MNI ASIA MARKETS ANALYSIS: FOMC Hawkish Hold, Taper x2

US TSYS: Hawkish FOMC In-Line, Liftoff After Mar'22 Taper End

• Widely anticipated (not as hawkish as some analysts expected) Tsys finished near late session lows following some initial whip-saw action on the release, yield curves steeper (5s30s at 60.67 late), equities reversed losses/session highs late: (ESH2 +65.0 at 4693.0) while VIX fell to 19.16 low from pre-annc high of 23.47.
• Chairman Powell sounded upbeat as he discussed solid job gains that have averaged "378,000 per month over the last 3 months. The unemployment rate has declined substantially falling .6 percentage point since our last meeting and reaching 4.2% in November."
• Sometime after Mar'22 (end of asset buys), Chair Powell said the Fed will "be in a position to raise interest rates as and when we think it's appropriate and we will, to the extent that's appropriate" and benefitting by "a few more months of data."
• Early action: Tsys gapped lower just ahead stocks open, weighed by large -30k FVH2 note sale at 120-28.25 that pushed 5s to 120-24 low in the aftermath. Not headline driven, sources reported prop, fast$ and option-tied buying in shorts to intermediates as futures bounce.

SHORT TERM RATES

US DOLLAR LIBOR: Latest settlements

• O/N -0.00850 at 0.06863% (-0.00363/wk)
• 1 Month -0.00225 to 0.10750% (-0.00113/wk)
• 3 Month +0.00475 to 0.21563% (+0.01738/wk) ** Record Low 0.11413% on 9/12/21
• 6 Month +0.01037 to 0.30150% (+0.01325/wk)
• 1 Year +0.01900 to 0.51688% (+0.00750/wk)

• Daily Effective Fed Funds Rate: 0.08% volume: $73B
• Daily Overnight Bank Funding Rate: 0.07% volume: $256B

• Secured Overnight Financing Rate (SOFR): 0.05%, $919B
• Broad General Collateral Rate (BGCR): 0.05%, $356B
• Tri-Party General Collateral Rate (TGCR): 0.05%, $336B
• (rate, volume levels reflect prior session)

• Thu 12/16 1010-1030ET: Tsy 10Y-22.5Y, appr $1.625B vs. $1.425B prior
• Thu 12/16 1100-1120ET: TIPS 1Y-7.5Y, appr $1.525B vs. $1.775B prior
• Fri 12/17 1010-1030ET: Tsy 22.5Y-30Y, appr $1.825B vs. $1.600B prior
• Note, while the size of buy-operations in 10-30Y actually increased slightly to account for the drop in number of operations from 4 to 3, combined purchases still reduced.

FED Reverse Repo Operation -- New All-Time High

NY Fed reverse repo usage climbs to new all-time high of $1,621.097B from 85 counterparties vs. $1,584.488B on Tuesday. Prior record high: 1,604.881B from Thursday, September 30.

EURODOLLAR/TREASURY OPTIONS SUMMARY

• 3,150 Green Mar 97.87/98.06/98.25 put flys
• +5,000 Green Jun 97.25/97.50/97.75/98.00 put condors, 4.0
• +10,000 short Mar 99.25/99.50 call spds, 2.5
• 4,000 short Mar 98.50/99.00 strangles,
• 2,300 Jun 99.25/99.50 2x1 put spds
• -12,000 short Jan 98.25/98.37/98.50/98.62 put condors, 2.0
• +4,000 Jan 99.81/99.87 call spds, 0.25
• Block, 10,466 Mar 99.56/99.75 put spds, 6.5 vs. 99.685/0.42%
• +5,000 short Feb 98.37/98.50/98.62 put trees, 0.0-1.0
• +10,000 short Jun 98.25/98.50 put spds, 8.5 vs. 98.615/0.14
• -1,000 short Mar 98.87 straddles, 38.5 vs. 98.83/0.10%
• Overnight trade
• 3,300 short Jan 98.75 puts, 10.0
• +3,500 Mar 98.25/98.37 call spds, 12.5 99.69ref

• 10,000 TYF 129 puts, 3
• -35,000 TYF 128.5 puts, 2 last total near 44k on day, huge >515k still offered
• 7,000 TYG 131/132 call spds, 18
• 5,000 TYG 132.5 calls, 9
• Block, +12,500 TYH 127.5/129.5 3x2 put spds, 36 net at 0849:44ET
• Overnight trade
• +6,500 TYF 128.5/129 put spds, 1 vs. 130-25.5/0.03%

FOREX: Greenback Loses Shine As Equities Bounce Post-FOMC

• The US Dollar initially reacted favourably to the announcement of an accelerated taper by the Federal Reserve on Wednesday.
• The dollar index rose roughly 30 pips on the release with EURUSD fading to a fresh low of 1.1222 and USDJPY rising back above 114 for the first time since November 28.
• The initial gains were short-lived and the underlying supportive tone for equity indices worked against the greenback throughout Chair Powell’s press conference.
• The dollar index (-0.22%) plumbed fresh lows for the session and EURUSD squeezed all the way back to 1.1299.
• Revived risk sentiment lent support to both AUD (+0.85%) and NZD (+0.45%) with AUDJPY a standout, rising well over 1% on the session.
• NOK was also at the top of the G10 leaderboard with bolstered risk sentiment and worth noting there is a Norges Bank decision tomorrow morning where consensus is for them to hike 25bps.
• Additionally, we have the two main events, in the form of the BoE and the ECB as well as a policy decision from the SNB.
• Preceding this, Aussie employment data is scheduled overnight with Eurozone Flash PMIs also on the docket.

EQUITIES

• DJIA up 383.25 points (1.08%) at 35537.35
• S&P E-Mini Future up 75 points (1.62%) at 4614
• Nasdaq up 327.9 points (2.2%) at 15095.62
• EuroStoxx 50 up 15.17 points (0.37%) at 4159.68
• FTSE 100 down 47.89 points (-0.66%) at 7170.75
• German DAX up 22.79 points (0.15%) at 15476.35
• French CAC 40 up 32.32 points (0.47%) at 6927.63

COMMODITIES

• WTI Crude Oil (front-month) up $0.85 (1.2%) at $70.48
• Gold is up $7.85 (0.44%) at $1766.61