MNI ASIA MARKETS ANALYSIS: Generally Upbeat Covid Headlines

US TSYS: Carry-Over Risk Appetite, Covid Headline Generally Upbeat

• Very light volumes on the last full session of the week (TYH2 <660k after the bell), early exit Thu, Fri closed for Christmas eve. (Next week, market closes early for New Years Eve Fri).
• Appetite for risk carried over from prior session with stock near highs in late trade (ESH2 +33.5 at 4674.0, 4678.5 high), West Texas crude gained 1.68 to 72.80 after an unexpected inventory drawdown.
• Limited react to data to positive data: US GDP Revised Up In Q3 (2.3% Q/Q SAAR), slightly lower savings; stronger than exp Consumer Conf unphased by Omicron variant (115.8; EST. 111.0). On tap Thu: wkly claims, PCE Durables, U-Mich and existing home sales. NY Fed buy-ops on hold, resume Jan 3.
• Wed focus more on upbeat Covid headlines: OMICRON HOSPITAL RISK TWO-THIRDS BELOW DELTA: SCOTTISH STUDY; PFIZER PILL CLEARED BY U.S. BECOMING FIRST AT-HOME COVID DRUG, Bbg. Meanwhile, US Pres Biden tested negative for virus after coming in close contact w/carrier earlier in wk.
• US Tsy $17B 5Y TIPS auction tailed 2bp w/-1.508% high yield.
• The 2-Yr yield is up 0bps at 0.6667%, 5-Yr is up 0.5bps at 1.2205%, 10-Yr is down 0.5bps at 1.4566%, and 30-Yr is down 0.9bps at 1.8538%.

SHORT TERM RATES

US DOLLAR LIBOR: Latest settlements

• O/N -0.00238 at 0.07050% (-0.00375/wk)
• 1 Month -0.00150 to 0.10275% (+0.00025/wk)
• 3 Month -0.00462 to 0.21138% (-0.00125/wk) ** Record Low 0.11413% on 9/12/21
• 6 Month +0.00088 to 0.32638% (+0.01363/wk)
• 1 Year +0.01138 to 0.55338% (+0.02375/wk)

• Daily Effective Fed Funds Rate: 0.08% volume: $69B
• Daily Overnight Bank Funding Rate: 0.07% volume: $249B

• Secured Overnight Financing Rate (SOFR): 0.04%, $896B
• Broad General Collateral Rate (BGCR): 0.05%, $345B
• Tri-Party General Collateral Rate (TGCR): 0.05%, $329B
• (rate, volume levels reflect prior session)

• Tsy 10Y-22.5Y, appr $1.601B accepted vs. $4.062B submission
• NY Fed buy-operations pause for holidays, resume Jan 3:
• Mon 01/03 1010-1030ET: Tsy 2.25Y-4.5Y, appr $6.325B vs. $7.375B prior
• Tue 01/04 1100-1120ET: TIPS 1Y-7.5Y, appr $1.525B
• Wed 01/05 1010-1030ET: Tsy 7Y-10Y, appr $2.425B vs. $2.825B prior
• Wed 01/05 1100-1120ET: Tsy 22.5Y-30Y, appr $1.825B
• Thu 01/06 1100-1120ET: TIPS 7.5Y-30Y, appr $0.925B
• Fri 01/07 1010-1030ET: Tsy 0Y-2.25Y, appr $9.325B

FED Reverse Repo Operation

NY Fed reverse repo usage recedes to $1,699.277B from 82 counterparties vs. Tuesday's $1,748.285B. New record high of $1,758.041B posted Monday, December 20.

EURODOLLAR/TREASURY OPTIONS SUMMARY

• -4,000 short Mar 98.62/98.81/99.00/99.31 call condors, 4.0 vs. 98.765/0.05%
• +5,000 Green Mar 98.00/98.75 strangles, 11.0
• +4,000 Mar 99.37/99.62 put spds, 4.5 vs. 99.65/0.37

• -10,000 FVH 120.75 puts, 35 vs. 120-31/0.44%
• +55,000 FVH 119.5/120 put spds, 7
• total 16,200 TYH 130.25 puts, 1
• 2,500 FVG 121/121.5 call spds
• 5,000 TYH 128.5/133 strangles
• 3,100 TYF 130.25/131 2x1 put spds, 23 earlier

FOREX: US Dollar Under Pressure, Cross-JPY Remains Supported

• Broad greenback weakness continued across markets as most G10 counterparts rose to their best levels of the week. The DXY is down 0.4% and completes its third consecutive daily decline, slowly eroding into last Friday’s advance.
• Outlier in this respect is the Japanese Yen which largely represents the extended bid for cross-JPY as equities extended their bounce with overall fears surrounding the Omicron variant waning. AUDJPY, NZDJPY and GBPJPY have all risen just shy of one percent.
• With the Aussie leading the charge in risk, it is worth highlighting the move away from 0.7090 short-term support, bolstering the medium-term outlook for a further recovery from a strong inflection point around 0.6995. Clearance of last week's high of 0.7224 on Dec 16 is needed to trigger a resumption of bullish activity.
• EURUSD broke a cluster of highs just above the 1.13 mark, rising to highs of 1.1342 and approaching last week’s peak at 1.1360. Key resistance, however, at 1.1383 is intact, Nov 30 high. A break of this hurdle is required to signal potential for a stronger recovery towards 1.1407 the 50-day EMA.
• Despite the looming holiday break – plenty of data for markets to assess tomorrow. Core PCE Price Index as well as durable goods headline the US calendar. In Canada, October GDP will be released.

FX: Expiries for Dec23 NY cut 1000ET (Source DTCC)

• EURUSD: 1.1225 (1.97bn), 1.1255 (774mln), 1.1270 (208mln), 1.1275 (230mln), 1.1300 (1.31bn), 1.1305 (233mln), 1.1315 (201mln), 1.1320 (364mln), 1.1330 (355mln), 1.1335 (466mln), 1.1340 (391mln), 1.1350 (782mln).
  
• USDJPY: 113.75 (733mln), 114.00 (320mln), 114.10 (527mln), 114.50 (276mln)
• USDCAD: 1.2880 (360mln), 1.2900 (230mln), 1.2925 (370mln)
• USDCNY: 6.35 (700mln)

EQUITIES

Key late session market levels:

• DJIA up 184.11 points (0.52%) at 35671.69
• S&P E-Mini Future up 31.75 points (0.68%) at 4672.25
• Nasdaq up 123.8 points (0.8%) at 15463.94

European bourses closing levels:

• EuroStoxx 50 up 42.07 points (1.01%) at 4217.06
• FTSE 100 up 44.25 points (0.61%) at 7341.66
• German DAX up 146.03 points (0.95%) at 15593.47
• French CAC 40 up 86.68 points (1.24%) at 7051.67

COMMODITIES: Oil Supported By Inventory Drawdown And Risk-On

• Oil futures are up 1-1.5% on growing risk-on sentiment, helped by a larger than expected drawdown in US crude oil inventories. They have consolidated these gains since Pfizer’s Covid pill was recently cleared by the FDA.
• WTI is +1.6% at $72.2, with resistance seen at $73.06 (50-day EMA) and initial support at $68.56 (Dec 21 low). Gains are however heavily skewed towards short-dated contracts.
• Brent +1.2% at $74.8, above the 20-day EMA of $74.61 as they next eye the 50-day EMA of $76.21 for resistance. Support is seen at $69.24 (Dec 3 low).
• Gold has been boosted on this backdrop, up +0.6% at $1799.2. It sits between the near-term bull trigger at $1815.6 (Nov 26 high) and the $1772.2 base of the bull channel.