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JGB TECHS

(M2) Correction Extends

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Late Session Rebound

AUSSIE 10-YEAR TECHS

(M2) Corrective Cycle Remains In Play

AUSSIE 3-YEAR TECHS

(M2) Gains Still Considered Corrective

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US TSYS: Putting 2021 Behind Us

Tsys finished out the shortened year-end holiday session higher -- paring Wed losses to near middle of range for the week; 30YY at 1.9018% after the bell, yield curves flatter, 5s30s -1.15 at 63.93.
  • Equities little weaker (ESH2 -3.25 at 4769.0( not far off Thu's all time high of 4799.5.; Gold +13.25 at 1827.92; West Texas Crude -1.69 at 75.30.
  • Very light volumes on net did see spike in volume in last few minutes of pit trade, appr 175k TYH2 helped push total volume over 600k by the bell.
  • No economic data on day, sites on next week:
    • Jan-04 ISM Mfg (60.3)
    • Jan-05 Services PMI (57.5) , ADP Private employment, Dec FOMC minutes
    • Jan-06 Weekly claims (206k), int'l trade (-$72B), ISM Services (67.0)
    • Jan-07 Employment data for December (+400k)
    • NY Fed buy operations resume Monday
  • The 2-Yr yield is down 0.2bps at 0.7223%, 5-Yr is down 1bps at 1.2532%, 10-Yr is down 1bps at 1.498%, and 30-Yr is down 2.3bps at 1.8942%.

SHORT TERM RATES

US DOLLAR LIBOR: Settlements resume

  • O/N -0.00825 at 0.06438% (-0.00537/wk)
  • 1 Month -0.00063 to 0.10125% (+0.00000/wk)
  • 3 Month -0.00525 to 0.20913% (-0.00875/wk) ** Record Low 0.11413% on 9/12/21
  • 6 Month -0.00638 to 0.33875% (-0.00450/wk)
  • 1 Year -0.00562 to 0.58313% (+0.01600/wk)
STIR: FRBNY EFFR for prior session:
  • Daily Effective Fed Funds Rate: 0.08% volume: $77B
  • Daily Overnight Bank Funding Rate: 0.07% volume: $239B
US TSYS: Repo Reference Rates
  • Secured Overnight Financing Rate (SOFR): 0.04%, $836B
  • Broad General Collateral Rate (BGCR): 0.05%, $322B
  • Tri-Party General Collateral Rate (TGCR): 0.05%, $307B
  • (rate, volume levels reflect prior session)
FED: NY Fed Operational Purchase Schedule
  • 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: New Record High

NY Federal Reserve/MNI

NY Fed reverse repo usage surged to new record high of $1,904.582B from 103 counterparties vs. $1,696.496B Thursday. Compares to prior record high of $1,758.041B posted Monday, December 20.

EURODOLLAR/TREASURY OPTIONS SUMMARY

Eurodollar Options:
+11,500 Jun 99.37/99.50/99.62 call flys, 2.0
Block, +25,000 Jun 99.87 calls, 0.75

Treasury Options:
+21,000 TYH 127.5/129.5 put spds, 24
2,300 TYH 130 puts, 44
1,200 FVH 119.5 put vs. TYH 128 put
1,000 USH 159 puts

FOREX: Greenback Loses Ground, EURUSD To Best levels In A Month

  • Broad dollar weakness in the final session of 2021 with the USD index retreating roughly 0.35% to 95.60.
  • With possible month/year-end dynamics in play, EURUSD rose half a percent on the day - from 1.1303 session lows to 1.1380, representing the highest levels seen for the pair since late November. The pair hovers just below this key resistance at 1.1383, Nov 30 high. A break of this hurdle is required to signal potential for a stronger recovery towards 1.1404 the 50-day EMA.
  • CNH one of the early standouts in European morning trade, with USD/CNH lurching lower and through the 6.3660 support. Pair traded down to its lowest levels since Dec9, and focus is on major support at the 2021 low at 6.3305.
  • CAD was the strongest performer in G10, rising 0.75%. USDCAD trades around 1.2650 and is homing in on the December lows just above the 1.26 handle after a string of positive sessions for the Canadian dollar.
  • In emerging markets, USDTRY slowly climbed above 13.60, however the pair pulled back ahead of the close to remain just 1% higher on the session around 13.25.
  • Some final manufacturing PMI figures to be published on Monday, however, with multiple holidays to start the week, markets may wait for Tuesday to kick-off the new year.

EQUITIES: US Stocks Clock Gains of 27% on the Year

  • While Wall Street edged lower Friday, US equity markets clocked a significant gain on the year, rising over 25% over the past twelve months. Both the S&P 500 and Dow Jones Industrial Average printed a fresh alltime high this week, with Friday trade seeing prices consolidate just below.
  • Communication services and tech names led the decline, countering strength across real estate and the defensive healthcare sector.
  • Although trade was thin Friday, Pfizer topped the index as the UK health authority formally approved the Paxlovid COVID-19 therapy, adding to the company's suite of products aimed at hastening the end of the virus pandemic.
  • European trade was more mixed, with the FTSE-100 and CAC-40 shedding around 0.3% into the close, while Germany's DAX and Spain's IBEX-35 managed to notch up gains into the early close.

COMMODITIES: Oil Set For More Than 50% Gain In 2021

  • Crude oil futures have slipped to the lows of the weekly range since the Dec 27 rally, seemingly on potential risk trimming in light of any material headlines.
  • WTI is -1.9% at $75.6 but still up 2.3% on the week, 14% on the month and 56% on the year (Brent up 51%), the largest annual gain since 2009.
  • It is back below the 50-day EMA of $76.26. There could be support at $72.57 (Dec 27 low) after which it’s $68.56 (Dec 21 low). Initial resistance is today’s earlier high of $77.08 and then $77.44 where this week’s rally has stalled (76.4% retracement of the Oct-Dec downleg).
  • Brent is -1.7% at $78.2, with support at $73.62 (Dec 22 low) and initial resistance at $80.17 (Dec 29 high).
  • OPEC+ meets on Tuesday and is likely to stick to existing plans and confirm a 400kbpd output increase for Feb according to four sources per Reuters yesterday.
  • Gold meanwhile is finishing the year on a solid note, +0.7% at $1826, breaking earlier highs of $1820.3 and opening $1830, the 61.8% retracement of the Nov 16 - Dec 15 downleg.

OUTLOOK

DateGMT/LocalImpactFlagCountryEvent
03/01/20220700/0200*TRTurkey CPI
03/01/20220730/0830**SEManufacturing PMI
03/01/20220730/0830**SEServices PMI
03/01/20220815/0915**ESIHS Markit Manufacturing PMI (f)
03/01/20220845/0945**ITIHS Markit Manufacturing PMI (f)
03/01/20220850/0950**FRIHS Markit Manufacturing PMI (f)
03/01/20220855/0955**DEIHS Markit Manufacturing PMI (f)
03/01/20220900/1000**EUIHS Markit Manufacturing PMI (f)
03/01/20221445/0945***USIHS Markit Manufacturing Index (final)
03/01/20221500/1000*USconstruction spending
03/01/20221630/1130*USUS Treasury Auction Result for 13 Week Bill
03/01/20221630/1130*USUS Treasury Auction Result for 26 Week Bill
MNI Chicago Bureau | +1 312-431-0089 | bill.sokolis@marketnews.com
MNI Chicago Bureau | +1 312-431-0089 | bill.sokolis@marketnews.com

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