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US TYS SUMMARY: Springtime Indoors

The overnight risk-off tone spurred on by pick-up in extended or renewed lockdowns in Europe continued through the US Session -- accelerating into the NY rates close:
deferring re-opening hopes weighed on stock indexes (hotel, travel shares hit hard), ESM1 extending session lows, while Tsys neared late overnight highs into the close.
  • US Data support for rates: new home sales fell: -18.2% TO 0.775M SAAR; U.S. current acct deficit widened by $7.6B, +4.2%, to -$188.5B in Q4, reflects expanded deficit on goods and reduced surplus on services. USD gained on European headlines: MERKEL IMPOSES EASTER LOCKDOWN, EXTENDS CURBS; NETHERLANDS EXTENDS LOCKDOWN UNTIL APRIL 20, RUTTE SAYS; ASTRAZENECA MAY HAVE GIVEN OUTDATED DETAILS ON COVID VACCINE, Bbg.
  • Yield curves bull flattened, long end made continued to rally after the bell, short end anchored on 2Y issuance: US Tsy $60B 2Y Note (91282CBU4): draws 0.152% high yield (0.119% last month) in-line w/ 0.152% WI, bid/cover 2.54 vs. 2.44 previous.
  • Heavy Fed funds sales -30k FFJ1, 99.935 to 99.93; -27k FFH1, 99.93.
  • Tone change in Eurodollar options accelerating, more constant and varied upside call buying, liquidation/unwinds put positions.
  • The 2-Yr yield is unchanged at 0.1472%, 5-Yr is down 3.7bps at 0.8254%, 10-Yr is down 5.6bps at 1.6382%, and 30-Yr is down 4.6bps at 2.3529%.


US DOLLAR LIBOR: Latest settles:

  • O/N +0.00025 at 0.07688% (+0.00000/wk)
  • 1 Month +0.00125 to 0.10863% (+0.00025/wk)
  • 3 Month +0.01013 to 0.20063% (+0.00375/wk) (Record Low of 0.17525% on 2/19/21)
  • 6 Month +0.00125 to 0.20538% (+0.00300/wk)
  • 1 Year +0.00313 to 0.27938% (+0.00313/wk)
STIR: FRBNY EFFR for prior session:
  • Daily Effective Fed Funds Rate: 0.07% volume: $68B
  • Daily Overnight Bank Funding Rate: 0.07%, volume: $241B
US TSYS: Repo Reference Rates
  • Secured Overnight Financing Rate (SOFR): 0.01%, $869B
  • Broad General Collateral Rate (BGCR): 0.01%, $358B
  • Tri-Party General Collateral Rate (TGCR): 0.01%, $332B
  • (rate, volume levels reflect prior session)
FED: NY Fed Operational Purchase
  • TIPS 7.5Y-30Y, $1.199B accepted vs. $1.665B submission
  • Next scheduled purchases:
  • 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
  • Block, 16,400 Blue Jul 81/85 put spds, 12.5 vs. 98.465/0.28%
  • Block, 10,000 Green Dec 95 puts, 58.5 vs. 98.94/0.90%
  • Block, 12,224 Green Dec 92 puts, 39.5 vs. 98.94/0.74%
  • Total 43,000 (blocked) short Dec 97/100 call spds 2.5 vs. 99.565/0.20%
  • +12,000 short Dec 90/93 put spds, 4.5 vs. 99.555/0.18%
  • +2,500 Green Jul 90/91/92/93 put condors, 3.75
  • -3,000 Green Sep/Green Dec 90 straddle strips, 88.5 covered
  • Block, -17,500 Blue May 98.62 puts, 15.5 vs. 98.62/0.51% at 0844:27ET
  • Block, 23,750 Blue Dec 98.75/99.12 put spds, 29.0 vs. 98.32/0.16% at 0840:19ET
  • Overnight trade
  • Block, 10,000 Green Dec 98.88/99.50 2x1 put spds, 15.5 at 0814:23ET
  • Block, total 10,000 short Dec 97/100 call spds 3.0 naked
  • Block, 14,000 short Dec 97/98 call spds, 2.0 vs. 99.57/0.11%
  • Block, total 19,000 short Jul 97/100 call spds 2.5 naked from 0619-0620ET
  • Block: total 14,000 short Jul 97/100 call spds 2.5 vs. 99.685/0.28% from 0704-0706ET
Treasury Options:
  • 11,000 TUM 110.37 calls, 4
  • 11,000 TYM 135 calls, 7
  • 10,000 TYJ 132 puts 10 over TYK 130 puts
  • Block, 12,000 TYM 132 straddles, 202 at 0921:30ET
  • 12,000 TYM 132 puts, 109
  • 4,000 TYK 134 calls, 5
  • 2,000 TYK 132 straddles, 131
  • +6,500 TYM 134 calls, 16-14
  • -1,000 FVK 123.5 puts, 15.5
  • Overnight trade
  • -6,000 TYJ 130.25/130.75/131.25/131.75 put condors, 9 vs. 131-24/0.18%
  • -5,000 TYK 133 calls, 13
  • +/-3,000 TYJ 132.5 calls, 3-4
  • +2,300 FVK 124.25 calls, 11.5
  • Block, 10,000 TYK 130.5/133 put over risk reversals, 13 naked

EGBs-GILTS CASH CLOSE: Lockdown Concerns

Core FI rallied throughout the day with a prevailing risk-off tone globally, with European COVID/lockdown concerns continuing to mount. Germany's announcement of a strict Easter lockdown was a focal point overnight, while the UK-EU vaccine export debate simmered.

  • Gilts outperformed Bunds; periphery spreads tightened slightly after earlier widening, with a sizeable rally in the afternoon. Weekly ECB PEPP purchase data show only E0.9bln of redemptions last week, broadly in line w expectations.
  • Issuance highlight was E13bn total of EU SURE dual-tranche 5Y/25Y via syndication. Germany sells E4bn of Bund Wednesday, while the UK sells linkers.
  • UK jobs data was a little better than expected, with earnings in line. Looking forward to Weds, the scheduled highlight is flash March PMIs.

Closing yields/10-Yr Spreads to Bunds:

  • Germany: The 2-Yr yield is down 0.9bps at -0.709%, 5-Yr is down 1.6bps at -0.67%, 10-Yr is down 3bps at -0.341%, and 30-Yr is down 3.4bps at 0.231%.
  • UK: The 2-Yr yield is down 2.8bps at 0.046%, 5-Yr is down 4bps at 0.33%, 10-Yr is down 5.1bps at 0.763%, and 30-Yr is down 5.3bps at 1.288%.
  • Italian BTP spread down 1.5bps at 94.3bps / Spanish spread down 1.5bps at 63.4bps

OPTIONS/EUROPE SUMMARY: Euribor Put Spread Features In Thin Trade

Tuesday's options flow included:

  • ERU1 100.37/100.25ps, bought for half in 7.5k, total 15k
  • DUK1 112.20/30 call spread bought for 2 in 5k
  • RXK1 166.5p, bought for 3 and 4 in 3.75k
  • RXM1 170.5/169/176.5p fly, was bought for 16.5 in 3k

FOREX: Dented Sentiment Prompts AUD/USD to Resume Downleg

  • A risk-off feel was evident from the European open, with growth and risk-proxies including NZD and AUD flagging in favour of USD and JPY. There was no specific catalyst for the risk-off, but a confluence of factors from lockdown extensions in the Eurozone, heightened vaccine protectionism and concern over New Zealand's tempering of house price growth that weighed from the off.
  • The downtick in risk sentiment as well as the NZD resulted in AUD/USD resuming the downleg from the February high, narrowing the gap with early March lows as well as the 100-dma support at 0.7610.
  • Greenback strength put the USD index on track for a test of the March highs at 92.503. A break above here opens the 200-dma resistance crossing at 92.672.
  • UK inflation and prelim March Eurozone & UK PMI data take focus Wednesday. Most metrics are seen broadly inline with February's turnout, indicating continued modest growth across manufacturing, but a still flagging services sector. ECB's Lagarde speaks, but on the topic of climate change, not policy.
  • From the US, durable goods orders and speeches from Fed's Barkin, Powell, Williams, Daly and Evans are due.

FX OPTIONS: Expiries for Mar24 NY cut 1000ET (Source DTCC)

  • EUR/USD: $1.1960-75(E732mln)
  • USD/JPY: Y108.00($1.3bln-USD puts)
  • EUR/NOK: Nok10.20(E844mln-EUR puts)
  • USD/CNY: Cny6.50($631mln)
  • USD/MXN: Mxn20.50($1.1bln-USD puts)

PIPELINE: Nomura, Santander Launched

  • Date $MM Issuer (Priced *, Launch #)
  • 03/23 $1.75B *Rentenbank 5Y +3
  • 03/23 $1B *OMERS Finance Trust 5Y +18
  • 03/23 $3.25B #Nomura $1.25B 5Y +105, 7Y +120, 10Y +130
  • 03/23 $2.25B #Banco Santander $1.5B 5Y +103, $750M 10Y +133
  • 03/23 $Benchmark Northern States Power WNG 10Y, 31Y
  • 03/23 $Benchmark ISDB (Islamic Development Bank) 5Y Sukuk +39a

EQUITIES: Futures Off Lows After Inside Session

  • US stock futures rolled off the overnight highs as the European session got off to a negative start. Prices recovered during US hours, but an inside session leaves Tuesday trade non-directional.
  • This translated to mixed cash markets, with the S&P500 broadly flat, while the NASDAQ and Dow Jones ebbed lower.
  • Materials and industrials performed poorly, while utilities and real estate were at the top of the table.
  • Europe was similarly mixed, with UK's FTSE-100 off around 0.4% while Spain's IBEX-35 outperformed, rallying just shy of 0.6%.

COMMODITIES: Oil Resumes Sell-Off, Tumbles 6%

  • Despite steady price action to start the week, crude futures extended most recent losses, tumbling ~6% on Tuesday, as of writing. The latest slide came during a resurgence of infections and slow progress with immunisations in a number of countries, including much of Europe, threatening the resumption of international passenger air travel.
  • Today's moves have reinforced the recent bearish theme. WTI futures are now breaking through the March 18 low of $58.28. This constitutes the bear trigger and a sustained break would open $55.65, the 38.2% retracement of the Nov 2 - Mar 8 rally.
  • A firm US dollar index prompted a leg lower in precious metals. Spot silver continued it's most recent poor performance, sliding 6% from last Thursday's top. The decline gathered momentum today on a break of $25.39 price support. Spot remains in a short-term technical bear leg and has had two consecutive days falling in the region of 2% to commence the week. Gold lost 0.8% amid the resurgent dollar but still remains above the March 18th low of $1720.
  • Copper (down 2%) also suffered during the session. According to Bloomberg, speculators have decreased their bullish LME copper bets by 1,199 net-long positions to 56,154, weekly bourse data on futures and options show. This net-long position is the least bullish in about 10 months.

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