MNI ASIA MARKETS ANALYSIS: Bullard Tempers the Inner Hawk

US TSY SUMMARY

Generally sedate, sideways trade since mid-morning, futures trading near session lows by the bell, yld curves regaining some ground after last week's post-FOMC bull flattening slip to 110.568 low from 142.541 high last week Monday.

• Tsy bonds extend lows after holding narrow/lower range for appr 4 hours heading into the NY open -- well off early overnight highs. Yld curves bounced after the steady bull flattening since last week's FOMC and hawkish pivot.
• Heavy overnight volumes (TYU >850k by the open; 1.7M after the close) after Tsys ground higher during Asia hours, only to reverse the move during the cross-over to London trade.
• 30YY currently 2.1083% +.0957 (2.1083%H, 1.9259%L)
• 10YY currently 1.4381% +.0455 (1.4903%H, 1.3526%L)
• Contributing to the bounce in yld curves: Bullard softened last week's more hawkish tone somewhat: "I think markets themselves are a little bit confused about the recent moves. I do think we're going to allow inflation to be above target...that has to get priced in."
• Mixed flow on session, decent corporate issuance hedging added to volumes.
• The 2-Yr yield is down 0.2bps at 0.2522%, 5-Yr is up 1bps at 0.8844%, 10-Yr is up 4.2bps at 1.4802%, and 30-Yr is up 8.3bps at 2.0954%.

SHORT TERM RATES

US DOLLAR LIBOR: Latest Settles

• O/N +0.00425 at 0.08475% (+0.02513 total last wk)
• 1 Month +0.00488 to 0.09588% (+0.01812 total last wk)
• 3 Month +0.00300 to 0.13788% (+0.01600 total last wk) ** (New Record Low: 0.11800% on 6/14)
• 6 Month +0.00750 to 0.16375% (+0.00375 total last wk)
• 1 Year +0.01075 to 0.25088% (+0.00075 total last wk)

• Daily Effective Fed Funds Rate: 0.10% volume: $68B
• Daily Overnight Bank Funding Rate: 0.08% volume: $224B

• Secured Overnight Financing Rate (SOFR): 0.05%, $921B
• Broad General Collateral Rate (BGCR): 0.05%, $370B
• Tri-Party General Collateral Rate (TGCR): 0.05%, $342B
• (rate, volume levels reflect prior session)

• Tsys 10Y-22.5Y, $1.401B accepted vs. $3.996B submission
• Next scheduled purchases:
• Tue 6/22 1010-1030ET: TIPS 1Y-7.5Y, appr $2.025B
• Wed 6/23 1010-1030ET: Tsy 4.5Y-7Y, appr $6.025B
• Thu 6/24 1010-1030ET: Tsy 22.5Y-30Y, appr $2.025B
• Fri 6/25 1010-1030ET: Tsy 2.25Y-4.5Y, appr $8.425B

FED: Reverse Repo

NY Fed reverse repo usage climbs to new record high of $765.141B from 68 counterparties, compares to last Thu's record high of $755.8B in the aftermath of FOMC's IOER technical adjustment to 0.15% from 0.10%.

EURODOLLAR/TREASURY OPTIONS SUMMARY

• +5,000 Gold Dec 77 puts, 11.0 vs. 98.21
• Block, 50,964 Blue Sep 98.62 puts, 22.5 vs. 98.53/0.61%
• +8,000 Green Jul 86 puts, 1.0
• +4,000 Green Sep 87 puts, 6.5 vs. 98.965/0.26%
• -10,000 Blue Dec 75/88 call over risk reversals, 3.5 vs. 98.46/0.31%
• -20,000 short Sep 95/96/97 put flys, 3.5
• -20,000 Blue Jul 86/87 put spds 7.5 over 88 calls vs. 98.555/0.27%
• Overnight trade
• 7,000 Mar'22 99.81/99.87/99.93 call flys
• 27,000 Mar'22 99.81/99.87 call spds
• 30,000 short Sep 96 puts, 7.5
• 10,000 short Sep 96/97 put spds
• 15,000 Blue Dec 76/80 3x2 put spds
• 1,500 Blue Sep 77/80/81/83 put condors
• 4,500 Gold Dec 77/80 put spds

• +10,000 TYN 129.5/TYQ 130 put spds, 7
• +11,000 TYN 130.5/131 put spds, 2
• +5,000 TYN 131.5/131.75/132 put trees
• -2,000 TYN 131.25/132 call spds, 37
• +8,000 TYN 131/132.5 call spds, 58
• Overnight trade
• +10,000 TYQ 131.5/132.5 2x1 put spds, 2
• 2,200 TYU 129/131 put spds vs. 134 calls
• 3,800 FVN 122.25/122.75/123.25 put flys

EGBs-GILTS CASH CLOSE: Reversal Sees Bear Steepening Curves

Core FI faded early gains, with the UK and German curves bear steepening Monday.

• Periphery EGB spreads tightened, while French OATs outperformed following weak results for Le Pen in weekend regional elections.
• Bunds weakened on headlines that German gov't net borrowing would hit ~E100bn next year (this had already been reported last week so unclear why there was a reaction).
• ECB Pres Lagarde said US inflation spillovers to the Eurozone are seen as being limited, while tightening market rates would pose a risk to the recovery. Meanwhile, ECB net asset purchases bounced back last week, with PEPP buys at a 4-week high of E19.4B.
• Tuesday sees UK fiscal data and a few ECB speakers; the Netherlands sells up to E2bln of DSL. Note Spain announced 10-Yr syndication.

Closing German/UK Yields And 10-Yr Spreads To Germany

• Germany: The 2-Yr yield is up 1.5bps at -0.652%, 5-Yr is up 2.7bps at -0.561%, 10-Yr is up 2.9bps at -0.171%, and 30-Yr is up 5.2bps at 0.303%.
• UK: The 2-Yr yield is down 0.5bps at 0.125%, 5-Yr is up 0.4bps at 0.385%, 10-Yr is up 1.7bps at 0.769%, and 30-Yr is up 2.2bps at 1.227%.
• Italian BTP spread down 2.5bps at 104.7bps/ Spanish down 3bps at 62.5bps

OPTIONS/EUROPE SUMMARY: Summer Bund Puts And Some SONIA

Monday's options flow included:

• RXN1 172/173ps 1x2, bought for 9 in 1k
• RXQ1 171.50/170.50ps 1x1.5, bought for 9.5 in 2k
• RXQ1 170.5/170.0/169.5/168.5p condor, bought for 1 in 1.5k
• SFIH2 (SONIA) 99.70/99.65/99.60p ladder, bought for -0.25 in 2k

FOREX: Greenback Steadily Pares Friday Gains

• The US dollar retreated for the first time in seven sessions on Monday, closely linked to a gradual recovery in equities. The DXY retreated from a 10-week high, dropping 0.4%, currently hovering just above the Friday lows of 91.81.
• After matching Friday's low at 1.1848, EURUSD was well supported throughout both the European and US sessions, grinding back above 1.19 to advance 0.5% on the day. The focus is on 1.1837, a Fibonacci retracement where a break would open 1.1704, the Mar 31 low and a key support. On the upside, initial firm resistance is at 1.2006, the Jun 17 high.
• Larger gains were seen in risk-tied currencies with AUD, NZD, CAD and GBP all firming around 0.85%. The Japanese Yen was broadly unchanged, owing to buoyant risk sentiment also putting a solid bid in cross-JPY.
• NOK notably strengthened 1.05% against the dollar, with the uptick in oil adding a tailwind for the Krone. The advance was closely matched in the EM space, with ZAR and BRL both firming around 1%.
• Tomorrow, FED Chair Powell is due to testify on the Fed's emergency lending programs and current policies before the House Select Subcommittee.
• A light data day on Tuesday before Flash PMI's headline Wednesday's docket.

FOREX/Expiries for Jun22 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.2175(E536mln), $1.2220-25(E1.4bln-EUR puts)
• USD/CNY: Cny6.28($600mln), Cny6.35($600mln)

PIPELINE: Decent Start to Week

• Date $MM Issuer (Priced *, Launch #)
• 06/21 $2.5B #HCA Inc $1B 10Y +95, $1.5B 30Y +140
• 06/21 $2.5B #Martin Marietta $700M 2NC1 +40, $900M 10Y +92, $900M 30Y +112
• 06/21 $2.15B #Bank of Nova Scotia $750M 2NC1 FRN/SOFR+28, $750M 5Y +48, $650M 5Y FRN/SOFR, 10Y +68
• 06/21 $800M #Brighthouse Fncl $450M 2Y +35, $350M 7Y +78
  
• 06/21 $650M #PPL electric Utilities 3NC1 FRN/SOFR+33
• 06/21 $Benchmark JP Morgan 4NC3 +50, 4NC3 FRN SOFR
• 06/21 $Benchmark BNP Paribas -- green bond investor call
• On tap for Tuesday:
• 06/22 $1B PSP Capital 5Y +9a

EQUITIES: Stocks Shake Off Unsteady Start

• Stock markets globally started Monday poorly, with futures all down sharply in initial Monday trade. This sentiment soon reversed, however, with a swift recovery in US equities helping underpin a global rebound. The Sep-21 E-mini S&P topped out at 4209.75. The Friday high at 4220.00 remains the next level to look out for.
• Energy names are driving markets higher here, with the sector higher by 3.3% in the S&P500, as new cycle highs for WTI crude futures underpin (recall BofA this morning upped their forecast for crude to $100/bbl next year).
• Industrials and financials are similarly firm, the latter benefiting from the modest re-steeping of the Treasury curve.
• A break north of 4220.00 for the e-mini S&P exposes the Jun 15 high at 4258.25 ahead of 4264.41, the 1.618 proj of Mar 25 - May 10 - 13 price swing

COMMDITIES: Oil Resumes Uptick as Raisi Seen Complicating Iran Nuclear Deal

• Oil markets were initially non-directional following Iranian election results that came in largely inline with expectations, with Ebrahim Raisi winning comfortably. Oil began to tick higher, however, as markets carefully eyed the President-Elect's first comments, oil traded more warily.
• Analysts are concerned that rights groups in the US could lean on negotiators to impose stricter demands on the lifting of Iranian sanctions given Raisi's alleged involvement in a series of mass killings and crackdowns.
• Elsewhere, Bank of America upped their oil call to be one of the most bullish on energy on the street, with the bank citing pent-up demand and a lack of mass transit capacity driving up private car use. As such, the Bank see WTI crude rising to as much as $100/bbl next year.
• Gold and silver both traded firmer Monday, with a weaker greenback helping relieve some of the recent downside pressure. Next level in gold sits at $1797.3.