MNI ASIA MARKETS ANALYSIS: KC George on Faster Asset Draw Down

US TSYS: Waiting For Fri's March Jobs Data

• Aside from mixed geopol headlines re: Russia/Ukraine, KC Fed George generated some interest after midday after mentioning "FED BALANCE SHEET SIZE NEEDS TO DECLINE SIGNIFICANTLY ... while "ROLLING OFF FED ASSET HOLDINGS COULD HELP STEEPEN CURVE" Bbg.
• George said it's clear that removing accommodation is required and laid out a more cautions stance on raising the federal funds rate, paired with a desire to roll assets off of the central bank's balance sheet faster.
• "Given the state of the economy, with inflation at a 40-year high and the unemployment rate near record lows, moving expeditiously to a neutral stance of policy is appropriate," she said, characterizing recent inflation as a result of supply constraints in the face of strong demand.
• Little/no react to March ADP +455 vs. +450 est, +6.9%. Thursday data focus on weekly claims (+196k est), Personal income/spending at 0830ET; Chicago PMI (57.0 vs. 56.3 prior) at 0945ET.
• The 2-Yr yield is down 4.4bps at 2.3204%, 5-Yr is down 5.8bps at 2.4399%, 10-Yr is down 4.6bps at 2.3488%, and 30-Yr is down 2.8bps at 2.4735%.

SHORT TERM RATES

US DOLLAR LIBOR: Latest settlements:

• O/N +0.00057 at 0.32814% (+0.00157/wk)
• 1 Month -0.00229 to 0.45514% (+0.01000/wk)
• 3 Month -0.03914 to 0.96686% (-0.01600/wk) ** Record Low 0.11413% on 9/12/21
• 6 Month -0.02771 to 1.47200% (+0.02086/wk)
• 1 Year -0.07714 to 2.12586% (+0.03715/wk)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 0.33% volume: $83B
• Daily Overnight Bank Funding Rate: 0.32% volume: $255B

US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 0.28%, $874B
• Broad General Collateral Rate (BGCR): 0.30%, $332B
• Tri-Party General Collateral Rate (TGCR): 0.30%, $320B
• (rate, volume levels reflect prior session)

FED Reverse Repo Operation

NY Fed reverse repo usage climbs to $1,785.939B w/ 86 counterparties vs. prior session's $1,718.870B. Compares to Wed, March 23 year-to-date high of $1,803.186B and all-time high of $1,904.582B on Friday, December 31.

EURODOLLAR/SOFR/TREASURY OPTIONS SUMMARY

• Eurodollar futures gained after latest 3M LIBOR settle falls -0.03914 to 0.96686%, -0.01600 total on week now after climbing to 1.00600% Tuesday -- highest since April 2020, futures finishing near highs across the strip as market pricing in multiple rate hikes for 2022 cools (203bp from 220bp on Monday).
• Salient mixed wing trade: included buyer of 15,000 short Jul 98.62/98.87 call spds, 3.0 vs. 96.85/0.06%.

• Block, 10,000 Jun 98.12/98.43 2x1 put spds, 6.5
• +15,000 short Jul 98.62/98.87 call spds, 3.0 vs. 96.85/0.06%
• -4,000 Red Jun'23 96.00/97.50 call over risk reversal, 1.0 vs. 96.85/0.60%
• +5,000 Red Dec'23 96.25 puts. 54.5
• +3,000 short May 96.62/96.87 2x1 put spds, 1.5 vs. 96.80/0.20%
• 2,500 Blue Jun 96.62/96.75/96.87 2x3x1 put flys
• Overnight trade
• Blocks, total 12,000 Blue Jun 96.75/97.12 put spds, 8

• +2,500 TYM 126.5 calls, 13
• -5,000 TYM 124.5 calls, 36
• +5,000 wk2 TY 124.5 calls, 5
• +5,000 wk3 TY 124.5 calls, 9
• 6,100 TYM 123/125.5 call spds, 43
• +25,000 FVK 114.5 calls, 32.5 vs. 114-09.5/0.45%
• 4,000 TYM 125 calls, 25
• +2,000 TYM 124/125 call spds, 16
• Overnight trade
• Block+screen: 27,000 FVK 114 puts, 24-25.5

EGBs-GILTS CASH CLOSE: Negative Yields Disappearing

German FI underperformed UK counterparts Wednesday with sharp bear flattening in the curve as ECB rate hike expectations edged higher.

• Higher-than-expected Spanish and German inflation data spurred a sell-off at the short end, more than offsetting weak economic sentiment data.
• As end-2022 ECB rate expectations rose into positive territory for the first time, likewise Schatz yields closed above 0% for the first time since 2014.
• Greece outperformed, with 10Y GGB spreads narrowing 10bp.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 5.5bps at 0.002%, 5-Yr is up 5.2bps at 0.484%, 10-Yr is up 1.3bps at 0.646%, and 30-Yr is up 0.7bps at 0.732%.
• UK: The 2-Yr yield is up 2.7bps at 1.382%, 5-Yr is up 2.6bps at 1.443%, 10-Yr is up 2.4bps at 1.666%, and 30-Yr is up 2.4bps at 1.813%.
• Italian BTP spread unchanged at 148.2bps / Greek down 10.3bps at 212.6bps

FOREX: Greenback Declines For Second Day, DXY Lowest Print Since March 3

• The dollar index retreated for a second consecutive session and briefly hit a near four-week low as the greenback unwinds a good portion of the March gains for the index.
• USD losses were broad based with the Japanese Yen and the Swiss France the main beneficiaries.
• The JPY has risen 0.82%, extending the bounce off the multi-year cycle lows printed earlier in the week. This places USD/JPY back below the Y122.00 handle approaching the APAC crossover. The move is considered corrective and is beginning to allow a recent extreme overbought condition to unwind. Any extension lower would open 120.95, the Mar 24 low ahead of the 120.00 handle.
• In similar vein, the Euro continued to grind higher amid the dollar weakness and in the process breached the key near-term resistance of 1.1137, Mar 17 high. A break of this hurdle eases recent bearish threats and instead highlights a developing bullish theme. Note too that the 50-day EMA intersects at 1.1150, an equally important resistance. A breach of this zone opens 1.1232 as a target.
• A slightly more muted session for equities/oil prices leaves the likes of AUD and CAD hovering around unchanged for Wednesday and underperforming their G10 counterparts.
• Chinese PMI’s on the data docket overnight before a flurry of minor European data points including German/Eurozone unemployment.
• US Core PCE Price Index headlines the US schedule as well as Canadian GDP for January being released. Later on Thursday, we will publish the MNI Chicago Business Barometer.

FX: Expiries for Mar31 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1000(E3.4bln), $1.1069-80(E1.2bln), $1.1100(E1.5bln), $1.1110-15(E531mln), $1.1125(E759mln), $1.1200(E1.7bln)
• GBP/USD: $1.3195-00(Gbp804mln)
• USD/JPY: Y121.60($585mln)
• AUD/USD: $0.7400(A$500mln), $0.7500(A$1.5bln)
• USD/CNY: Cny6.3270($750mln), Cny6.3355($631mln)

Late Equity Roundup: Extending Lows, Well Above 20D EMA Support

Stock indexes extending lows heading into the FI close -- modest unwind of Tue's rally in SPX, eminis still up for the week at 4591.0 (-34.5).
As has been the case for weeks, geopol headline risk tied to Russia war in Ukraine, nascent peace talks and troop (re)deployment an ongoing source of volatility for market.

• Rates inside range, near highs on mixed drivers including month end buying, technical support, trading desks posited earlier. No react from Tass headline:
• "South Ossetia to hold referendum on whether the Georgian breakaway region should become part of Russia"
• SPX eminis still trading well above key support: 4428.55, the 20-day EMA.
• On the flipside: Resistance at 4578.50, Feb 9 high has been cleared. The break opens 4663.50, Jan 18 high.
• Dow trades -135.67 (-0.38%) at 35160.3, and Nasdaq -149.1 (-1%) at 14470.93.
• SPX leading/lagging sectors: Energy sector gaining +0.91%, outpacing Utilities (+0.44%). Laggers: Consumer Discretionary (-1.48%) lead by weaker retail (-1.92%) and consumer durables (-1.37%) shares.
• Dow Industrials Leaders/Laggers: United Health (UNH) extends gains of +7.69 to 518.42, Walmart +2.32 at 149.55. Home Depot extends losses -10.41 to 307.30.

• RES 4: 4730.50 High Jan 1
• RES 3: 4663.50 High Jan 18
• RES 2: 4578.50 High Feb 9 and a key resistance
• RES 1: 4633.44 76.4% retracement of the Jan 4 - Feb 24 downleg
• PRICE: 4586.00 1515ET Mar 30
• SUP 1: 4428.55 20-day EMA
• SUP 2: 4129.50/4094.25 Low Mar 15 / Low Feb 24 and a bear trigger
• SUP 3: 4055.60 Low May 19 2021 (cont)
• SUP 4: 4029.25 Low May 13 2021 (cont)

COMMODITIES: Oil Prices Firm As Russia Repositions Forces

• Oil and gold prices have firmed after softening yesterday as Russia repositions forces in a push to take the Donbas.
• A much larger than expected draw on crude inventories in the US gave a small boost but it’s small compared to broader moves.
• OPEC+ meets tomorrow and is expected to continue with the planned modest monthly production increase.
• WTI is +3.3% at $107.6 having briefly cleared initial resistance from yesterday’s high of $107.84 which opens the bull trigger of $116.64 (Mar 24 high).
• Relatively low volumes in the May’22 contract today. The most active calls have been $115/bbl and the most active puts have been $100/bbl.
• Brent is +2.7% at $113.3 although didn’t quite test resistance at $114.83 (Mar 29 high). Support remains $104.84 (Mar 28 low).
• Gold is +0.75% at $1934.0. It hasn’t challenged resistance of $1966.1 (Mar 24 high) and is comfortably above support from yesterday’s low at $1890.2 (Mar 29 low).

Thursday Data Calendar

Date	GMT/Local	Impact	Flag	Country	Event
31/03/2022	2350/0850	**		JP	Industrial production
31/03/2022	0030/1130	*		AU	Building Approvals
31/03/2022	0030/1130	**		AU	Lending Finance Details
31/03/2022	0600/0700	***		UK	GDP Second Estimate
31/03/2022	0600/0700	*		UK	Quarterly current account balance
31/03/2022	0630/0730			UK	DMO Gilt Operations Calendar April-June
31/03/2022	0630/0830	**		CH	retail sales
31/03/2022	0645/0845	**		FR	Consumer Spending
31/03/2022	0645/0845	**		FR	PPI
31/03/2022	0645/0845	***		FR	HICP (p)
31/03/2022	0755/0955	**		DE	unemployment
31/03/2022	0800/1000			EU	ECB Lane Lecture at Paris School of Economics
31/03/2022	0900/1100	**		EU	unemployment
31/03/2022	0900/1100	***		IT	HICP (p)
31/03/2022	1000/1200			EU	ECB de Guindos Discussion at University of Amsterdam
31/03/2022	1230/0830	**		US	Jobless Claims
31/03/2022	1230/0830	**		US	Personal Income and Consumption
31/03/2022	1230/0830	**		US	WASDE Weekly Import/Export
31/03/2022	1230/0830	***		CA	Gross Domestic Product by Industry
31/03/2022	1300/0900			US	New York Fed's John Williams
31/03/2022	1345/0945	**		US	MNI Chicago PMI
31/03/2022	1430/1030	**		US	Natural Gas Stocks
31/03/2022	1530/1130	**		US	NY Fed Weekly Economic Index
31/03/2022	1530/1130	**		US	US Bill 04 Week Treasury Auction Result
31/03/2022	1530/1130	*		US	US Bill 08 Week Treasury Auction Result
31/03/2022	1600/1200	**		US	USDA GrainStock - NASS
31/03/2022	1600/1200	***		US	USDA PROSPECTIVE PLANTINGS - NASS
01/04/2022	2200/0900	**		AU	IHS Markit Manufacturing PMI (f)