, appr $6.025B
  • Fri 2/19 1010-1030ET: Tsy 2.25Y-4.5Y, appr $8.825B
  • Mon 2/22 1010-1030ET: Tsy 20Y-30Y, appr $1.750B
  • Tue 2/23 1010-1030ET: TIPS 1Y-7.5Y, appr $2.425B
  • Wed 2/24 1010-1030ET: Tsy 7Y-20Y, appr $3.625B
  • Thu 2/25 1010-1030ET: Tsy 20Y-30Y, appr $1.750B
  • Fri 2/26 1010-1030ET: Tsy 0Y-2.25Y, appr 12.825B

EURODOLLAR/TREASURY OPTIONS: Summary

  • Eurodollar Options:
  • 1,750 Green Mar 95/Blue Mar 92 put spds
  • +10,000 short Sep 95 puts, 1.5 vs. 99.765/0.10%
  • -5,000 Blue Jul 86/88/92/95 iron condor, 9.5
  • +10,000 short Sep 95/96 put spds, 1.0
  • +1,500 Blue Sep 85/87 put spds, 4.0
  • +5,000 Blue/Gold Sep 86/87 put spd strip, 7.5 total to buy both
  • Overnight trade
  • +7,000 Blue Sep 86/87 put spds, 2.5
  • +1,000 Blue Apr 88/90/91/92 call condors, 4.5
  • Treasury Options:
  • +16,000 FVJ 125.25 puts, 8.5 on screen, little more in pit
  • +1,300 TYJ 134/135 3x2 put spds w/ TYK 133.5/135 3x2 put spds, 39-40
  • -2,200 FVM 124.5 puts, 7.5
  • -3,000 FVH 126 calls, 1.5
  • +1,500 USH 168.5 calls, 26
  • Overnight trade
  • +15,000 TYH 136/136.25 put spds, 1
  • another 10,000 TYH 136 puts, 2
  • 8,000 TYH 137.75 calls
  • 5,000 TYH 137 straddles, 30
  • -2,500 TYJ 134/135 3x2 put spds, 13

EGBs-GILTS CASH CLOSE: BTP Yields Reach Record Lows

With few macro/headline drivers, Thursday's session saw largely sideways trading in Gilts and Bunds following a strong start, with periphery spreads mixed.

  • That said, BTPs were a highlight, with 10-Yr yields hitting record low at 0.45%. Italy also provided the lone supply today, and saw strong demand, esp for 3-Yr BTP.
  • Friday's highlight is UK Dec GDP and components; no central bank speakers scheduled nor bond supply.

Closing yields/10-Yr Spreads to Bunds:

  • Germany: The 2-Yr yield is down 0.3bps at -0.717%, 5-Yr is down 1.3bps at -0.704%, 10-Yr is down 2.1bps at -0.458%, and 30-Yr is down 1.4bps at 0.028%.
  • UK: The 2-Yr yield is down 1.2bps at -0.04%, 5-Yr is down 1.8bps at 0.064%, 10-Yr is down 1.9bps at 0.47%, and 30-Yr is down 1.7bps at 1.054%.
  • Italian BTP spread down 2.7bps at 91.4bps/ Spanish spread down 0.4bps at 58bps

OPTIONS: EUROPE SUMMARY: Mixed Bund / Schatz Trade

Thursday's options flow included:

  • RXH1 176/177/178 c fly, bought for 36.5 in 2k
  • RXJ1 174/175cs 1x1.5, bought for 17.5 in 3k
  • DUH1 112.40/112.30/112.20p fly sold at 4.75 in 2.5k
  • DUH1 112.20/112.00ps, bought for 0.5 in 2.5k
  • DUH1 112.30/112.40 call spread sold at 1.5 in 2.5k
  • OEH1 135.25/134.75ps 1x2, sold at 16.5 in 1k
  • LU1 100/12/25/37c condor bought for 2 in 3k
  • LZ1 100.25c + Lu1 100.12c, bought for 3.25 in 15.5k
  • 0LZ1 100/99.87/99.62 broken p fly, bought for -0.25 (receive) in 2k
  • 2LJ1 99.62/99.50ps, bought for 1.5 in 3k

FOREX: JPY Softer Despite Another Equity Tumble

Although equities stabilised and recouped the bulk of Wednesday's losses ahead of the open, US stocks saw another spell of selling pressure after the London close, with the e-mini S&P shedding around 20 points to narrow the gap with the week's lowest levels.

  • Despite this, the JPY traded poorly throughout, with markets still cognizant of the risks ahead of the March BoJ rate decision, at which the Bank could stress they still have room to cut rates further into negative territory. USD/JPY was supported, although failed to take out the Wednesday highs of 104.84.
  • AUD, NZD were among the best performers Thursday, with GBP at the other end of the table. AUD/USD touched a new multi-week high, with bulls now eyeing recent cycle highs printed in early January at 0.7820 for direction.
  • Focus Friday turns to UK industrial/manufacturing production numbers for December as well as prelim Q4 GDP. In the US, prelim February University of Michigan confidence data is the headline. There are no central bank speakers of note.

FX OPTIONS: Expiries for Feb12 NY cut 1000ET (Source DTCC)

  • EUR/USD: $1.2000-05(E1.0bln), $1.2040-50(E550mln), $1.2060-70(E751mln), $1.2095-00(E553mln), $1.2110-25(E1.3bln), $1.2165-80(E1.8bln), $1.2195-10E898mln), $1.2250-55(E538mln)
  • USD/JPY: Y103.00-05($737mln), Y103.50-60($1.3bln), Y103.85-90($768mln), Y104.00-20($1.6bln), Y104.85-105.00($3.6bln), Y105.25-35($840mln), Y106.00-10($2.1bln), Y106.30-35($1.0bln)
  • GBP/USD: $1.3850(Gbp1bln-GBP puts)
  • EUR/GBP: Gbp0.8700(E607mln)
  • AUD/USD: $0.7620-30(A$1.1bln), $0.7700-10(A$1.1bln), $0.7720-35(A$1.4bln), $0.7750-70(A$837mln)
  • USD/CAD: C$1.2675-80($672mln), C$1.2720-25($525mln)
  • USD/MXN: Mxn20.00($1.1bln)

PIPELINE: $35.47B Priced First-Half Week

No new issuance Thursday, Friday expected to be light as well ahead extended holiday weekend
  • Date $MM Issuer (Priced *, Launch #)
  • $9.55B Priced Wednesday; $35.47B/wk
  • 02/10 $3.5B *Carnival 6NCL 5.75%, upsized from $2.5B
  • 02/10 $2.3B *Citigroup PerpNC5 3.875%
  • 02/10 $2.2B *Centene 10NCL 2.5%
  • 02/10 $800M *Goldman Sachs 5NC4 +40
  • 02/10 $750M *Ford Motor Cr 7Y 2.9%

EQUITIES: Echoing Wednesday Slide, Programmatic Selling Drive Stocks Lower

Just after the London close, equities saw another round of selling pressure, with the e-mini S&P taking out the Asia-Pac low to rival Thursday's lowest levels. The move was very reminiscent of the selling pressure seen mid-Wednesday, with the index shedding around 20 points on seemingly no news, before stabilising.

  • Energy and industrials led the losses, with tech the sole sector in the green across the S&P 500. Europe was more mixed, with German stocks outperforming, while Spanish names were in retreat.

COMMODITIES: Oil Rally Fades, Gold Trades Heavy

The fearsome oil rally posted over the past fortnight is showing the first signs of stalling Thursday, with WTI and Brent crude futures prices lower for the first session in 10. Declines are very mild so far, and there's relatively little risk of a material reversal just yet, but today's price action shows the market isn't quite one-way.

  • Gold slipped in late US trade, with prices slipping through both the Wednesday and Tuesday lows to extend the gap with nearest upside target at the 200-/50-dmas. Next support flagged by MNI tech at the Feb 8 lows of $1807.90. USD strength and equity sentiment remain key for the precious metals outlook headed into the Friday session.
MNI Chicago Bureau | +1 312-431-0089 | bill.sokolis@marketnews.com