MNI ASIA MARKETS ANALYSIS: What A Peace Accord Would Look Like

US TSYS: Give Peace a Chance, Say Bye to QE, Hello to $30B ATT/Discovery Debt

• FI markets opened weaker, Tsys following Gilts lower in early London trade. De-escalation hopes tied to Russia officials claims no intention of toppling the Ukrainian government, preferring to achieve goals via talks.
• Mood carried through midday US trade on headlines Ukraine ready for diplomatic solution to strife, according to Pres Zelensky aide. Move tempered after aide added security guarantees are required while Ukraine "Won't Trade `Single Inch' Of Territories".
• Tsy futures gaps lower/bounces slightly after $34B 10Y note auction re-open (91282CDY4) tails slightly: 1.920% high yield vs. 1.915% WI; 2.47x bid-to-cover off last month's 2.68x.
• Aside from the Tsy 10Y re-open, markets absorbed $30B in the forth largest corporate debt issue on record: ATT/Discovery deal main focus in corporate spheres this week. In early February, ATT announced early they would spin off WarnerMedia in a $43 billion transaction to merge media properties with Discovery. Today's 11-part mega-deal: Magallanes, Inc (aka Spinco -- wholly owned T sub under a registration statement filed last Nov) will converts automatically after the divestiture to WarnerMedia Business.
• Final NY Fed purchase operation: After 1,780 operations and nearly $6T in securities bought, NY Fed's last purchase operation of Tsy 2.25Y-4.5Y, accepts $4.0001B vs. $17.398B submission. MBS buy-backs to continue through the end of the week.

SHORT TERM RATES

US DOLLAR LIBOR: Latest settlements:

• O/N +0.00043 at 0.07843% (+0.00029/wk)
• 1 Month +0.03057 to 0.35171% (+0.04157/wk)
• 3 Month +0.04200 to 0.74500% (+0.13486/wk) ** Record Low 0.11413% on 9/12/21
• 6 Month +0.02115 to 1.04486% (+0.10543/wk)
• 1 Year +0.03971 to 1.48657% (+0.13371/wk)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 0.08% volume: $69B
• Daily Overnight Bank Funding Rate: 0.07% volume: $256B

US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 0.05%, $948B
• Broad General Collateral Rate (BGCR): 0.05%, $364B
• Tri-Party General Collateral Rate (TGCR): 0.05%, $358B
• (rate, volume levels reflect prior session)

NY Fed Purchase Operation: After 1,780 operations and nearly $6T in securities bought, NY Fed's last purchase operation of Tsy 2.25Y-4.5Y, accepts $4.0001B vs. $17.398B submission. MBS buy-backs to continue through the end of the week.

FED Reverse Repo Operation

NY Fed reverse repo usage rebounds to $1,542.504B w/ 81 counterparties vs. $1,525.099B prior session -- remains well off all-time high of $1,904.582B on Friday, December 31.

EURODOLLAR/SOFR/TREASURY OPTIONS SUMMARY

Option volume improved Wednesday -- accts gradually migrating off the sidelines as risk appetite improved (stocks surged, SPX eminis +122.0 in late trade, Gold -57.0, WTI crude -14.0) and implied vols shifted lower.

• Continuing put skew buy theme: Eurodollar options hosted more put tree sales (net long vol package) with over 120,000 Dec 97.00/97.50/98.00 put trees sold from 1.5-2.0 (one-leg over) since last Friday.
• Shifting to nearer Sep expiry, paper sold -30,000 Sep 97.12/97.62/98.37 put trees, 13.5 1-leg over.
• Trading desk chatter the put tree sales are a hedge vs. a large OTC trade where risk becomes untenable around 3% -- thus the buying of the two lower strikes funded by the one-leg sale.
• Salient Treasury options trade: buy of +35,000 TYJ 130 calls mostly 11 -- adding to some +75k on the prior session at 18.
• Highlight 5Y trade: 20,000 FVJ 117.25/118 put spds, 24.5-25 after 30k Blocked/traded Monday at 14.5. In call, Block sale of -15,000 FVK 118 calls, 29 ref: 117-19.25

• -10,000 short Sep 96.75/97.25 put spds, 11.5
• 2,200 Green Mar 97.50 puts, cab
• 2,000 Dec 97.00/97.50/98.00 put trees, 1.5
• Block, -30,000 Sep 97.12/97.62/98.37 put trees, 13.5 1-leg over
• -1,200 Dec 98.00 straddles, 90.0 still offered
• +5,000 Sep 97.50/98.25 2x1 put spds, 6.5
• Overnight trade
• -15,000 Dec 97.00/97.50/98.00 put trees, -1-0.5, appr -100k since Friday
• +4,000 May 90 calls, 7.0 vs. 98.645/0.30%

• 4,000 TYJ 125/125.5 put spds, 8
• +6,000 wk3 TY 125/125.75 put spds, 11 ref 126-20.5
• 3,000 wk3 TY 125.5/126 put spds, 4
• -3,000 USK 153/155 put spds, 48 ref 156-04
• Block, -15,000 FVK 118 calls, 29 ref: 117-19.25
• Overnight trade
• +35,000 TYJ 130 calls mostly 11
• +10,000 TYJ 126.5 puts, 36-40
• +5,000 TYK 123/124 put spds, 9 ref 126-27
• Block, 5,000 TYJ 126 puts, 33
• Block, 20,000 FVJ 117.25/118 put spds, 24.5-25 ongoing: 30k Blocked/traded Monday at 14.5

EGBs-GILTS CASH CLOSE: Risk-On Bear Flattening Ahead Of ECB

Bunds and Gilts continued to sell off Wednesday, in what was a more clearly risk-positive session compared with Tuesday's core FI weakness.

• In a combination of dip-buying and nascent optimism that the Ukraine-Russia situation won't worsen further, European stocks rallied strongly (DAX posted its best gains since March 2020), oil and gold fell sharply, and periphery spreads compressed, led by GGBs.
• Both the German and UK curves bear flattened, as attention turned to the ECB decision Thursday, and the Lagarde press conference which will come alongside US inflation data.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 12.3bps at -0.487%, 5-Yr is up 9.8bps at -0.111%, 10-Yr is up 10.4bps at 0.216%, and 30-Yr is up 10.7bps at 0.427%.
• UK: The 2-Yr yield is up 9bps at 1.416%, 5-Yr is up 8.6bps at 1.325%, 10-Yr is up 8bps at 1.526%, and 30-Yr is up 6.5bps at 1.685%.
• Italian BTP spread down 2.2bps at 146.2bps / Greek down 5.3bps at 217.2bps

EGB Options: Largely Downside In Bund And Euribor

Wednesday's Europe rates / bond options flow included:

• RXJ2 161.5/159/151p fly 1x3x3, bought for 13 in 10k
• RXJ2 163.50/162.00/161.50p ladder, bought for 6, 7, 7.5 in 9k
• ERM2 99.625p/100.50c combo, bought the put for 1 in 6.5k (ref 100.33)

FOREX: Renewed Optimism Prompts Euro Relief Rally, DXY Retraces Lower

• A significant recovery in European equities amid renewed hopes for a diplomatic solution to the Ukraine conflict, triggered a strong relief rally for the Euro. Additionally, the surge in sentiment weighed on the greenback with the dollar index falling over 1%, back to Friday’s lowest levels.
• EURUSD broke through short-term resistance of Monday's intraday high of 1.0961 and was steadily supported throughout the trading day. The price action was stubborn and unrelenting as the pair registered a high print of 1.1095, marking a substantial 205-pip range. Resistance now resides at 1.1121, the low from Jan 28 and the recent breakdown level and comes into focus ahead of tomorrow’s ECB meeting and US inflation data.
• Single currency strength was broad based, with Euro registering +1% gains against AUD, CAD, NZD, CHF and GBP and EURJPY posted a very decent intra-day advance of +1.7%.
• Another notable upswing on Wednesday was seen for the Swedish Krona. The currency is set to register its best day against the greenback since at least 2011 and in turn, USDSEK has now retraced over half the war-induced rally, retreating back to 9.68 and the Feb 24 highs.
• Aussie MI Inflation Expectations will be released overnight ahead of a vacant European data docket before the ECB statement and press conference. President Lagarde is scheduled to start talking as the US release their February CPI data, with the headline annual rate expected to jump to 7.9%. Eight surveyed analysts are expecting the figure to reach 8%.

FX: Expiries for Mar10 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0950(E744mln), $1.1000(E1.8bln), $1.1020-25(E1.0bln), $1.1075-80(E652mln), $1.1150-55(E706mln)
• GBP/USD: $1.3280-00(Gbp603mln), $1.3500(Gbp758mln)
• USD/JPY: Y114.65-75($1.2bln), Y114.90($750mln), Y115.30-40($1.5bln), Y115.80-00($580mln), Y116.40($560mln)
• USD/CAD: C$1.2550($860mln), C$1.2750($755mln), C$1.2900($1.2bln)

Late Equity Roundup, Near Highs, IT Outperforms

Stocks broadly higher/near late session highs after FI market close, underpinned hope over a nascent peace accord (or at least a solid cease fire) between Russia and Ukraine -- has yet to coalesce.

• SPX emini March'22 futures traded +121.5 at 4290.25 -- shy of first resistance 20-day EMA level of 4349.88.
• European bourses kicked off the rally in early London trade amid de-escalation hopes after Russia officials claims no intention of toppling the Ukrainian government, preferring to achieve goals via talks. Mood carried through midday US trade on headlines Ukraine ready for diplomatic solution to strife, according to Pres Zelensky aide. Move tempered after aide added security guarantees are required while Ukraine "Won't Trade `Single Inch' Of Territories".
• SPX leading/lagging sectors: Information Technology outperformed +44.25% as it took lead from rebound in Financial sector +4.18%, Communication Services +3.58%. Sharply weaker oil weighed on Energy sector -3.25%.
• Dow leaders: Goldman Sachs (GS) +13.33 to 334.70, followed by United Health (UNH) rebounded +12.33 at 485.79 as regulatory scrutiny ebbed slightly -- focus turned to carving out aid funds for Ukraine.

• RES 4: 4671.75 High Jan 18
• RES 3: 4586.00 High Feb 2 and a key resistance
• RES 2: 4446.14 50-day EMA
• RES 1: 4349.88/4418.75 20-day EMA / High Mar 3
• PRICE: 4290.50 @ 1538 ET Mar 9
• SUP 1: 4101.75 Low Feb 24 and a bear trigger
• SUP 2: 4055.60 Low May 19 2021 (cont)
• SUP 3: 4029.25 Low May 13 2021 (cont)
• SUP 4: 3990.50 0.764 proj of the Jan 4 - 24 - Feb 2 price swing

COMMODITIES: Across The Board Declines On De-Escalation Hopes

• Commodities have seen a sizeable pullback on de-escalation hopes, with Russia stating early on that they don't want to topple the Ukrainian government and prefers to achieve goals via talks before Zelensky later adding he is prepared for certain compromises to end the war.
• Crude oil prices have seen an additional hit, 12-13% today with the UAE saying it favors production increases and will be encouraging OPEC to consider higher production higher levels, giving back some of the decline after the Iraq oil minister says the OPEC+ increases are enough with extra output hikes potentially harming the market.
• WTI is -12.0% at $109.4 having earlier touched a low of $103.63, fleetingly clearing the second support level of $105.18 (Mar 2 low) and opening $95.32 (Mar 1 low).
• Brent is -13.0% at $111.3 off earlier lows of $105.6, fleetingly clearing the second support level of $106.83 (Mar 2 low) and opening $98.30 (Mar 1 low).
• Gold is -3.2% at $1984.78 close to testing yesterday's late low of $1981.2 again after which it opens $1929.9 (Mar 4 low).
• European gas sharply unwinds some of the recent rises with a 27% slump today but remains 120% higher ytd.

Thursday Data Calendar

Date	GMT/Local	Impact	Flag	Country	Event
10/03/2022	0001/0001	*		UK	RICS House Prices
10/03/2022	0101/0101	**		UK	IHS Markit/REC Jobs Report
10/03/2022	0700/0800	*		NO	CPI Norway
10/03/2022	1245/1345	***		EU	ECB Deposit Rate
10/03/2022	1245/1345	***		EU	ECB Main Refi Rate
10/03/2022	1245/1345	***		EU	ECB Marginal Lending Rate
10/03/2022	1330/0830	**		US	Jobless Claims
10/03/2022	1330/0830	***		US	CPI
10/03/2022	1330/0830	**		US	WASDE Weekly Import/Export
10/03/2022	1330/0830	*		CA	Intl Investment Position
10/03/2022	1530/1030	**		US	Natural Gas Stocks
10/03/2022	1630/1130	**		US	NY Fed Weekly Economic Index
10/03/2022	1630/1130	*		US	US Bill 08 Week Treasury Auction Result
10/03/2022	1630/1130	**		US	US Bill 04 Week Treasury Auction Result
10/03/2022	1800/1300	***		US	US Treasury Auction Result for 30 Year Bond
10/03/2022	1900/1400	**		US	Treasury Budget