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US TYS SUMMARY: Low Conviction Rally

Rather a muted start to week, Tsy futures higher on moderate volumes (TYM 1.1M) but holds to narrow range since much of rally occurred early overnight on mkt destabilizing concerns picked up after Turkey Pres Erdogan fired CBRT Gov just days after 200bps rate hike.
  • USD/TRY Surges 15%, Sharpest one-day slide in TRY for decades. Blowback on broader markets in general relatively contained by Monday NY open, FI futures climbed back to early Friday levels, equities gaining as well (ESM1 +40.0 late).
  • Rally conviction not very strong ahead heavy data, Fed speakers on wk. Richmond Fed Barkin: will "Look Through" Y/Y Inflation Rises: took a reasonably dovish stance Mon, saying has not yet seen sufficient progress to warrant an asset purchase taper: "I want to get a good part of the way there before having the conversation about whether we've made substantial forward progress".
  • Chicago Fed National Activity Index (CFNAI) fell to –1.09 in February from +0.75 in January; existing home sale: -6.6% MOM TO 6.22M SAAR.
  • Rates sold off briefly after Oracle annc 6Pt jumbo debt (last Mar sold $20B) spurred early rate locks. Late launch: $15B spurred some spec unwinds.
  • Heavy selling Eurodollar Sep'21 and Dec'21 noted early (-120k EDZ1 around the open). Tsy yld curves flattened. The 2-Yr yield is down 0.2bps at 0.1472%, 5-Yr is down 2.4bps at 0.8562%, 10-Yr is down 4.1bps at 1.6804%, and 30-Yr is down 5.4bps at 2.3795%.


US DOLLAR LIBOR: Latest settles:

  • O/N -0.00025 at 0.07663% (-0.00125 total last wk)
  • 1 Month -0.00100 to 0.10738% (+0.00225 total last wk)
  • 3 Month -0.00638 to 0.19050% (+0.00738 total last wk) (Record Low of 0.17525% on 2/19/21)
  • 6 Month +0.00175 to 0.20413% (+0.00838 total last wk)
  • 1 Year +0.00000 to 0.27625% (-0.00188 total last wk)
STIR: FRBNY EFFR for prior session:
  • Daily Effective Fed Funds Rate: 0.07% volume: $72B
  • Daily Overnight Bank Funding Rate: 0.07%, volume: $226B
US TSYS: Repo Reference Rates
  • Secured Overnight Financing Rate (SOFR): 0.01%, $885B
  • Broad General Collateral Rate (BGCR): 0.01%, $362B
  • Tri-Party General Collateral Rate (TGCR): 0.01%, $337B
  • (rate, volume levels reflect prior session)
FED: NY Fed Operational Purchase
  • Tsy 7Y-20Y, $3.601B accepted vs. $9.607B submission
  • Next scheduled purchases:
  • Tue 3/23 1010-1030ET: TIPS 7.5Y-30Y, appr $1.225B
  • Wed 3/24 1010-1030ET: Tsy 2.25Y-4.5Y, appr $8.825B
  • Thu 3/25 1010-1030ET: Tsy 20Y-30Y, appr $1.750B
  • Fri 3/26 No buy operation


Overnight repo remains at special across the curve. Still off last March lows, Bills bounce slightly, current levels:
T-Bills: 1M 0.0025%, 3M 0.0025%, 6M 0.0203%; Tsy General O/N Coll. 0.00% vs. -0.01% Friday.

DurationCurrentOld Issue


Eurodollar Options:
  • Blocks: Both 3Y midcurve call spds go up at 1431:06ET:
  • 23,625 Blue Jun 88/90 call spds, 2.5 vs. 98.54/0.08%
  • 10,000 Blue Jul 88/91 call spds, 3.0 vs. 98.40/0.10%
  • Block, 12,224 Green Dec 95 calls, 2.5 vs. 98.89/.10%
  • Block, 10,000 Blue Jul 88/91 call spds, 3.0 vs. 98.405/0.10%
  • +5,000 Dec 98 calls, 0.5
  • +5,000 Dec 97/98 call spds, 1.0
  • +3,000 Blue Jun 82/85 put spds 1.0 over 87/90 call spds
  • -4,000 short Dec 95 puts, 10.5 vs. 99.56/0.44%
  • +3,000 Dec 97 calls, 4.5
  • +3,000 Dec 97 calls, 4.5
  • +3,000 Dec 99.81/99.87 call spds, 1.0
  • -1,000 Red Jun'22 97 straddles, 18.5
Treasury Options:
  • 2,000 TYM 134 calls, 15
  • odd ratio: 1,000 TYK 132.5/133.5 5x8 call spds, 52 vs. 131-16/40%
  • +2,000 FVM 122.5/122.75 put strip, 28-30
  • +3,000 TYK 134 calls, 5
  • 1,750 TYJ 133/134/135 put flys
  • 3,000 FVJ 123.75/124 call spds
  • 4,500 FVK 123.5/124 1x2 call spds,
  • Overnight trade
  • 17,000 TYM 132 calls, multiple small prints from 50-54
  • 13,000 TYJ 130.5/131 put spds, 4
  • 1,000 TYK 129.5/130.5 3x2 put spds
  • 6,600 USM 157 calls, wide range from 112-122, 121 last
  • 3,000 FVJ 123.75/124.25 call spds

EGBs-GILTS CASH CLOSE: ECB Starts Putting PEPP Talk Into Action

Core FI curves bull flattened, with Gilts outperforming Monday, though yields came off lows as early risk-off (related to Turkey concerns and EU-UK vaccine rhetoric) faded.

  • Eagerly anticipated data showed ECB net asset purchases picked up last week, with PEPP purchases the fastest since early December (E21.1bn). The muted reaction suggested that markets were prepared for a figure around this level, 11 days after the ECB pledged to accelerate buys, though BTP spreads tightened steadily after the release.
  • Earlier, ECB's Knot said the ECB may be able to begin talks on unwinding accommodation later this year if there is "good progress with vaccinations". Nothing new in a Pres Lagarde blog post.
  • Tues sees UK labor market data, EU SURE double-tranche syndication and Dutch DSL auction; speakers including BOE's Haldane and ECB's Villeroy.

Closing yields/10-Yr Spreads to Bunds:

  • Germany: The 2-Yr yield is down 0.5bps at -0.7%, 5-Yr is down 0.9bps at -0.654%, 10-Yr is down 1.7bps at -0.311%, and 30-Yr is down 1.7bps at 0.265%.
  • UK: The 2-Yr yield is down 1.9bps at 0.074%, 5-Yr is down 1.7bps at 0.37%, 10-Yr is down 2.4bps at 0.814%, and 30-Yr is down 2.5bps at 1.341%.
  • Italian BTP spread unchanged at 95.8bps/ Spanish spread up 0.8bps at 64.9bps

OPTIONS/EUROPE SUMMARY: Sterling Mid Structures Stand Out

Monday's options flow included:

  • RXK1 173/174/175c fly,bought for 11.5 in 2k
  • RXK1 172.50c, bought for 51/52 in 2k
  • RXK1 173.00c, bought for 35/36 in 2k
  • RXK1 171/170/168.50/166p condor vs 173.0/174.5cs bought the condor for 1 in 2k
  • RXJ1 170/169 put spread vs 173/174.5 call spread sold at 1 in 4.1k (-put spread). Hearing closing
  • OEJ1 135.00/134.75ps, bought for 2 in 3k
  • OEJ1 135.25/50/75c fly, sold at 6.25 in 2k
  • ERU1 100.37/100.25ps, bought for 0.5 in 17.5k
  • 3RJ1 with 3RK1p strip, sold at 4.75 in 4k
  • 0LU1 99.75/99.625.99.375 broken put fly bought for 0 in 9k
  • 0LZ1 99.50/99.62/99.75c ladder, bought the 1 for -1 in 2k
  • 0LZ1 99.62/99.75/99.87c ladder, bought for 1.25 in 3k
  • 0LM1 with 0LU1 99.62/99.75/99.87c flt 1x3x2, strip, bought for -1 in 3k (ref) 99.745)
  • TYJ1 131/130.5ps, bought for 4 in ~7k

FOREX: Markets Shake Off Sluggish Open to Retain Risk-On Feel

  • Currency markets shied away from risk-proxies and commodity-tied currencies at the open, with the concern of any spillover impact from TRY volatility keeping a lid on risk appetite. As it became increasingly clear that the risk was relatively contained, markets picked the likes of EUR and CNH off the day's lows, both of which improved into the NY close.
  • USD, CAD traded poorly into the close, with NOK and CHF the day's best performers.
  • TRY recovered a decent portion of the opening losses, but remains on track for a considerably weaker close. Offshore TRY borrowing rates shot higher as the session progressed, which may have stemmed some of the spot losses as shorting the currency became prohibitively expensive.
  • Focus Tuesday turns to jobs data from the UK as well as February new home sales data from the US.
  • A number of central bank speakers cross, with BoE's Baily, Haldane & Cunliffe, ECB's Villeroy and no fewer than 7 different Fed speakers.

FX OPTIONS: Expiries for Mar23 NY cut 1000ET (Source DTCC)

  • EUR/USD: $1.1895(E508mln), $1.2000(E567mln)
  • USD/JPY: Y107.95-108.00($2.3bln), Y108.12($1.8bln)
  • AUD/USD: $0.7750(A$1.3bln)
  • AUD/NZD: N$1.0785-90(A$2.2bln - A$2.1bln of AUD puts)

PIPELINE: $15B Oracle 6Pt Launched

Notice the substantial narrowing in spds from last year's $20B issuance:

  • Date $MM Issuer (Priced *, Launch #)
  • 03/22 $15B #Oracle 6pt, $2.75B 5Y +80, $2B 7Y +100, $3.25B 10Y +120, $2.25B 20Y +140, $3.25B 30Y +155, $1.5B 40Y +170a. Last year, Oracle issued $20B over 6 tranches on March 30: $3.5B 5Y +210, $2.25B 7Y, $3.25B 10Y, $3B 20Y, $4.5B 30Y +225, $3.5B 40Y +250
  • 03/22 $1B *DTE Electric $575B 7Y +58, $425B 10Y +90
  • 03/22 $Benchmark OMERS Finance Trust 5Y +21a
  • 03/22 $750M *American Honda Finance 7Y +70 (adds to $1.75B issued on Jan 11: $900M 3.5Y +35, #300M 3.5Y FRN L+35, $550M10Y +700
  • On tap for Tuesday
  • 03/23 $Benchmark Rentenbank 5Y +5a

EQUITIES: Stocks Recover Smartly

  • Tech outperformed value into the Monday close, with the NASDAQ higher by over 1.5% ahead of the close as stocks shrugged off opening losses. The e-mini S&P gapped lower at the open before making decent progress through the Friday highs to clock a positive close.
  • Tech names were the strongest in the S&P 500, closely followed by communication services and consumer discretionary. Financials and utilities made the poorest showing, with banks slipping as the US Treasury curve reverses recent steepening.
  • Across Europe, performance was more mixed, with German, UK names trading well while French and Spanish names sagged. Spain's IBEX-35 was led lower by BBVA shares, which suffered on large exposure to Turkish corporates.

COMMODITIES: Silver Down 2% Amid Improving Equities

  • Silver consolidated towards the lower end of it's Monday trading range, amid improving equities and countering US dollar weakness approaching the NY close. Spot remains in a short-term technical bear leg and is currently down 2%, with the first key support of $25.391 – March 12 low, holding for now.
  • Spot gold price action remained more contained losing just 0.25% on Monday.
  • Copper price action remained supportive, now over 3% higher than Friday's lows, with futures trading back to 414.50. Analysts at RBC stated, "the copper market remains tight, which, combined with strong demand growth, should keep prices elevated for several years." They added that "rising yields and a stronger USD have taken the air out of the macro push higher, but underlying fundamentals remain strong".
  • Oil steadied on Monday and crude futures were broadly unchanged from Friday's closing levels. Oil prices had their worst week in 2021 last week amid growing demand concerns surrounding renewed European restrictions. Analysts also noted that physical markets have come under pressure as refiners around the world, including China and the United States, begin maintenance activities.

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