MNI ASIA MARKETS ANALYSIS: Readying FOMC, ECB, BoE Rate Annc's

US TSYS: CPI Beat Est's, Final Policy Anncs of 2021 From Fed, ECB, BoE Next Wk

Rates holding marginal gains in 2s-10s after the bell, bonds steady while the ultra-bond trades weaker. Omicron-variant headlines more positive: CAUSED MILD ILLNESS IN FULLY VACCINATED IN U.S.; ONE VACCINATED PERSON HOSPITALIZED FOR TWO DAYS; NO DEATHS, Bbg.

• Tsy futures gapped higher after Nov CPI came out slightly higher than est (0.8% vs. 0.7%), algos duked it out as lvls quickly receded to pre-data levels, Equities surged higher (ESH2 +34.5) - see-sawed through the session to near highs late (+30.50 at 3690.25).
• Orderly trade late morning on with rates gradually paring gains amid two-way positioning ahead next week's FOMC, BOE and ECB policy announcements.
• No data on tap Monday, Tuesday focus on PPI Final Demand MoM (0.60% prior, 0.50% est); YoY (8.6% prior, 9.2% est) -- and of course the Final FOMC policy annc of 2021 on Wednesday.
• The 2-Yr yield is down 2.7bps at 0.6604%, 5-Yr is down 1.6bps at 1.2516%, 10-Yr is down 1.4bps at 1.4854%, and 30-Yr is up 0.5bps at 1.8811%.

SHORT TERM RATES

US DOLLAR LIBOR: Latest settlements

• O/N -0.00463 at 0.07225% (-0.00425/wk)
• 1 Month +0.00400 to 0.10863% (+0.00450/wk)
• 3 Month -0.00263 to 0.19825% (+0.01062/wk) ** Record Low 0.11413% on 9/12/21
• 6 Month -0.00050 to 0.28825% (+0.01712/wk)
• 1 Year +0.01113 to 0.50938% (+0.04788/wk)

• Daily Effective Fed Funds Rate: 0.08% volume: $76B
• Daily Overnight Bank Funding Rate: 0.07% volume: $266B

• Secured Overnight Financing Rate (SOFR): 0.05%, $973B
• Broad General Collateral Rate (BGCR): 0.05%, $351B
• Tri-Party General Collateral Rate (TGCR): 0.05%, $339B
• (rate, volume levels reflect prior session)

• Tsy 7Y-10Y, $2.799B accepted vs. $5.541B submission
• Next scheduled purchase
• Mon 12/13 1010-1030ET: Tsy 22.5Y-30Y, appr $1.600B
• Mon 12/13 1500ET: Updated NY Fed Operational Purchase Schedule

FED Reverse Repo Operation

NY Fed reverse repo usage climbs to $1,507.147B from 77 counterparties vs. $1,500.027B on Thursday. Record high remains at 1,604.881B from Thursday, September 30.

EURODOLLAR/TREASURY OPTIONS SUMMARY

• 5,000 short Mar 98.25/98.62 3x2 put spds 2.25 over 99.00 calls
• Block, total 20,000 short Mar 98.50/98.75/99.0 iron flys, 19.5
• Overnight trade
• 3,250 Green Dec 98.18/98.25/98.31 put trees
• 32,000 Green Jan 98.00/98.18 put spds vs. Green Jan 98.37 calls
• 11,800 Green Jan 97.87/98.00 put spds
• Block, 21,000 Green Jan 98.25/Green Mar 98.00 put spds, 1.5
• 4,200 Green Mar 98.25 puts
• 4,000 Blue Dec 98.12 puts, 1.0

• 42,950 TYH 127/128.5 2x1 put spds, 7 net
• total 18,000 TYF 128 puts, 1
• 4,000 TYF/TYG 128/129 put spd spd
• 10,000 FVF 119.75 puts, 1.5
• -4,000 TYG 129.5/131 strangles, 101
• 14,850 TYF 129.5/TYG 130.5 put spds
• 5,000 TYF 129/130.25 3x2 put spds, 51
• Overnight trade
• 15,000 TYF 129 puts, 9
• 9,300 wk2 TY 129.75 puts, 4
• 8,200 TYH 126 puts, 10

EGBs-GILTS CASH CLOSE: BTPs Regain Ground

Periphery EGB spreads fell and Gilts outperformed Bunds Friday.

• The most anticipated event of the session was the November US CPI reading, which came in line w expectations - and the "sell the rumour, buy the fact" dynamic meant yields fell across the curve, and risk assets gained (including BTPs).
• 10Y Gilt/Bund spread tested the tightest levels seen since mid-September.
• Late in the session, Gilt yields came off the lows on a UK report showing that Covid boosters increased protection against Omicron to around 70-75%.
• Attention turns to key central bank meetings next week, including the Fed, ECB and BoE.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 0.8bps at -0.693%, 5-Yr is up 1.1bps at -0.583%, 10-Yr is up 0.6bps at -0.347%, and 30-Yr is up 1bps at -0.035%.
• UK: The 2-Yr yield is down 0.1bps at 0.429%, 5-Yr is down 0.2bps at 0.552%, 10-Yr is down 1.4bps at 0.741%, and 30-Yr is unchanged at 0.86%.
• Italian BTP spread down 3.8bps at 131.1bps / Spanish down 2.8bps at 70.3bps

EGB Options: More Rolling Of Bund Risk Reversals

Friday's Europe bonds / rate options flow included:

• RXF2/G2 172/174 RR calendar, sold the Feb at 9.5 in 20k (Recall Thursday: RXF2 171.5/173.5 RR, bought the call for 86 in 30k vs RXG2 171.5/173.5, sold the call at 103 down to 101 in 30k)
• RXG2 172.00/170.00/168.00 put fly, bought for 22.5 in 2.4k
• RXH2 172.00/170.00/169.00 broken p fly, bought for 33.5 in 2.4k
• 0RH2 100.25/100.37cs vs 2RH2 100.12/100.25cs, bought the 1yr for 1.75 in 10k
• 2RH2 100/99.6299.37p fly 1x3x2, bought for 4 in 2k

FOREX: Dollar Edges Lower Post US CPI, DXY Unchanged For Week

• US inflation data was broadly in line with consensus which immediately weighed on the dollar.
• After president Biden’s cautious pre-release comments relating to the November number not fully reflecting the adjustment in oil prices, dollar bulls may have been underwhelmed by the figures.
• The dollar index retreated around 0.3% and despite a retracement over the preceding hour, the greenback traded with an offered tone throughout the remainder of Friday’s session.
• The White House provided further support following the release, suggesting price pressures will ease further in the coming months keeping an underlying bid in equities which supported AUD (+0.31%) and GBP (+0.27%).
• Overall, price action in G10 FX was subdued with narrow ranges to end the week where the DXY remains almost at identical levels to last Friday’s close.
• On Monday the BOE will release their Financial Stability Report. This kicks off a very busy week of central bank meetings, which include the Fed, ECB and the BoE.

FX: Expiries for Dec13 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1200(E572mln), $1.1225-35(E667mln), $1.1250(E1.3bln), $1.1320(E2.0bln), $1.1370(E765mln)
• USD/JPY: Y114.00-05($629mln)
• GBP/USD: $1.3150(Gbp712mln), $1.3200(Gbp560mln), $1.3250-60(Gbp507mln)
• EUR/GBP: Gbp0.8530-50(E798mln)
• AUD/USD: $0.7120-30(A$547mln), $0.7200-15(A$848mln)
• USD/CAD: C$1.2730-50($563mln)
• USD/CNY: Cny6.3500($1.9bln)

EQUITIES: US Tops Europe Into Friday Close

• US stocks traded well Friday, rallying following an inline inflation release that soothed concerns of a sky high CPI release given Biden's cautious comments earlier in the week. The White House provided further support following the release, suggesting price pressures will ease further in the coming months.
• Re-opening names saw further support Friday as data from both the US and UK health regulators suggested that the new omicron variant caused only mild illness among the 'fully vaccinated' - signifying that an efficiently rolled out booster program will go a long way to avoiding the rising hospitalizations and fatalities.
• The consumer staples sector led markets higher Friday alongside tech firms, with CostCo among the sharpest gainers following a solid beat on expectations across their fiscal Q1 results.

COMMODITIES: Oil Set To Finish The Week Up Nearly 8%

• Oil futures have edged up ~0.5% today having seen a slight pull back after US CPI data and less optimistic headlines on the effectiveness of vaccines against Omicron compared to Delta, especially without a booster.
• Omicron news and geopolitics will likely continue to drive prices in the near term. Iran re-entered the Vienna talks this week to remove US sanctions but Biden has indicated further sanctions could follow if the nuclear talks fall through.
• WTI is +0.5% at $71.35 and remains bullish following recent strong gains. Attention is on the 50-day EMA of $74.64 next, whilst initial firm support lies at $69.52 (Dec 7 low).
• Brent is +0.4% at $74.74. Attention is on the 50-day EMA of $77.10 whilst first support is tighter at $73.20 (Dec 7 low).
• Gold is also +0.5% at $1783.6. Short-term conditions remain bearish after breaching both the 20- and 50-day EMAs with attention on the base of a bull channel at $1765.5, drawn off the Aug 9 low.