MNI ASIA MARKETS ANALYSIS: Bostic: Substantial Further Progress

US TSY SUMMARY: Early Bid Evaporates

• Democrats Dump Debt Limit From Budget Resolution? Politico headlines on Dems budget resolution: "Democrats omit debt limit from budget that launches $3.5T party-line spending plan", the prospect of quick passage keeping lid on early bid in rates, misc acct selling 10s-30s.
• Tsys followed German Bunds lower around midmorning -- otherwise no obvious headline driver by midmorning; 10YY climbed to session high of 1.3221% during second half -- well over the 200DMA 1.2908%.
• Focus turns to Wed's Consumer Price Index after last Friday's better than expected July jobs data (+943k; May/Jun up-revisions add +119k) helps Fed take another step in the right direction on "substantial further progress". Sell-side economists invariably expect a pick-up in the inflation metric, but at a slower pace than prior reads, others anticipating continued slow down over the medium term as Covid Delta-variant weighs.
• The 2-Yr yield is up 1bps at 0.2183%, 5-Yr is up 2.3bps at 0.7903%, 10-Yr is up 2bps at 1.317%, and 30-Yr is up 1.7bps at 1.9624%.

SHORT TERM RATES

US DOLLAR LIBOR: Latest Settles

• O/N +0.00025 at 0.07875% (+0.00162 total last wk)
• 1 Month +0.00012 to 0.09525% (+0.00462 total last wk)
• 3 Month -0.00113 to 0.12725% (+0.01063 total last wk) ** (Record Low: 0.11800% on 6/14)
• 6 Month +0.00025 to 0.14963% (-0.00375 total last wk)
• 1 Year +0.00037 to 0.23775% (+0.00225 total last wk)

• Daily Effective Fed Funds Rate: 0.10% volume: $70B
• Daily Overnight Bank Funding Rate: 0.08% volume: $248B

• Secured Overnight Financing Rate (SOFR): 0.05%, $891B
• Broad General Collateral Rate (BGCR): 0.05%, $367B
• Tri-Party General Collateral Rate (TGCR): 0.05%, $347B
• (rate, volume levels reflect prior session)

• Tsy 10Y-22.5Y, $1.401B accepted vs. $3.586B submission
• Next scheduled purchases
• Tue 8/10 1010-1030ET: Tsy 4.5Y-7Y, appr $6.025B
• Wed 8/11 1010-1030ET: Tsy 22.5Y-30Y, appr $2.025B
• Thu 8/12 1010-1030ET: TIPS 1Y-7.5Y, appr $2.025B
• Thu 8/12 1500ET Update NY Fed Operational Purchase Schedule

FED: Reverse Repo Operations

NY Fed reverse repo usage climbs to $981.765B from 70 counterparties vs. $952.134B on Friday. Compares to record high of $1,039.394B on Friday, July 30.

EURODOLLAR/TREASURY OPTIONS SUMMARY

• +10,000 short Oct 99.25/99.50 put spds, 4.5
• +10,000 Blue Sep 99.00 calls, 2.0 vs.98.695/0.15%
• 3,000 Blue Aug 98.75/98.87 call spds
• +2,000 Blue Oct 80/82/85 put trees, 4.25
• +5,000 Green Mar 100 calls, 1.0
• +2,000 Green Sep 93 calls, 1.5 vs. 99.125/0.10
• +10,000 Blue Dec 97.75/98.00/98.25/98.50 put condors, 5.0
• Overnight trade
• 13,000 Mar 99.75/99.81 call spds

• Update, +20,000 wk2 TY 132.5/132.75 put spds, 1
• 2,000 TYZ 130.5/132.5 put spds
• 4,000 TYU 134.5/135/135.5 call trees, 5, 1-leg over.
• -5,000 TYV 132/135 strangles, 41
• +27,500 TYU 130 puts, 1
• Overnight trade
• +14,000 wk2 TY 132.5/132.75 put spds, 1
• +6,000 TYU 134/134.75 put spds, 26
• 10,000 wk2 FV 124.5 puts, 27 last
• 1,700 wk2 FV123.75/124.25/124.5 broken put flys

EGBs-GILTS CASH CLOSE: Long-End Gilts Impress To Start The Week

Monday saw modest gains with some curve flattening in core FI.

• Gilts outperformed Bunds, with the long end particularly strong and 5s30s flattening significantly.
• Periphery spreads vs Bunds came in a little as well, with risk seen mixed most of the day.
  
• Few catalysts during the session, and volumes were thin, with some anticipation of Wednesday's key U.S. inflation figures.
• No ECB / BOE speakers and limited data today (German trade balance); a little more data Tuesday (German ZEW) but again no scheduled speakers.
  
• No bond supply either; Tuesday sees the UK sell GBP2.75bln of Jul-31 Gilt.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 0.7bps at -0.75%, 5-Yr is up 0.3bps at -0.725%, 10-Yr is down 0.4bps at -0.46%, and 30-Yr is down 1.1bps at -0.012%.
• UK: The 2-Yr yield is down 0.4bps at 0.135%, 5-Yr is down 1.8bps at 0.278%, 10-Yr is down 2.7bps at 0.584%, and 30-Yr is down 5.7bps at 0.953%.
• Italian BTP spread down 1.2bps at 101.2bps / Spanish down 0.3bps at 69.4bps

OPTIONS/Yet More Euribor Call Spread Selling

Monday's European rate/bond options flow included:

• DUU1 112.30/112.20 put spread sold at 2 in 2.5k
• OEU1 135.25/135.50cs, sold at 13 in 2k
• RXU1 176/175.5/175p ladder, bought for -1.5 in 1.5k
• 2RH2 100/100.25cs sold at 22.25 in 16.5k (ref 100.39, 21 del). This was sold in 15k at 22.5 on Friday
• SFIH2 99.80/99.85cs vs 0NH2 99.80c, bought the cs for flat in 25k

FOREX: Narrow G10 Ranges, CHF The Clear Laggard

• G10FX held fairly tight ranges to start the week, with a lack of tier one data and markets firmly focused on Wednesday's U.S. inflation readings.
• The US dollar traded from very minor negative territory back into the green as broad optimism following Friday's jobs report resurfaced.
• The Swiss franc was the clear underperformer, with both EURCHF (+0.4%) and USDCHF (0.52%) making a move to the topside. After making fresh lows from December below 107.35 EURCHF has had a notable bounce back above 1.08. USDCHF is set to post a fourth consecutive day of gains, potentially eyeing a move towards resistance from the July highs at 0.9275. The continued resilience of US equity indices potentially underpinning the slight away from safety with no significant domestic headlines.
• A shaky commodity complex, driven by the increased volatility in gold stemming from the gap lower overnight, weighed on AUD , NZD and CAD, all retreating between 0.15-0.25%. However, a distinct lack of catalysts failed to garner much momentum in currency markets.
• Aussie NAB Business Confidence overnight before German ZEW sentiment data during European hours. No notable data on the U.S docket before Wednesday's CPI data.

FX/Expiries for Aug10 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1690-00(E684mln), $1.1800-05(E859mln), $1.1825-40(E1.7bln), $1.1850(E2.4bln)
• AUD/USD: $0.7300(A$949mln), $0.7350(A$539mln), $0.7385-00(A$1.1bln)
• USD/CAD: C$1.2530-50($647mln)
• USD/CNY: Cny6.4730($1bln)

PIPELINE: Swappable Issuance Surges

• Date $MM Issuer (Priced *, Launch #)
• 08/09 $3.1B #Thermo Fisher $700M 7Y +65, $1.2B 10Y +80, $1.2B 20Y +95
• 08/09 $2.5B #BMW US $750M 3Y +33, $750M 3Y FRN/SOFR+38, $500M 5Y +50, $500M 10Y +65
• 08/09 $2B #Unilever Capital $500M 3NC1 +20, $850M 10Y +50, $650M 30Y +70
• 08/09 $1.5B Uber 58NC3 4.5%a
• 08/09 $1.25B #Simon Property Grp $550M 5Y +60, $700M 10Y +100
• 08/09 $1.1B NRG Energy 10.5NC5.5 3.75%
• 08/09 $1.1B #Duke Energy $650M 10Y +70, $450M 30Y +93
• 08/09 $1B #Huntington Ingalls $400M 2NC1 +45, $600M 7Y +95
• 08/09 $1B *CVS Health Corp WNG 10Y +87.5
• 08/09 $650M #Regions Financial 7Y +75
• 08/09 $500M #ConAgra Brands 2NC1 +37.5
• 08/09 $500M McKesson 5Y +75a
• 08/09 $500M #Equitable Fncl Life 3Y +38
• 08/09 $Benchmark Bell Canada 10Y +90a, 30Y +125a

EQUITIES: Stocks Tread Water Ahead of US CPI

• Markets were mixed Monday, with European indices trading either side of unchanged, with US following in a similar fashion. Italy's FTSE-MIB gained modestly, while Spain's IBEX-35 struggled.
• In the US, tech outperformed slightly, boosting the NASDAQ above unchanged, while the S&P 500 and Dow Jones consolidated just below last week's highs.
• The financials sector traded generally well alongside consumer staples, with the slightly steeper US Treasury yield curve supporting sentiment toward banking names.
• The energy sector sank, with oil & gas explorers suffering from a general decline in oil prices. Both Brent and WTI crude futures circled mid-July lows into the close.

COMMODITIES: Gold Implied Volatility Rises Most in a Year

• Gold's whipsaw session saw prices spiral lower in early Asia-Pac trade, falling sharply to touch fresh multi-month lows. While the European morning and bulk of the US session saw decent interest in buying on dips, prices remained deep in negative territory, worsening the outlook for the yellow metal. Market speculation of forced liquidation, position unwinds and margin calls inevitably spread, with the price action likely exacerbated by market closures across Asia and typically light summer volumes.
• The pull lower found some support at the 61.8% retracement of the 2020 range, but the recovery off the low will have emboldened bulls. To reinforce any upside argument, bulls need to regain $1834.1, Jul 15 high, ahead of $1853.3, a Fibonacci retracement. Front-end implied vols for Gold understandably lurched higher, with the 1m contract adding almost 2.5 points across the trading day.
• Oil benchmarks also traded lower, with both WTI and Brent showing through last week's lows. WTI printed a fresh low of $65.15/bbl, with scope of a further decline toward the mid-July low of $65.01/bbl.