MNI ASIA MARKETS ANALYSIS: Pre-NFP Consolidation

US TSYS: Steady BoE Early Tailwind For Tsys, Focus Now On Oct NFP

Tsy futures extended session highs late -- USZ1 back to Sep 24 levels, while FVZ and TYZ tapped mid-October lvls before scaling back by the close. In turn, yield curves mixed: flatter in the short end while 5s and 10s vs. 30s holding steeper.
Rates had opened mixed but charged higher after the Bank of England BoE unexpectedly held rates steady.

• First half: Tsy futures drifting back toward mid-morning highs, while sources report better selling from central banks in 5s and real$ in 10s and 30s. Yield curves mixed with steepeners in 5s vs. 10s and 30s noted earlier.
• After midday, sources report two-way in the short end w/ leveraged acct selling 2s-3s vs. fast$ and prop acct buying in 2s-5s, continued real-$ selling in 10s-30s. Modest deal-tied rate locks earlier and swap-tied paying in 5s.
• Focus turns to Fri's October employment report: +450k median est (+194k in Sep) on range of +50k/L to +750k/H from 71 economists polled by Bbg, late whisper number +495k.
• The 2-Yr yield is down 5.1bps at 0.4145%, 5-Yr is down 8.6bps at 1.1024%, 10-Yr is down 7.9bps at 1.5244%, and 30-Yr is down 5.9bps at 1.9617%.

SHORT TERM RATES

US DOLLAR LIBOR: Latest settlements

• O/N -0.00475 at 0.07300% (-0.00313/wk)
• 1 Month +0.00413 to 0.08963% (+0.00213/wk)
• 3 Month +0.00463 to 0.14438% (+0.01213/wk) ** Record Low 0.11413% on 9/12/21
• 6 Month -0.00525 to 0.21325% (+0.01225/wk)
• 1 Year +0.00488 to 0.36250% (+0.00138/wk)

• Daily Effective Fed Funds Rate: 0.08% volume: $75B
• Daily Overnight Bank Funding Rate: 0.07% volume: $276B

• Secured Overnight Financing Rate (SOFR): 0.05%, $877B
• Broad General Collateral Rate (BGCR): 0.05%, $359B
• Tri-Party General Collateral Rate (TGCR): 0.05%, $329B
• (rate, volume levels reflect prior session)

• Tsy 4.5Y-7Y, $5.999B accepted vs. $12.901B submission
• Tsy 10Y-22.5Y, $1.401B accepted vs. $4.024B submission
• Next scheduled purchase
• Fri 11/05 1010-1030ET: Tsy 2.25Y-4.5Y, appr $8.425B

FED Reverse Repo Operation

NY Fed reverse repo usage climbs to $1,348.539B from 73 counterparties vs. $1,343.985B on Wednesday. Record high remains at $1,604.881B from Thursday, September 30.

EURODOLLAR/TREASURY OPTIONS SUMMARY

• Block, +26,500 Red Dec'22 98.50/98.75/99.00/99.37 put condors at 9.5 vs. 99.22/0.16% from 1439-1440ET
• 14,500 Feb 99.00 puts, 0.5
• 7,000 Sep 99.62/99.75 2x3 call spd
• 3,000 Green Nov 98.31/98.43/98.56 put flys
• -10,000 short Dec 99.25/99.37/99.50 put flys, 2.75
• +5,000 Green Dec 98.00puts, 1.0
• +10,000 Apr 99.00/99.25 put spds, 1.5
• -5,000 Green Mar 98.50 puts, 42.0
• +20,000 Jun 99.00/99.25 put spds, 2
• -10,000 Jun 99.81 calls, 1.5
• Overnight trade
• 12,000 Red Dec 98.12/98.37 put spds
• 5,000 short Mar 98.75/99.25/99.75 put flys
• 4,000 Green Mar 97.75/98.00/98.25 put flys
• Block, 8,880 Green Nov 98.75/98.87 put spds, 12.0
• Block, 8,880 Jun 99.00/99.25 put spds, 2.0 vs. 99.60/0.10%
• 2,000 Jun 99.25/99.37/99.50 put flys
• 10,000 Sep 99.00/99.25/99.50 put flys
• 6,000 short Nov 99.00 puts, 1.5
• 2,500 short Dec 99.00/99.12 put spds

• 23,300 FVZ 121.75 puts, various prices from 9-12, 11.5 last
• 4,000 TYZ 129/130 put spds, 6
• 3,000 TYZ 129.5/130/130.5 put flys, 3
• Update, over 13,000 wk2 TY 130 puts, 4
• 5,000 USZ 158/162 strangle, 1-13
• 35,000 wk2 TY 129/129.5 put spds

EGBs-GILTS CASH CLOSE: Gilts Soar On BoE Stunner

Gilts saw one of the biggest rallies in years after the BoE unexpectedly held rates Thursday, pulling the rest of the global FI space with them.

• 2Yr Gilt yields outperformed, and STIR contracts rallied hard, with the BoE now seen making its next 15bp hike only in February, and ECB liftoff pushed back from 2022 to 2023.
• 5Yr UK yields fell the most since the Brexit referendum.
• Bunds couldn't keep pace but still saw strength across the curve; periphery spreads tightened on reduced likelihood of ECB tightening and a broader risk-on atmosphere.
• BoE commentary including Cunliffe later today, and Ramsden, Pill, Tenreyro, Broadbent, and Bailey Friday will be in focus.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 5.6bps at -0.71%, 5-Yr is down 8.3bps at -0.559%, 10-Yr is down 5.6bps at -0.224%, and 30-Yr is up 1.2bps at 0.159%.
• UK: The 2-Yr yield is down 20.6bps at 0.498%, 5-Yr is down 19.3bps at 0.66%, 10-Yr is down 13.1bps at 0.944%, and 30-Yr is down 5.6bps at 1.144%.
• Italian BTP spread down 5.9bps at 115.7bps / Greek down 2.9bps at 134bps

EGB Options: Light Rates Trade ... Considering The Volatility

Thursday's Europe rates / bond options flow included:

• 2RZ1 100.25/100.37cs 1x2, bought for 1 in 5k
• 3LZ1 9875/9862/9850p fly, 1x3x2 sold at -1 in 4k

FOREX: GBP Sinks As Bank of England Stands Pat

• The BOE disappointed the markets by keeping rates on hold at their November meeting. GBP came under immediate selling pressure, which extended throughout the majority of Thursday's trading session.
• GBPUSD actually spiked around 25 pips to 1.3650 prior to the announcement amid thin liquidity, however, the 7-2 vote in favour of rates on hold sparked a rapid 100 point move lower to 1.3550.
• Consistent selling ensued throughout the press conference and the rest of Thursday as technical conditions deteriorated, both in cable and in the crosses.
• EURGBP (+0.90%) rose above short term resistance, extending the most recent recovery back above 0.8500 to close on a Fibonacci retracement level around 0.8561. A buoyant yen saw GBPJPY plummet 1.65%, encountering the 50-day moving average for the first time since October 7.
• Prior to the BOE, the greenback had a strong recovery post the FOMC weakness late on Wednesday. The dollar index rose to a 3-week high, helped by EURUSD completing a near 100-pip turnaround to trade within a few pips of the 2021 lows residing at 1.1524.
• Dollar gains were broad based but focused against more risky currencies such as AUD (-0.65%), NZD (-0.75%) and CAD (-0.58%) with mixed and more modest performance against both the JPY and CHF.
• The latter half of Thursday saw much more contained ranges as market participants paused for breath between the recent event risk and tomorrow's NFP data. Ahead of the US and Canadian employment reports, the RBA will release their Monetary Policy Statement.

EQUITIES

Key late session market levels:

• DJIA down 150.86 points (-0.42%) at 36007.25
• S&P E-Mini Future up 10 points (0.21%) at 4663
• Nasdaq up 119.3 points (0.8%) at 15932.57

European bourses closing levels:

• EuroStoxx 50 up 23.73 points (0.55%) at 4333.34
• FTSE 100 up 31.02 points (0.43%) at 7279.91
• German DAX up 69.67 points (0.44%) at 16029.65
• French CAC 40 up 37.14 points (0.53%) at 6987.79

COMMODITIES

• WTI Crude Oil (front-month) down $1.91 (-2.36%) at $78.95
• Gold is up $22.73 (1.28%) at $1792.54