MNI ASIA MARKETS ANALYSIS: NFP Optimism

US TSYS: NFP Optimism

• Current mean estimate for the Sep employ report holds at +500k jobs (Bbg whisper number around +475k) -- a number that would most certainly keep the Fed on track to announce asset purchase tapering at the November FOMC -- a precursor to rate normalization later next year (as long as the economy continues to improve).
• Futures volumes were not exceptional -- closer to below average as larger accts plied the sidelines to await the Fri data.
• On the other hand, option trading was robust with better buying of low delta puts (TYX 131 puts, short Dec Eurodollar midcurves hedging on Dec'22 downside risk) and vol plays: 1-day vol buyer wk2 TY 131.5 straddle that expire late Friday, later rolled to wk 3 straddles.
• Flow included two-way positioning w/better selling on net, option-tied hedging and rate lock hedging on appr $6.5B swappable corporate issuance.
• By the bell, 2-Yr yield is up 1.2bps at 0.3055%, 5-Yr is up 3.4bps at 1.0154%, 10-Yr is up 4.5bps at 1.566%, and 30-Yr is up 5.1bps at 2.1299%.

SHORT TERM RATES

US DOLLAR LIBOR: Latest settlements

• O/N -0.00037 at 0.07238% (-0.00200/wk)
• 1 Month -0.00113 to 0.08600% (+0.01075/wk)
• 3 Month -0.00037 to 0.12363% (-0.00950/wk) ** Record Low 0.11413% on 9/12/21
• 6 Month -0.00025 to 0.15588% (-0.00112/wk)
• 1 Year +0.00200 to 0.24313% (+0.00825/wk)

• Daily Effective Fed Funds Rate: 0.08% volume: $75B
• Daily Overnight Bank Funding Rate: 0.07% volume: $256B

• Secured Overnight Financing Rate (SOFR): 0.05%, $902B
• Broad General Collateral Rate (BGCR): 0.05%, $364B
• Tri-Party General Collateral Rate (TGCR): 0.05%, $348B
• (rate, volume levels reflect prior session)

• TIPS 7.5Y-30Y, $1.201B accepted vs. $2.974B submission
• Next scheduled purchase
• Fri 10/08 1010-1030ET: Tsy 0Y-2.25Y, appr $12.425B

FED Reverse Repo Operation, Lower

NY Fed reverse repo usage recedes to $1,375.863B from 76 counterparties vs. $1.451.175B on Wednesday. Compares to record high of $1,604.881B on Thursday, September 30.

EURODOLLAR/TREASURY OPTIONS SUMMARY

• Block, 10,000 EDZ3 97.00 puts, 9.0 vs. 98.815/0.07%
• Block, 22,500 short Dec 99.12/99.37 put spds, 1.5
• +15,000 short Oct 99.56 calls, cab
• +3,000 short Jun 99.12 straddles 37.5 vs. 99.19/0.10%
• +13,000 Blue Dec 98.00/98.25 put spds 2.0 over Blue Nov 98.12/98.37 put spds vs. 98.385/0.10%
• >+36,000 short Dec 99.25 puts, 1.0
• >+30,000 short Dec 99.43 puts, 4.0
• +5,000 Red Dec 99.62 calls, 7.0, 99.475 ref
• +/-20,000 short Nov/short Dec 99.50 straddle strip, 19.0
• +10,000 Green Dec 99.25 calls, 1.5 vs 98.87/0.10%
• Overnight trade
• 4,500 Blue Oct 98.25 puts

• 7,500 TYX 130/131 3x2 put spds, 25
• Block, +10,000 wk2/wk3 TY 131.5 straddle spds, 23 +wk3
• 4,000 wk3 TY 130.5/131/131.5 2x3x1 put flys, 1 net/legs over
• -4,000 TYZ 129.5/130.5 put spds, 15
• +10,000 wk2 TY 131.5 straddles, 26
• +5,500 TYX 131 puts, 19, ongoing buyer over 26.5k from 16-19 adds to +20k Blocked O/N from 14-17
• +2,500 TYX 131 puts, 16 -- adds to overnight trade
• Overnight trade
• 5,000 wk3 TY 130.5 puts
• 4,600 TYZ 129 puts, 9
• 4,600 wk3 TY 131.5/132 call spds
• 9,600 TYX 131 puts, 16 adds to 20k Blocks from 14-17
• Block, +10,000 TYX 131 puts, 14 adds to +10k at 17 late Wed
• Block, 5,000 USX 156/157 2x1 put spds, -3 2-legs over

EGBs-GILTS CASH CLOSE: Peripheries Gain As Core Consolidates

A further moderation in energy prices helped support core European FI in a fairly rangebound session for core instruments Thursday, with Friday's U.S. payrolls figure still dominating attention.

• Gilts underperformed, with comments by BoE's new chief econ Huw Pill appearing to put him in a majority at the bank who see guidance conditions already "met".
• It was a generally risk-on session with strong equities, and periphery EGB spreads tightened, with ECB's Stournaras pushing against market rate hike pricing, and a BBG sources story on the ECB considering anew post-crisis bond-buying program.
• ECB minutes showed officials stressing PEPP flexbility.
• Supply this morning came from France (E10bn) and Spain (E4.9bn).

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 1bps at -0.704%, 5-Yr is down 1bps at -0.559%, 10-Yr is down 0.3bps at -0.185%, and 30-Yr is up 0.1bps at 0.302%.
• UK: The 2-Yr yield is up 0.4bps at 0.474%, 5-Yr is up 0.7bps at 0.698%, 10-Yr is up 0.6bps at 1.077%, and 30-Yr is up 0.1bps at 1.429%.
• Italian BTP spread down 3.3bps at 104.1bps / Greek down 2.9bps at 107.3bps

EGB Options: Sonia Structures And Bund Puts

Thursday's Europe bond / rates options flow included:

• OEZ1 135.25/75cs 1x2 bought for 7 in 4k vs selling the OEZ1 134.25 put at 12 in 2k
• RXX1 169 put, bought for 30 in 2k
• 0LZ1 99.37/99.50/99.62c fly, bought for 1.25 in 5.5k
• 2LZ1 99.25/99.12ps 1x2 vs 99.87/99.75ps 1x2, bought for 9 in 2.5
• SFIH2 99.80/99.90 call spread sold for 1.25 in 14k (vs 99.585, d08)
• SFIH2 99.50/99.40/99.30p fly, bought for 1.25 in 6k

FOREX: JPY Sinks as US Lawmakers Strike Debt Ceiling Deal

• Haven currencies edged lower alongside the greenback Thursday, with solid progress on the US debt ceiling helping buoy risk sentiment. A vote among lawmakers is now possible ahead of Friday, with a bipartisan deal struck that would avoid the near-term crunch of a mid-October credit event. The $480bln package knocks back the debt ceiling deadline to early December, at which more political tussles are highly likely.
• As a result, equities rallied sharply, helping pressure the JPY to the bottom of the G10 pile and putting USD/JPY on track for a test of the mid-week highs at 111.79.
• Growth proxy currencies outperformed, with AUD leading markets higher to prompt a new October high at 0.7324. Further progress for the pair from here opens the 100-dma resistance at 0.7435.
• Friday's nonfarm payrolls release is in focus, with markets expecting job gains of 500k over the month of September, equating to a drop of 0.1ppts in the unemployment rate. Caixin composite and services PMI data is also due from China, as well as Canada's latest labour market report. ECB's Lagarde also makes an appearance, speaking alongside US Treasury Secretary Yellen.

FOREX Expiries for Oct08 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1450-55(E538mln), $1.1500-05(E954mln), $1.1550(E557mln), $1.1570(E521mln), $1.1600(E1.7bln), $1.1650(E1.6bln), $1.1700(E1.3bln)
• USD/JPY: Y109.75($860mln), Y110.40-50($1.3bln), Y111.00($2.7bln), Y111.50($534mln), Y111.75-90($1.1bln)
• AUD/USD: $0.7300(A$986mln), $0.7335(A$2.1bln)
• AUD/JPY: Y81.00-20(A$715mln)
• USD/CAD: C$1.2500-05($1.3bln), C$1.2530-50($1.6bln), C$1.2670-80($1bln), C$1.2700($1.6bln)
• USD/CNY: Cny6.55($1.3bln)

PIPELINE: $2.25B TransCanada Pipelines 2Pt Launched

• Date $MM Issuer (Priced *, Launch #
• 10/07 $2.4B #Kyndryl $700M 5Y +105, $500M 7Y +135, $650M 10Y +160, $550M 20Y +205
• 10/07 $2.25B #TransCanada Pipelines $1.25B 3Y +45, $1B 10Y +100
• 10/07 $1B #John Deere $600M 3Y FRN SOFR+20, $400M 5Y +32
• 10/07 $800M #Ontario Teachers Cadillac Property Trust 10Y +105

EQUITIES: Stocks Cheer Debt Ceiling Progress, Can Kick or Otherwise

• Wall Street added to recent gains Thursday, with the S&P 500 adding over 3.5% off the week's lows to narrow in on the next resistance levels. In futures space, this translated to a rally of over 160 points for the e-mini S&P, turning focus to first resistance at the 4434.1 50-dma. A rally through here opens late September highs of 4472.00.
• Energy names are lagging following the climb-down in oil & gas prices,although this sector has inched back into the green as the US Energy Dept made clear there are no current plans to deploy the Strategic Petroleum Reserve.
• The upside in stocks followed confirmation that arrangements had been made among US lawmakers to avoid the worst-case scenario of hitting the debt ceiling in mid-October. While the $480bln package is only a stopgap, kicking the can into early December, markets welcomed the signs of bipartisan co-operation.

COMMODITIES: Oil Reverses Losses as Energy Dept Rule Out SPR Use

• WTI and Brent crude futures traded under pressure in early Thursday hours, with a Russian pledge to stabilise gas prices and speculated use of the US' Strategic Petroleum Reserve putting a cap on oil prices. This soon reversed into the US close, however, with the US Energy Department issuing a statement clarifying that there were no intentions to either release reserves or place a ban on energy exports. As a result, WTI recovered around $3/bbl off the lows of $74.96/bbl.
• EU-bound gas prices held the bulk of the losses off the record highs printed earlier in the week. Front month futures halved in price off the Wednesday highs and staged only a mild recovery into the Thursday close, further suggesting that fears of a supply crunch across winter may have eased.
• Gold traded modestly lower into the Thursday close, with spot prices failing to make headway on the show above the Wednesday highs. Buoyant equity markets worked against the yellow metal, with progress toward resolving the debt ceiling boosting risk appetite.