MNI ASIA MARKETS ANALYSIS: Rates Bid as Virus Angst Grows

US TSY SUMMARY: Carry-Over Rate Bid

• No react to JOLTS data (OPENINGS RATE 7.367M IN FEB; QUITS RATE 2.3%), rates drew better buying as angst over a third COVID-wave of closures spread:
• "FAUCI SAYS U.S. IS ON BRINK OF ANOTHER COVID SURGE" aired late while "TORONTO ORDERS SCHOOLS TO SHIFT TO REMOTE LEARNING" starting Wednesday.
• Unlikely adding to rate bid, but more likely keeping some squared-up on the sidelines is Wednesday afternoon release of March FOMC minutes.
• Pick-up in swappable corporate supply generated some selling (late launches, for Mexic, GM, Toyota and Penske still waited to price before hedges unwound). Core options positions remain hedged for rate hikes mid-2022 through 2023, while session trade say pick-up in in upside call buying.
• The 2-Yr yield is down 0.8bps at 0.1586%, 5-Yr is down 5.3bps at 0.8688%, 10-Yr is down 4.6bps at 1.6542%, and 30-Yr is down 3.3bps at 2.3129%.

SHORT TERM RATES

US DOLLAR LIBOR: Latest settles

• O/N +0.00313 at 0.07788% (+0.00137 total last wk)
• 1 Month -0.00025 to 0.11013% (+0.00313 total last wk)
• 3 Month -0.00237 to 0.19738% (+0.00075 total last wk) (Record Low of 0.17525% on 2/19/21)
• 6 Month -0.00025 to 0.20100% (-0.00200 total last wk)
• 1 Year +0.00575 to 0.28625% (-0.00025 total last wk)

• Daily Effective Fed Funds Rate: 0.07% volume: $73B
• Daily Overnight Bank Funding Rate: 0.07%, volume: $262B

• Secured Overnight Financing Rate (SOFR): 0.01%, $985B
• Broad General Collateral Rate (BGCR): 0.01%, $368B
• Tri-Party General Collateral Rate (TGCR): 0.01%, $338B
• (rate, volume levels reflect prior session)

• Tsy 20Y-30Y, appr $1.734B accepted vs. $3.985B submission
• Next scheduled purchases:
• Wed 4/07 1010-1030ET: Tsy 4.5Y-7Y, appr $6.025B
• Thu 4/08 1010-1030ET: TIPS 1Y-7.5Y, appr $2.425B
• Fri 4/09 1010-1030ET: Tsy 7Y-20Y, appr $3.625B

US TSYS/OVERNIGHT REPO: Holding steady

Holding steady to Monday's levels, 10s lead specials. Bills reverse Monday bounce, current levels:
T-Bills: 1M 0.0101%, 3M 0.0101%, 6M 0.0330%; Tsy General O/N Coll. 0.04%

EURODOLLAR/TREASURY OPTIONS SUMMARY

• +10,000 Blue Dec 82/85/87 call flys, 3.5
• -2,500 Red Dec 92/95 put spds, 6.5
• +12,000 Green Apr 99.18/99.25 1x2 call spds, 0.0
• +10,000 Green Jun 99.25/99.31/99.43 call trees, 1.0
• +5,000 Green May 99.18/99.25/99.31 call trees, 0.0
• +1,000 Red Sep 93/97 2x1 put spds, 0.75, 1-leg over and bid
• +Red Jun 95/96 put spds 1.5 over 98/100 call spd
• Overnight trade
• 5,600 short May 99.75/99.81 call spds, 0.5
• 3,500 Blue Jun 78/81/85 put flys, 9.5
• 4,500 Blue Jun 81/85 put spds, 13.5
• 2,500 Green May 99.18/99.25/99.31 call trees, 0.5
• 2,000 Green Apr 99.18/99.31/99.43 put flys, 3.5

• 9,200 FVM 121/122/123 put flys, 7
• >7,000 FVM 122/123 put spds, 11
• +4,000 TYK 129.75/130.25 put spds, 4
• 2,000 USK 158/160 call spds vs. USM 160/162 call spds
• >3,000 USM 153/159 put over risk reversals, 8
• 4,000 TYK/TYM 130 2x1 put calendar spds, 10-11
• 1,400 TYM 133/134.5/136 call flys, 9
• Update, +20,000 TYM 128/130 put spds, 17-19
• Overnight trade
• +6,000 TYM 128/130 put spds, 19
• Block, 5,000 FVM 123.75/124 1x2 call strip, 43 total

EGBs-GILTS CASH CLOSE: BTP Spreads Widen On Supply

European bond markets returned from the long weekend on a weak note, but Bunds and Gilts improved from worst levels in the session in tandem with US Tsys.

• While Bunds weakened by the end of the cash session, Gilts went from underperformer to outperformer.
• But new issuance stole the show in the afternoon, with Italy announcing a dual-tranche syndication (7-/50-Yr) and Portugal a 10-Yr. 10-Yr BTP spread moved from 98bps to over 100bps on the announcement.
• Attention Wednesday is on aforementioned syndications (which are likely to take place tomorrow), plus E4bn of German Bobl - and services PMIs. G20 meeting involving finance ministers and central bankers also bears some attention.

Closing yields/10-Yr Spreads to Bunds:

• Germany: The 2-Yr yield is up 0.7bps at -0.701%, 5-Yr is up 1bps at -0.649%, 10-Yr is up 1.2bps at -0.316%, and 30-Yr is up 0.9bps at 0.235%.
• UK: The 2-Yr yield is down 0.1bps at 0.075%, 5-Yr is up 0.7bps at 0.373%, 10-Yr is up 0.2bps at 0.797%, and 30-Yr is down 0.6bps at 1.337%.
• Italian spread +5bps at 100.9bps/ Spain +2.5bps at 66.1bps/ Portugal +2.1bps at 55.7bps

EUROPE SUMMARY: Largely Downside Structures

Tuesday's options flow included:

• DUK1 112.20/30cs vs 112.10p, sold the put at 2.5 in 1.25k
• DUM1 112.20/30cs vs 112.00/111.90ps, sold at 0.25 in 2.5k
• DUM1 112.20/10/111.90p fly, bought for 2.5 in 5k
• RXK1 171/172cs 1x2, bought for 10.5 in 1.25k
• RXK1 171.50/172.50cs 1x2, bought for 11 in 3.75k
• RXK1 170/168ps, sold at 17/16.5 in 3k
• RXK1 169/168ps, sold at 5.5 in 2k
• RXM1 174/168.5^^, seems done off market and presume sold at 44 in 5k
• 0RZ1 100.62/100.50ps, 1x2, bought the 1 for 0.75 in 5k (ref 100.51, 20del)
• 0RH2 100.25/100.75 ^^ bought for 6.5 in 4k (v 100.48)
• 3RK1 100.25/100.12ps vs 3RJ1 100.25p x2, bought the ps for half in 2kx4k
• 3RU1 100.125/100.00 put spread vs 100.50 call (v 100.25) bought for 0.75 in2k (bot p/s)
• 3LM1 99.00/98.875 put spread bought for up to 2.75 in 2k

FOREX: Shine Comes Off Sterling as Vaccine Rollout Falters

• GBP traded poorly, reversing the recent spell of strength and dragging GBP/USD off 1.3919 and back below the 1.3853 50-dma.
• Reversal in GBP follows continued concerns over an expected slowdown in the UK's vaccine rollout, as a supply crunch results in a marked slowdown of those receiving first doses. Nonetheless, UK PM Johnson has maintained that the lockdown easing schedule is currently on track.
• After a decent start, retracing the Monday losses, the dollar faltered in NY hours, keeping the USD Index oscillating on either side of the 200-dma.
• SEK was the strongest performer alongside CHF and EUR, while GBP, CAD and NZD were the weakest.
• Focus Wednesday turns to final revisions to March PMI data from across the Eurozone, UK, Australia and the US. US trade balance and the FOMC minutes from their latest rate-setting meeting also cross. Fed's Evans, Kaplan, Barkin & Daly all speak.

FX OPTIONS: Expiries for Apr07 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1800-10(E776mln), $1.1830-35(E1.2bln), $1.1850(E885mln), $1.1940-50(E743mln)
• USD/JPY: Y107.95-05($893mln), Y109.00($1.4bln), Y109.95-110.00($2.5bln)
• AUD/USD: $0.7610-20(A$591mln), $0.7705-15(A$631mln)
• USD/CNY: Cny6.60($1.7bln-USD puts)

PIPELINE: $8.7B to Price Tuesday

• Date $MM Issuer (Priced *, Launch #)
  
• 04/06 $2.5B #Mexico 20Y +205
• 04/06 $700M #Brighthouse Financial Global Funding $400M 3Y +72, $300M 3Y FRN SOFR+76
• 04/06 $2.25B #General Motors $850M 3Y +73, $400M 3Y FRN SOFR+76, $1B 7Y +108 (adds to $2.5B on Jan 5: $1.5B 5Y +92, $1B 10Y +140)
• 04/06 $2.5B #Toyota Motor Cr $1B 2Y +28, $750M 2Y FRN SOFR+32, $750M 7Y +58 (adds to $3B on Jan 6: $1B 3Y +25, $750M 3Y FRN SOFR+33, $700M 5Y +40, $550M 10Y +62.5)
• 04/06 $750M #Penske Trucking +5Y +82
• Later in week:
• 04/07 $Benchmark Ontario 5Y +13a
• 04/06 $Benchmark Asia Development Bank (ADB) 5Y +5a
• 04/07 $Benchmark EBRD 5Y FRN SOFR+20a
• 04/08 $3.5B Organon $2B 7NC3, $1.5B 10NC5
• 04/09 $Benchmark Aflac multi-tranche
• 04/?? $Benchmark Philippines

EQUITIES: Stocks Hold Lofty Heights, But Further Gains Hard to Come By

• The S&P 500 inched higher Tuesday to touch new all-time highs at 4,086.23 for the cash index. Gains were minimal, however, as progress in consumer staples and utilities was tempered by weakness in technology and real estate firms.
  
• In futures markets, the e-mini S&P faltered at 4,076 before dipping back into negative territory, indicating that further swift gains could be harder to come by as the divergence from the 50-dma widens to its highest level since February.
  
• Across Europe, gains were more uniform with all major indices closing higher. Strength was noted in UK's FTSE-100 as GBP weakness flattered the index. Italy's FTSE-MIB lagged slightly, but still managed to close with gains of 0.2%.

COMMODITIES: Weak Dollar Further Boosts Precious Metals, Oil Prices Rangebound

• Both gold and silver have continued their recovery, spurred on by broad dollar indices reversing early gains to fall 0.2% on Tuesday.
• After bouncing off significant support at $1,677 around March month end, spot gold has extended its rebound back to test March 25^th highs at $1,745.50. Technically, price remains in a bear trend and requires a break of key resistance at $1755.5 – the March 18 high to alter the short-term picture.
• The IMF raising its global economic outlook and a decline in U.S. yields have provided a solid backdrop for a fourth consecutive daily gain in the yellow metal.
• April has seen a rejuvenated copper rally, however, futures struggled throughout Asia and London, dropping 2% amid headlines from Chile that supply would not be affected by the tighter lockdown restrictions and border closures.
• Oil prices have stabilised and partially recovered following yesterday's sell-off due to increasing OPEC+ oil supply and rising COVID-19 infections in India and parts of Europe.
• Both Brent and WTI futures gained around 1.5% on Tuesday, buoyed by stronger services data out of China and the U.S.
• Despite the intraday volatile ranges, WTI crude has closed each of the past eight sessions less than $2 above or below $60 as investors continue to weigh the multitude of counteracting factors.