MNI ASIA MARKETS ANALYSIS: US Looking To Halt Russia Expansion

US TSYS: US Sanctions Russia, First Tranche Start Wednesday

• Markets reacted the way one would expect following the Russia/Ukraine news last night: gap bid in rates/safe havens on Russia formally recognizing and in short order inserting "peacekeeping" forces into Ukraine separatist regions of Donetsk and Luhansk.
• Risk-off/safe-haven support evaporated through the session -- perhaps tied to to measured response via sanctions from US and allies lending to relative calm, Pres Biden annc sanctions similar to EU later in the session: 'We are implementing full blocking sanctions on VEB and military bank. Comprehensive sanctions on Russian sovereign debt. Russia can no longer raise money on US or EU markets.'
• Decent 2Y note sale, short end Tsy futures held weaker but off lows after $52B 2Y note auction (91282CEA5) small stop through: 1.553% high yield vs. 1.57% WI; 2.64x bid-to-cover vs. last moth's 2.81x, well over five auction avg: 2.56x.
  • Indirect take-up: eases to 65.58% vs. 66.00% in January;
  • Primary dealer take-up falls to 15.65% vs. 24.61% last month;
  • Direct take-up: climbs to 18.77% vs. last month's 1+ year low of 9.39%

SHORT TERM RATES

US DOLLAR LIBOR: Latest settlements:

• O/N +0.00100 at 0.07657% (+0.00100/wk)
• 1 Month +0.01386 to 0.17586% (+0.00515/wk)
• 3 Month +0.0240 to 0.48786% (+0.00829/wk) ** Record Low 0.11413% on 9/12/21
• 6 Month +0.02314 to 0.78143% (+0.00014/wk)
• 1 Year +0.03086 to 1.28857% (+0.00271/wk)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 0.08% volume: $71B
• Daily Overnight Bank Funding Rate: 0.07% volume: $245B

US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 0.05%, $931B
• Broad General Collateral Rate (BGCR): 0.05%, $345B
• Tri-Party General Collateral Rate (TGCR): 0.05%, $335B
• (rate, volume levels reflect prior session)

NY Fed Purchase Operation: The Desk plans to purchase approximately $20 billion, ending Thu, March 9.

• TIPS 1Y-7.5Y, appr $1.001B accepted vs. $2.747B submission
• Next scheduled purchases:
• Thu 02/24 1010-1030ET: Tsy 0Y-22.5Y, appr $6.225B steady
• Tue 03/01 1100-1120ET: TIPS 7.5Y-30Y, appr $0.625B vs. $1.225B prior
• Thu 03/03 1100-1120ET: Tsy 7Y-10Y, appr $1.625B vs. $3.225 prior
• Tue 03/08 1010-1030ET: Tsy 22.5Y-30Y, appr $1.825B steady
• Thu 03/09 1010-1030ET: Tsy 2.25Y-4.5Y, appr $4.025B

FED Reverse Repo Operation

NY Fed reverse repo usage climbs to $1,699.432B w/ 81 counterparties vs. $1,674.929B prior session -- remains well off all-time high of $1,904.582B on Friday, December 31.

EURODOLLAR/SOFR/TREASURY OPTIONS SUMMARY

• +3,000 SFRZ2 97.68/97.93/98.18/98.43 put condors, 5.5 -- adds to +3k last Fri

• +10,000 Apr 99.12 calls 2.0
• Overnight trade
• 7,500 Dec 98.43/98.56 call spds
• -10,000 short Apr put spds, 19.0 ref 97.765
• -7,500 Apr 98.87/99.00 put spds, 8.0 ref 98.805
• +5,000 Jun 98.50/98.68 put spds, 5.0 vs. 98.815/0.12%

• Block, +15,000 wk1/wk2 125 put calendar spd, 6
• +5,000 FVJ 117.25 puts, 27.5, total +20k/day
• -5,000 TYJ 125.5/128.5 strangles, 50-48
• Overnight trade
• Block, 4,000 USJ 160 calls, 33 vs. USM2 at 155-03/0.19%
• Block, 10,000 FVJ 117.25 puts, 27
• Blocks, total 15,000 FVJ 118.25 calls, 30.5-32

EGBs-GILTS CASH CLOSE: Reversal On Geopolitical Relief

Markets entered Tuesday firmly in risk-off mode, but faded the move later in the morning - with geopolitics driving throughout once again.

• The risk-on reversal came as both Russia and the US/Europe appeared more measured in their approach to the Ukraine crisis than had been feared late Monday.
• After showing some signs of short covering last week (see today's Europe Pi for more), Bund futures sold off sharply this morning.
• Short end rates sold off; one exception was March UK which further faded 50bp hike probability following relatively dovish comments by BoE's Ramsden.
• BTP spreads fell sharply thanks to the broader risk-on move.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 5.5bps at -0.399%, 5-Yr is up 4.9bps at 0.001%, 10-Yr is up 3.7bps at 0.243%, and 30-Yr is up 2.2bps at 0.496%.
• UK: The 2-Yr yield is up 5.4bps at 1.338%, 5-Yr is up 6bps at 1.362%, 10-Yr is up 6.3bps at 1.471%, and 30-Yr is up 5.6bps at 1.548%.
• Italian BTP spread down 2.4bps at 168.1bps / Spanish down 1.7bps at 102bps

EGB Options: Nothing But Downside

Tuesday's Europe rates / bond options flow included:

• RXM2 169c, sold at 42.5 in 2.75k (closing)
• RXJ2 162/159.50ps sold at 41/40 in 10k (ref 167.04). Said to be an unwind
• OEJ2 131.00/130.00ps 1x1.5, bought for 18.5/19 in 5k (bought yesterday in 10k)
• OEJ2 131.25/130.50/130.00/128.50 put condor vs 132.25/133.00 call spread bought for 6 in 11.3k (bought condor, sold c/s)
• DUJ2 111.20/111.00/110.80p fly, bought for 1.75 in 2kDUJ2 111.30/111.10/110.90p fly, bought for 3.25 in 4k
• ERU2 100.25/100.125/100.00p fly, bought for 1.25 in 4k (ref 100.225)
• 2RH2 99.125/99.00/98.875p fly, bought for 1.25 in 4k2RH2 99.125/99.00ps, bought the 1 for 0.75 in 5.75k
• 2RH2 99.125/99.00ps, 1x2 bought the 1 for 0.75 in 4k and in 5.75k

FOREX: Swiss Franc Retraces Monday Strength, Scandinavian FX Outperforms

• Price action for the majors remains subdued as equity markets continue to have large swings amid the geopolitical headline turbulence. A strong initial rally across equity/commodity markets was met with some US dollar weakness, however, renewed pressure on risk throughout US hours leaves the DXY unchanged for Tuesday.
• EURUSD appears content trading between 1.1300-50 while USDJPY resides close to the week’s open just below the 115 mark.
• More notable move seen in the Swiss Franc as the majority of yesterday’s risk-off induced strength was unwound. EURCHF climbed 0.73% to 1.0436, after the downward move fell shy of the 1.0300 support level.
• Scandinavian FX were the strongest performers in the G10 space with commodity-tied currencies leading the way as Brent crude futures touched $99.50/bbl, the highest level since 2014. NOK leads the way, rising 1.38% against the greenback as the Russia - Europe Nordstream 2 gas pipeline falls victim to sanctions responses.
• Late post-Biden relief rally in equities lent strong support to the Russian Ruble which is also seen over 1% in the green against the dollar with markets potentially expecting a wider array of strict sanctions from the US.
• Australian Wage Price Index data overnight before the February RBNZ rate decision/statement. There is very limited scheduled event risk for Wednesday’s US session.

FX: Expiries for Feb23 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1200(E1.0bln), $1.1250(E601mln), $1.1275(E1.1bln), $1.1300-15(E1.6bln), $1.1350-60(E1.4bln), $1.1380-85(E575mln)
• USD/JPY: Y114.00($860mln)
• AUD/USD: $0.7190-00(A$1.3bln), $0.7225($637mln)

EQUITIES: Stocks Dip After Three-Day Break, Retailers Nosedive

• Wall Street settled lower Tuesday, catching up with the volatile price action evident across Monday's market holiday. Futures also fared poorly, with most key indices shedding around 1% or so as developing Ukraine crisis worked against sentiment.
• Consumer discretionary sectors bore the brunt of the downtick, with automakers a particular source of weakness. The likes of Tesla, Ford and General Motors shed as much as 5.5% Tuesday as markets anticipated possible global supply chain issues that may result from sanctions pressure headed toward Russia from the West.
• Elsewhere, retail had a poor session, with Home Depot and Best Buy the worst performers on the S&P 500 as Home Depot's earnings detailed a lower than expected gross margin for Q4, raising questions about profitability for retail names across 2022.
• The e-mini S&P recovered off the 4250 low printed on the resumption of trade, but recovered modestly since. Technical conditions remain bearish and the contract has traded lower today. The moving average set-up and the contracts recent inability to remain above the 50-day EMA - at 4528.69 - suggest the broader path of least resistance remains down. The focus is on this year’s low of 4212.75 on Jan 24.

COMMODITIES: Oil Fades As Russian Sanctions Rolled Out

• Oil prices saw a strong start to the day on the Russian escalation theme before fading in London hours on a move triggered by the Russian parliament planning to ratify agreements that don’t specify the exact borders of the self-proclaimed separatist entities with further headlines that seemingly limited sanctions pressure for Russia.
• This set the tone for much of the day, with a levelling off following Biden’s speech on Russian sanctions after they appeared less aggressive than perhaps had been expected after a delay in giving the speech.
• WTI is +1.4% from Friday’s settlement at $92.35 having briefly cleared the bull trigger of $95.82 (Feb 14 high) before retreating. It sits above key short-term support of $88.41 (Feb 9 low).
• Within the Apr’22 contract, the most active strikes by far have been $100/bbl calls.
• Brent is +1.1% at $96.43 having earlier touched highs of $99.5 and by doing so clearing resistance at $98.94 (2.764 proj of the Dec 2-9-20 price swing) before retreating.
• Gold has dipped -0.4% to $1899.3 after a string of large gains on Russian escalation, maintaining its bull rally. Resistance is the $1914.3 intraday high whilst initial support is $1879.6 (Feb 15 high).

Wednesday Data Roundup

Date	GMT/Local	Impact	Flag	Country	Event
23/02/2022	0030/1130	***		AU	Quarterly wage price index
23/02/2022	0030/1130	***		AU	Quarterly construction work done
23/02/2022	0100/1400	***		NZ	RBNZ official cash rate decision
23/02/2022	0700/0800	*		DE	GFK Consumer Climate
23/02/2022	0700/1500	**		CN	MNI China Liquidity Suvey
23/02/2022	0745/0845	**		FR	Manufacturing Sentiment
23/02/2022	0915/1015			EU	ECB Elderson Intro & panel participation at Eurofi Seminar
23/02/2022	0930/0930			UK	BOE Governor Bailey et al at TSC
23/02/2022	1000/1100	***		EU	HICP (f)
23/02/2022	1130/1230			EU	ECB de Guindos Q&A at El Español & Invertia symposium
23/02/2022	1200/0700	**		US	MBA Weekly Applications Index
23/02/2022	1330/0830	*		CA	Quarterly financial statistics for enterprises
23/02/2022	1355/0855	**		US	Redbook Retail Sales Index
23/02/2022	1500/1500			UK	BOE Tenreyro speaks at NIESR Institute lecture
23/02/2022	1630/1130	**		US	US Treasury Auction Result for 2 Year Floating Rate Note
23/02/2022	1630/1130	*		US	US Treasury Auction Result for Cash Management Bill
23/02/2022	1800/1300	*		US	US Treasury Auction Result for 5 Year Note
23/02/2022	2030/1530			US	San Francisco Fed's Mary Daly