MNI ASIA MARKETS ANALYSIS: Last Full Session of 2021

US TSYS: Bond Near Late Session Highs

• Despite the best volumes of the week (TYH2>675k, thin year-end participation made for whippy trade in the first half -- last full session of 2021 w/early close New Years eve (1300ET).
• Rates traded steady to mixed after weekly claims came out lower than est (-8k to 198k vs. 206k est). Pre-open bid in long end evaporated after the bell/well ahead data release, are holding near lows/early evening range.
• Trimmed Gains Post-Chicago PMI: Tsy futures receded to steady/marginally mixed levels after slightly better than expected Chicago PMI: 63.1 vs. 62.0 est. USH2 weaker now, but just as quickly regained footing.
• Data picks up as 2022 gets underway next week, Change in Nonfarm Payrolls for December next week Friday, wide range of sell-side opinions, mean est +400k so far vs. +210k in Nov.
• The 2-Yr yield is down 0.8bps at 0.7382%, 5-Yr is down 2.4bps at 1.2726%, 10-Yr is down 3.6bps at 1.5134%, and 30-Yr is down 3.8bps at 1.9226%.

SHORT TERM RATES

US DOLLAR LIBOR: Settlements resume

• O/N -0.00012 at 0.07263% (+0.00288/wk)
• 1 Month -0.00237 to 0.10188% (+0.00063/wk)
• 3 Month -0.00937 to 0.21438% (-0.00350/wk) ** Record Low 0.11413% on 9/12/21
• 6 Month -0.00925 to 0.34513% (+0.00188/wk)
• 1 Year +0.00275 to 0.58875% (+0.02162/wk)

• Daily Effective Fed Funds Rate: 0.08% volume: $71B
• Daily Overnight Bank Funding Rate: 0.07% volume: $230B

• Secured Overnight Financing Rate (SOFR): 0.04%, $869B
• Broad General Collateral Rate (BGCR): 0.05%, $330B
• Tri-Party General Collateral Rate (TGCR): 0.05%, $308B
• (rate, volume levels reflect prior session)

• 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 climbs to $1,696.496B from 90 counterparties vs. $1,642.506B Wednesday. Record high of $1,758.041B posted Monday, December 20.

EURODOLLAR/TREASURY OPTIONS SUMMARY

• 10,000 short Mar 98.00/98.50 put spds, 5.0
• +10,000 Dec 98.75 calls, 37.0
• 7,500 short Jan 98.93/99.00 call spds
• 2,500 Mar 99.68/99.75/99.81 call flys
• -2,000 Green Feb 98.12/98.50 call over risk reversals, 2.0 vs. 98.35/0.52%
• -4,000 Jun 99.37/99.98 put spds
• +2,000 Red Jun 98.00 puts, 18.5
• +5,000 Mar 99.56/99.62/99.68 put flys, 0.75
• 2,600 short Jan 98.50/98.56/98.62 put trees earlier
• 2,000 Blue Jan 98.37 puts, 13.5

• +3,700 TYH 133 calls, 9 vs. 130-10.5
• 2,000 TYH 128/130 2x1 put spds, 20 earlier

FOREX: Greenback Regains Poise Amid Two-Way Price Action

• The dollar index is currently up 0.2% on the day and has recovered the majority of yesterday’s selloff. Price action was volatile throughout Thursday’s US trading session with 95.90-96.20 capping the day’s range.
• The euro was the biggest underperformer and trades roughly 65 pips lower than yesterday’s highs at 1.1370. Failure to capitalise on the break of cluster resistance yesterday around 1.1345 prompted the single currency to trade with an offered tone, grinding back towards the 1.1300 mark. Resistance for EUR/USD remains at 1.1388, the 50-day EMA.
• Despite the early close for US markets tomorrow, there is potential for heightened volatility approaching the WMR month/year-end fix amid thin holiday markets.
• In emerging markets, the Turkish Lira underperformed, retreating 4% against the dollar. USDTRY continues to grind further away from the 10.25 lows on Dec 23. The Brazilian Real was the main beneficiary, posting a 2% rally on the final session of the year.
• Chinese manufacturing PMI data overnight before an empty data docket for both he European/US session.

EQUITIES: Stocks Strike New Highs Into Year End

• The S&P 500 hit new record highs Thursday in both cash and futures space, with the e-mini S&P touching 4799.75 - making the 4800 mark a clear level of psychological resistance. Gains for equities come as fears over the Omicron variant continue to fade, and as the MNI Chicago PMI came in well ahead of expectations at 63.1 vs. Exp. 62.0.
• The communication services and healthcare sectors drove gains in the US, with the likes of Twitter, General Motors and ViacomCBS at the top of the table. Notably, re-opening names surged, helping the likes of Penn National Gaming, Match Group and Norwegian Cruiselines to add well over 2.5% apiece.
• The Friday session will likely be a muted affair despite a full trading session for US equities, with European markets being largely closed throughout. European indices generally gained, with the EuroStoxx50 higher by 0,5%.

COMMODITIES: Oil Holds Onto Recent Rally Ahead of OPEC+

• Crude oil futures are mixed today, with WTI up 0.4% but Brent flat, on an day when both equities and USTs have rallied.
• OPEC+ is likely to stick to existing plans at the Jan 4 meeting and confirm the 400kbpd output increase for Feb according to four sources per Reuters.
• WTI is +0.4% at $76.9, holding onto the recent rally on the penultimate trading day of the year and with increases across the curve.
• In a day of low volumes, by far the most active strikes for the Feb’22 contract have been $80/bbl and $85/bbl calls.
• Initial resistance is seen at $77.37 (Dec 29 high) having stalled at the 76.4% retracement of the Oct-Dec down leg of $77.44. Support is seen at $68.56 (Dec 21 low).
• Brent is -0.1% at $79.1, with initial resistance at $80.17 (Dec 29 high) and support materially lower at $73.62 (Dec 22 low).
• Separately, gold is +0.5% at $1813.7 with attention on resistance at $1820.3 (Dec 29 high) and support at $1773.9, the channel base.

OUTLOOK: New-Year Data: Markit Mfg PMI, Construction Spending, Bill Sales

No new data on tap for Friday's shortened year-end session, resumes Monday full session (London bank holiday, however). NY Fed buy-ops resume.

• US Data/Speaker Calendar (prior, estimate)
• Jan-03 0945 Markit US Manufacturing PMI (57.8, 57.7)
• Jan-03 1000 Construction Spending MoM (0.2%, 0.6%)
• Jan-03 1030 NY Fed buy-op: Tsy 2.25Y-4.5Y, appr $6.325B vs. $7.375B prior
• Jan-03 1130 US Tsy $60B 13W, $51B 26Y bill auctions