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MNI ASIA MARKETS ANALYSIS: Second 7Y Tail Ahead Month-End

US TYS SUMMARY: Busy Session on Data, Fed-Speak, Tsy Supply, Month-End

Fairly hectic session on decent volumes Thursday (TYM1>1.8M after the bell) with a lot of moving parts. Net change for Tsy futures after the bell mixed, near middle session range, curves steeper w/Bonds underperforming.
  • Data: Tsys drew immediate sellers after better than exp wkly claims (684K vs. 730K est; continuing claims 3.870M vs. 4.00M est). Decent 2-way trade followed as lvls held range on buy the dip and risk-off flow over deferred re-open plans and vaccine concerns (ongoing underlying theme).
  • Fed Speak: Rates and equities both sold off/pared gains around midmorning, desks hard pressed to explain the sharp drop in WNM1 ultra-bond that lead the retreat -- Fed Chair Powell NPR interview not the driver, comments innocuous despite mkt comparison to Dunkirk (!?). Mixed Fed speak from Clarida, Bostic and Evans through second half: Evans least optimistic: rates may hold until 2024.
  • Tsy supply: Another weak 7Y. Tsys sold off after US Tsy $62B 7Y Note auction (91282CBS9) drews high yield 1.300% vs. vs. 1.277% WI (huge 4bp tail last month: high yield of 1.195% vs. 1.155% WI); 2.23 bid/cover vs. 2.30 prior. Indirects drew 57.27% vs. 38.06% prior, directs 18.00% vs. 22.13%, dealers 27.73% vs. 39.81%.
  • Month-end rebalancing has market on edge, "Balanced mutual funds are expected to sell $136bn of equities to buy fixed income," according to JPMorgan estimates.
  • The 2-Yr yield is down 1.2bps at 0.1348%, 5-Yr is up 1bps at 0.8171%, 10-Yr is up 0.5bps at 1.6138%, and 30-Yr is up 2.6bps at 2.3358%.

MONTH-END EXTENSIONS: Preliminary Barclays/Bbg Extension Estimates

Forecast summary compared to the avg increase for prior year and the same time in 2020. TIPS 0.07Y; Govt inflation-linked, 0.02. Notice the bounce in US Tsy, Agency and MBS estimates, and drop in Credit extension est vs. last year.

Estimate1Y Avg IncrLast Year
US Tsys0.070.09-0.03
Long Gov/Cr0.10.090
Iterm Credit0.090.080.09
Interm Gov00.080.01
Interm Gov/Cr0.090.080.05
High Yield0.120.10.12


US DOLLAR LIBOR: Latest settles:

  • O/N -0.00088 at 0.07550% (-0.00138/wk)
  • 1 Month -0.00112 to 0.10913% (+0.00075/wk)
  • 3 Month -0.00213 to 0.19300% (-0.00388/wk) (Record Low of 0.17525% on 2/19/21)
  • 6 Month -0.00562 to 0.20388% (+0.00150/wk)
  • 1 Year +0.00075 to 0.28075% (+0.00450/wk)
STIR: FRBNY EFFR for prior session:
  • Daily Effective Fed Funds Rate: 0.07% volume: $70B
  • Daily Overnight Bank Funding Rate: 0.07%, volume: $248B
US TSYS: Repo Reference Rates
  • Secured Overnight Financing Rate (SOFR): 0.01%, $895B
  • Broad General Collateral Rate (BGCR): 0.01%, $393B
  • Tri-Party General Collateral Rate (TGCR): 0.01%, $355B
  • (rate, volume levels reflect prior session)
FED: NY Fed Operational Purchase
  • Tsys 20Y-30Y, $1.735B accepted vs. $4.924B submission
  • Next scheduled purchases:
  • Fri 3/26 No buy operation
  • Mon 3/29 1010-1030ET: Tsy 2.25Y-4.5Y, appr $8.825B
  • Tue 3/30 1010-1030ET: TIPS 7.5Y-30Y, appr $1.225B
  • Wed 3/31 1010-1030ET: Tsy 20Y-30Y, appr $1.750B
  • Pause for Easter Holiday, Resume April 5:
  • Mon 4/05 1100-1120ET: Tsy 0Y-2.25Y, appr $12.825B

US TSYS/OVERNIGHT REPO: Inching Slowly Off Lows

Overnight repo remains at special across the curve but continue to inch off early week lows. Current levels:
Tsy General O/N Coll. 0.03% vs. 0.00% on Monday; T-Bills: 1M 0.0051%, 3M 0.0127%, 6M 0.0355%;

DurationCurrentOld Issue


Eurodollar Options:
  • +5,000 short Dec 91/95 put spds, 6.25
  • -5,000 Green Sep 90 puts, 12.5
  • +7,500 short Sep 92/93/95/96 put condors, 1.75
  • -1,000 Blue Apr 85/87 strangles, 9.5
  • 7,000 Jun 99.81/99.87 1x2 call spds
  • Overnight trade
  • 7,200 short Sep 99.50/99.68 put spds
  • 3,500 Green Sep 85/87/88/90 put condors
Treasury Options:
  • +8,500 TYM 129/130/131/132 put condors, 12-13 vs. 132-07.5-08/0.06%
  • -2,000 USM 159 calls, 121-122
  • +5,000 wk1 132.5 calls, 16
  • +2,300 FVK 123.5 puts, 11
  • Overnight trade
  • 5,000 TYK 129.5/130.5/131.5 put flys

EGBs-GILTS CASH CLOSE: Core Curves Flatten

Bunds and Gilts enjoyed a positive (generally risk-off) session with core curves flattening Thursday. Semi-core and peripheries lagged, with Greek spreads underperforming.

  • Eurostoxx equity futures bounced sharply from 2-week lows to hit week's best levels.
  • Mixed headlines on the day. A detente between the UK and EU over vaccine supplies seemed tentative as European Union leaders met. Notably, the cash close came just before a very poor US 7-Yr Tsy auction which dragged Bund and Gilt futures lower.
  • French confidence data came in stronger than expected; Friday sees UK retail sales, German IFO and Italian confidence.
  • Also Friday, we get speeches by BoE's Saunders and Tenreyro.

Closing yields/10-Yr Spreads to Bunds:

  • Germany: The 2-Yr yield is down 0.4bps at -0.716%, 5-Yr is down 1.6bps at -0.698%, 10-Yr is down 3.1bps at -0.384%, and 30-Yr is down 3.5bps at 0.175%.
  • UK: The 2-Yr yield is down 1.5bps at 0.046%, 5-Yr is down 1.9bps at 0.315%, 10-Yr is down 2.9bps at 0.729%, and 30-Yr is down 4bps at 1.242%.
  • Italian BTP spread up 2bps at 96.4bps / Spanish bond spread up 1.8bps at 64.6bps

OPTIONS/EUROPE SUMMARY: Bund Upside And Short Cover

Thursday's options flow included:

  • DUK1 112.10/112.00/111.90p fly, bought for 1.5 in 2k
  • DUM1 112.20/30/40 call fly bought for 1.5 in 2.5k
  • RXJ1 172p, bought for 11.5 in 5k
  • RXK1 172/171/170p ladder, bought for 15 in 1.65k
  • RXK1 174.50/175.50cs, bought for 10.5 in 25k
  • RXK1 172c, bought for 114 in 5k (said to be a short cover of the 171/172cs 1x2)
  • RXK1 169.50/168.50/167.50 put fly bought for 3 in 1.8k
  • RXK1 170.5 put bought for 20 in 6k
  • 2RU1 100.37/100.50cs 1x2, bought the 1 for 2.75 in 2k
  • 3RZ1 100/99.87ps vs 100.50/100.62cs, bought the ps for 0.25 in 3.5k, and for flat in 7k all day
  • 2LZ1 99.50/62/75c ladder, bought for 0.25 in 3.5k
  • 2LZ1 99.12/98.75ps + 3LZ1 98.87/98.50ps strip, bought for 15.25 in 4k
  • 3LU1 99.00/98.75ps, bought for 5.75 in 4k

FOREX: EUR/USD Chews Through Key Support

  • EUR/USD bears chewed through key resistance at the $1.18 handle Monday, putting the pair at the lowest level since November 2020. The moves follow the break and close below the 200-dma earlier in the week, with the move opening 1.1746 as the next support ahead of 1.1695 - a key Fibo support.
  • Oil sold off after Wednesday's sharp rally, undermining the strength in commodity-tied FX ahead of the Thursday close. This left NOK at the bottom of the pile, prompting USD/NOK to eye the first close above the 100-dma since October last year.
  • GBP traded well, outpacing all others in G10 to partially reverse recent underperformance. This keeps key support at the 1.3625 100-dma intact for now, with focus turning to the
  • Focus Friday turns to UK retail sales, German IFO in the European morning as well as US trade balance, personal income/spending and PCE releases. Central bank speakers include ECB's Rehn and BoE's Saunders & Tenreyro.

FX OPTIONS: Expiries for Mar26 NY cut 1000ET (Source DTCC)

  • EUR/USD: $1.1900(E749mln)
  • AUD/USD: $0.7765(A$1.7bln)
  • USD/CAD: C$1.2900($520mln)
  • USD/CNY: Cny6.40($1.1bln)

PIPELINE: $4.5B London Stock Exchange Leads Thu's $11.125 Total Issuance

$11.125B To price Thursday

  • Date $MM Issuer (Priced *, Launch #)
  • 03/25 $4.5B #London Stock Exchange $500M 3Y +40, $1B 5Y +60, $1B 7Y +75, $1.25B 10Y +90, $750M 20Y +100 (EUR and GBP denominated debt issuance expected Fri)
  • 03/25 $2.5B *ISDB (Islamic Development Bank) 5Y Sukuk +33
  • 03/25 $2.525B #AmerisourceBergen $1.525B 2NC1 +60, $1B 10Y +110
  • 03/25 $1.6B #Jackson Financial $600M 3Y +105, $500M 10Y +165, $500M 30Y +215
  • 03/25 $1B Pilgrims Pride 10NC5 +10a
  • 03/25 $Benchmark Pakistan 5Y, 10Y, 30Y investor calls
  • 03/25 $2B Imola Merger Corp 8NC3 investor calls

EQUITIES: Stocks Shake Off Lower Open

  • A lower open for stocks saw futures trade heavy, resulting in the e-mini S&P hitting March 9 lows, before sentiment turned ahead of the close and indices staged a modest bounce to trade in the green ahead of the close.
  • The S&P500 traded heavy from the off, with energy firms leading losses as oil markets reversed the Wednesday rally. The sell-off abated after the London close, with utilities, materials and financials leading the bounce.
  • Across Europe, sentiment was more mixed. The UK's FTSE-100 was the laggard, slipping by 0.6% while Germany, French indices held just above unchanged on the day.

COMMODITIES: Oil Prices Shrug Off Rebound, Resume Downward Trajectory

  • Oil prices slumped 5% per barrel on Thursday, erasing yesterday's optimism and extending a string of softer sessions amid renewed global lockdowns. WTI crude futures tumbled back towards Wednesday's lows, where 57.25 remains the initial level to watch before more notable support at $55.65 - 38.2% retracement of the Nov 2 - Mar 8 rally.
  • Suez-fuelled gains yesterday are being sold. The ship has still not been freed but for now, the market is shrugging off the blockage, as only a small percentage of the world's crude is shipped through the canal and companies such as Maersk are re-routing to other shipping lines.
  • Precious metals are ending broadly unchanged after bouts of volatile price spikes. Gold has been struggling to find any direction as of late. A brief spike above $1,740 triggered a short-term flurry of buying, however this proved to be short-lived as the dollar index continued to inch higher. Spot gold reversed the entire move and trades down 0.35% at $1,728.50.
  • Copper futures fell back below the 400 mark as Chinese demand concerns and the stronger dollar continue to impact the whole of the commodity space.
  • Bitcoin came close to posting a $10,000 reversal in less than a week, printing lows of $50,440.

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